Looking forward to seeing the slam-bang movie sequel G.I. Joe: Retaliation this summer? If so, you're out of luck. The studio behind the film, Viacom's
Summer "tentpole" releases are what make the big Hollywood studios big. The few players in this game -- Paramount, News Corp.'s
Traditionally, they've rolled the dice with such huge-budget films in the hopes of attracting lots of ticket revenue and, in the case of non-sequels, establishing series that will continue to pay off.
This year, it's a bit of a nervy time to be doing so because several budget-busters released lately have been flops. There's the notorious example of Disney's John Carter, which although it didn't do badly abroad, fell well short of recouping its estimated $250 million production budget in the crucial domestic market. Universal's much-derided board game adaptation Battleship also sank on its U.S. release, bringing in only $47.4 million against a production budget of roughly $209 million.
In the case of Disney, this has been somewhat offset by a release that's made its money back and then some, The Avengers. The memory of those other swan dives is still fresh in the company's mind, though, so it's no surprise that its summer releases are generally smaller-budgeted and more low-key.
Let rivals slug it out
So Paramount is in good company by electing to go the modest route this season. Besides, despite its budget and the presence of a big-name star (Bruce Willis) in G.I. Joe's cast list, the movie is really just the latest entry in a middling franchise. It's not Batman -- in other words a series that produces hundreds of millions in profit for its studio (in this case, Warner Bros.).
Rather, it's an adaptation of an old property with a narrower fan base that makes a decent if unspectacular return -- the previous film in the franchise, The Rise of Cobra, grossed more than $300 million worldwide (versus a production budget of $175 million). Meanwhile, Batman's latest installment, The Dark Knight, collected more than $1 billion while costing $185 million to produce.
And Warner Bros. is rolling out the newest Batmobile, The Dark Knight Rises, this summer. The other studios, meanwhile, also have powerful tentpoles with excellent box office potential. Fox, for one, is releasing Prometheus, Ridley Scott's much-anticipated return to the realm of expensive science fiction, and an adaptation of the wild alt-history thriller Abraham Lincoln: Vampire Hunter. Sony, despite the awful financial performance by its parent company of late, is also doing the tentpole thing with its flashy upcoming superhero reboot, The Amazing Spider-Man.
We can wait for this movie
Besides, operationally speaking, what's the rush? Paramount's parent company has been doing just fine lately, delivering a net profit in its most recent quarter that blew past analyst expectations. That bottom line also happened to be its best in the last four quarters and was 56% higher than in the same period of 2011.
Those happy results led the company to boost its dividend by 10%; investors are now rewarded to the tune of $1.10 per share. This makes for a yield of just over 2%, which is higher than Disney and News Corp. stock, nearly matches Sony's, and approaches that of Time Warner.
A big, expensive tentpole movie flop would imperil the nice financial momentum Viacom has built up lately, not to mention that healthy dividend. Pulling G.I. Joe leaves Paramount's summer release schedule with offerings such as the latest entry in the well-performing DreamWorks Animation series Madagascar and the 3-D concert-documentary film Katy Perry: Part of Me. Neither of these are likely to set the box office afire, but they both feature characters and personalities that have sold reliably in the past.
Joe's gonna be in your face!
The G.I. Joe retrenchment could also, very possibly, benefit from a technical sprucing up. Despite the widespread belief that consumers of Hollywood fare are jaded by technology, 3-D is still a magnet for audiences. The 3-D-enhanced rerelease of Titanic, for example, brought in gross box office of more than $200 million within two weeks when it was released earlier this year. The Avengers, meanwhile, is currently the No. 2 highest-grossing 3-D movie of all time (second only to Avatar), and since it's still in theaters it easily has the potential to take over the top slot.
Paramount has gotten some bad press over its delaying of the G.I. Joe release, and perhaps some of it is deserved (awkwardly, the announcement came barely a month ahead of the originally planned date). Given the parent company's performance and the nearly overwhelming competition this summer, though, the rescheduling looks like a sharp move from where investors are sitting. They can enjoy their popcorn and Milk Duds while Viacom continues to improve its results and keep or lift that dividend. There's plenty of time to wait for G.I. Joe.
Is there time to wait for some of the market's best video technology, though? Many investors are inclined to think not. Read about a trend-defining company operating in the realm of moving pictures in our FREE report "The Next Trillion Dollar Revolution," which can be downloaded here.