Time Warner (NYSE:TWX) has a lot riding on the success of its latest blockbuster, Batman v Superman: Dawn of Justice. The film, which will make its theatrical debut on Friday, pits two of DC Comics' most iconic characters against each other. With a production budget of $250 million, Time Warner has a lot invested in the film. But there is more to it than just a single film: Batman v Superman is intended to be the opening salvo in a long-running initiative that will shape its business for years to come.
It's somewhat troubling, then, that the film has been so poorly received by critics. It remains to be seen how well the film will ultimately perform at the box office this weekend, but this is a development that should concern Time Warner shareholders.
A rotten reception
When it comes to movies, Rotten Tomatoes is perhaps the most well-regarded review aggregator. The site compiles the views of dozens of professional critics to assess the relative quality of a given film. Individual reviews are labeled either rotten (bad) or fresh (good), and the number of each is compared in order to award a composite score. A film with a score of 100% on Rotten Tomatoes indicates that every single critic surveyed enjoyed the film, while a score of 0% means no one liked it.
Currently, Rotten Tomatoes has surveyed 167 different critics and from their reviews, has awarded the film a meager 31%. Among top critics -- those who write for more reputable publications, such as The New York Times -- the reception has been even worse as just 29% enjoyed the film.
By comparison, Walt Disney's (NYSE:DIS) first superhero crossover film, The Avengers, garnered an impressive 92% rating. Its sequel scored lower with just 75%, but that was still enough to receive Rotten Tomatoes' "certified fresh" designation. Other recent Marvel movies, including Ant-Man, Iron Man 3, Thor, Guardians of the Galaxy, and Captain America: The First Avenger have all managed to land scores of 75% or greater.
Critics have taken issue with Batman v Superman's pacing; its messy, humorless plot; and its tendency to shoehorn references to future DC films. TimeOut's Joshua Rothkopf used particularly colorful language, labeling it a "a $250 million tombstone". A.O. Scott of The New York Times called the film a "cynical cash grab".
But does any of that actually matter? Are audiences swayed by critical response?
Critical favorites -- the sort of films that regularly dominate the Academy Awards -- are rarely big budget success stories. Still, there does seem to be some correlation between strong reviews and ticket sales. Of the top 10 highest-grossing films of all time, every single one scored at least 72% or better on Rotten Tomatoes. Brendan Bettinger, writing for Collider back in 2012, looked at the major films released in 2011 and found that strong Rotten Tomatoes scores do correlate with box office success.
Building an extended universe
Nevertheless, Batman v Superman is unlikely to bomb. Warner Bros. has been marketing the film aggressively for most of the last two years, building anticipation for its release. According to Deadline, the film could generate $350 million in its debut.
The risk for Time Warner is that, even if audiences are willing to see it, they may not return. In August, Time Warner will release its second major DC crossover, Suicide Squad, followed by Wonder Woman and Justice League films in 2017. Other DC superheroes, including The Flash, Aquaman, and Cyborg are slated to receive their own movies in the years to come. If audiences find it just as distasteful as critics, they may lose their appetite for additional DC entries.
That could affect other portions of Time Warner's business. The company has been infusing its Turner cable networks with new series featuring DC characters, such as The Flash and Teen Titans Go. Its premium cable network offers its Warner Bros. films to subscribers, and since movies are a big part of HBO's draw, strong demand for DC films could lead to more HBO subscriptions.
Warner Bros. has expanded into video games in recent years and utilizes the intellectual property of its films to attract gamers to major releases. Video games based on Batman v Superman and other DC properties should form the basis of much of Time Warner's video game output in the quarters to come, and if the films themselves capture little interest, gamers may be similarly unaffected.
Likewise, box office underperformance could weigh on Time Warner's aspirations for consumer products. In November, CEO Jeff Bewkes noted that the company was hoping to leverage DC success to sell merchandise. "The next stage of growth for DC will be in film, which is also a critical driver in our plans to further expand our consumer products business," he said.
To be fair, there's more to Warner Bros. than DC Comics -- the company will reenter the world of Harry Potter with Fantastical Beasts in November -- and perhaps audiences will find the movie far more favorable than critics. Still, its poor critical reception is not an encouraging sign by any means.