Hey, did you see That's My Boy, The Watch, or the 2012 version of Total Recall? No? Well, you weren't the only one missing out. A host of expensive flops combined to make for weak North American summer box office for the major movie studios. This most critical of all time periods for the film industry isn't quite done yet, but it's on pace to come in lighter than 2011's season.
Dog days
It's easy to blame the reduced ticket revenue on the quality of movies Hollywood insists on shoving down the collective American gullet. That's always been a factor, though, and both hits and flops alike this summer have received their share of glowing and negative reviews.
That situation was essentially the same in the initial four months of the year, when box office take stood a tall 14% above the comparable period from last year.
So what happened? This summer has been a fairly disruptive one, at least from the perspective of a movie studio. Films had to compete for viewing time and eyeballs with the Olympics, which is always a big attention getter. This summer's Games scored record high ratings for the network that broadcast them, NBC, a unit of Comcast (Nasdaq: CMCSA) and General Electric's (NYSE: GE) NBC Universal.
One of Universal's tentpole releases, The Bourne Legacy, was released while the Games were still on. Perhaps as a result, the movie raked in only $87.5 million domestically against a production budget of $125 million. Foreign gross was relatively weak at $44 million -- big-budget action movies typically do well overseas. By comparison, the espionage series' previous record-holder for underperformance, The Bourne Identity, brought in $122 million domestically.
The drought plaguing much of America through the season didn't help either; people tend not to go to the multiplex when there are pressing matters to deal with.
It's debatable whether the theater shooting in Colorado had a material impact on movie attendance. Regardless, customer traffic was particularly light in the waning months of the summer. The week ended Aug. 25 was the most anemic so far this year for the business. The top 12 releases took in a bit less than $84 million collectively, which was a queasy 12% below the previous low-water mark set back in February.
This was despite the presence of big stars, promising stories, and sequels to films that did pretty well in seasons past. Lions Gate (NYSE: LGF) released The Expendables 2, featuring Sylvester Stallone and about 30 other top action movie names from the 1980s. In its first 10 days in theaters, however, part 2's box office take of $52 million was more than $13 million short of the original's tally. Another underperformer came from Time Warner's (NYSE: TWX) Warner Bros., namely the timely political comedy The Campaign with the usually popular Zach Galifianakis and Will Ferrell as the two lead characters.
Where did the audience go?
It's not a good sign when box office receipts in one week of the summer come in significantly below a comparable stretch in the middle of winter. It nearly goes without saying that the most important period for the movie business is the summer when kids are home from school, adults generally have more time for fun stuff, and the weather is conducive to leaving the house.
What seems to be the case for this year's edition is that audiences have latched onto a small number of releases while ignoring the majority of the studios' offerings. That limited club did gangbusters while most releases languished. Among the winners were a pair of comic book sequels, The Avengers from the release slate of Disney's (NYSE: DIS) Buena Vista, and The Dark Knight Rises from Warner Bros.
Not coincidentally, the two are (so far) Nos. 1 and 2 in terms of box office winners for all of this year. The former has taken in $618 million in its domestic theatrical run against a production budget of $220 million, while the numbers for the latter are $424 million over $250 million. Compare that to, say, the already forgotten Adam Sandler flop That's My Boy ($37 million and $70 million, respectively), and the feast-or-famine nature of this season's movie release schedule becomes apparent.
Leave news to the news folks
The summer season typically accounts for around 40% of annual box office take for the studios, so there's plenty of handwringing in Los Angeles these days. This is compounded by the fact that some releases did exceptionally well in the early part of the year, most notably the first installment of Lions Gate's The Hunger Games series and Universal's spy thriller Safe House.
The movie folks hope that some late-year releases already attracting buzz will help lift the annual take. Lions Gate will unspool the final chapter of the teenage vampire soap opera The Twilight Saga in November, for example and anticipation is high for Warner Bros.' long-awaited Lord of The Rings prequel The Hobbit, which will hit theaters just before Christmas.
But they'll need to perform exceptionally well to take up the slack of summer. Industry figures have it that domestic theatrical take for the season will fall short of the (admittedly record) $4.4 billion of 2011, representing the first year-over-year decline since 2005. Not even this year's heroes Batman, Catniss from The Hunger Games, or any of The Avengers, it seems, will be able to reverse this decline.
General Electric has its hands in the movie business, but of course the company is much, much more than a purveyor of entertainment. We dive into GE in our premium report on the stock, an essential tool for any current or prospective investor in the firm. Not only is the report a hard-to-believe deal at $9.99, it also includes a FULL YEAR of quarterly updates. For more, pay a visit to this link.
