"Batman v Superman" is a winner, even if the film hasn't met expectations. Image source: Warner Bros./DC Entertainment.
In many ways, Batman v Superman: Dawn of Justice is anything but a failure for Time Warner (TWX +0.00%) and its shareholders.
Just look at the at the data: At $833.9 million worldwide, BvS ranks third on the list of highest-grossing DC Comics films, while its $312.8 million domestic haul is 12th best all-time among comic book adaptations, according to Box Office Mojo.
And while Rotten Tomatoes says only 28% of critics gave the film a positive review, 68% of the fans who saw Batman v Superman -- over 200,000 as of this writing -- said they liked it. The divergence helps to explain why BvS has done as well as it has at the box office.
Knowing all of this, how can I (or anyone, really) call this film a failure for Time Warner? Momentum is the issue. According to data compiled by Box Office Mojo, BvS was screening in 3,505 theaters earning $228 per theater after day 26 in cinemas. Avengers: Age of Ultron -- a similarly big-budget superhero film from Marvel Studios -- was yielding $523 per theater at 3,727 locations during the same point in its run last year.
To put a fine point on it: Batman v Superman: Dawn of Justice is not only playing in fewer theaters today, but it's also earning 56% less per theater than its closest peer did.
The troubling villainy of meager enthusiasm
Maybe you think this doesn't matter. Some films are huge hits; others aren't, right? While that's true, it's important to remember how cinema operators make their profits.
Let's take AMC Entertainment (AMC 5.09%) as an example. One of the largest U.S. chains, the company reported a whopping $498.7 million in admissions revenue in the fourth quarter offset by $388.6 million in film exhibition costs and rent. Add in half of the remaining operating expenses ($103.8 million), and you're just about at break-even for AMC's filmed entertainment business -- in a quarter that saw record crowds for Star Wars: Episode VII: The Force Awakens.
Why is this? Like every other cineplex operator, AMC pays a percentage of ticket sales after agreed-upon house expenses (the "nut") for every new film shown on its screens. Splits vary, but big studios usually get 95% of the take after accounting for the nut in weeks 1 and 2, 90% in week 3, and 85% in week 4. Films that have appeal after the initial four-to-six week engagement period are more profitable for AMC and its peers because the rental terms for longer runs are more favorable to cineplexes.
Marvel's merc with a mouth has been a big winner at the box office. Image source: 20th Century Fox.
This is why they love Deadpool. This R-rated superhero comedy is still playing in 791 theaters (and earning $128 per theater) 68 days into its run. Cineplexes showing the film are doing so to milk the last few drops of profit before 21st Century Fox (NASDAQ: FOX) (FOXA +0.00%) pulls it to prepare fans for Blu-ray and streaming sales.
DC movies won't always need the staying power of Deadpool. They just need to be good enough for Warner to extract the same rental terms for say, Cyborg, as they do for the Justice League movies.
Cinematic kryptonite
Nor can Warner allow the DC Entertainment brand to become associated with bad movies when intensifying competition will make it easy for fans to find alternatives. Here's what each of the planned DCU films faces over the next several years:
| Movie | Scheduled Release | Competiton Before | Competition After |
|---|---|---|---|
| Suicide Squad | Aug. 5, 2016 | TMNT 2: Out of the Shadows June 3, 2016 | Doctor Strange Nov. 4, 2016 |
| Wonder Woman | June 2, 2017 | Guardians of the Galaxy vol. 2 May 5, 2017 | Spider-Man: Homecoming July 7, 2017 |
| Justice League-Part One | Nov. 17, 2017 | Thor: Ragnarok Nov. 3, 2017 | Black Panther Feb. 16, 2018 |
| The Flash | March 23, 2018 | Black Panther Feb. 16, 2018 | Avengers: Infinity War-Part One May 4, 2018 |
| Aquaman | July 27, 2018 | Ant-Man and The Wasp July 6, 2018 | Animated Spider-Man Film Dec. 21, 2018 |
| Batman solo film (unconfirmed) | Oct. 5, 2018 | Ant-Man and The Wasp July 6, 2018 | Animated Spider-Man Film Dec. 21, 2018 |
| Shazam! | April 5, 2019 | Captain Marvel March 8, 2019 | Avengers: Infinity War-Part Two May 3, 2019 |
| Justice League-Part Two | June 14, 2019 | Avengers: Infinity War-Part Two May 3, 2019 | Inhumans July 12, 2019 |
| Man of Steel sequel (unconfirmed) | Nov. 1, 2019 | Inhumans July 12, 2019 | Untitled Marvel Movie May 1, 2020 |
| Cyborg | April 3, 2020 | Inhumans July 12, 2019 | Untitled Marvel Movie May 1, 2020 |
| Green Lantern Corps. | June 19, 2020 | Untitled Marvel Movie May 1, 2020 | Untitled Marvel Movie July 10, 2020 |
Source: Box Office Mojo.
While some films are likely to have a clear path to profit, others could get squeezed. Look at The Flash and Shazam!, which have potentially tough rivals at both bookends, while Justice League-Part Two is going to have to live up to the finale in Marvel's Infinity War two-parter before facing off against Inhumans.
Then again, maybe this is what we need. Maybe DC and Warner need tough competition in order to raise the level of filmmaking. It's happened before; Batman Begins set the stage for The Dark Knight, which was both an economic powerhouse and an Oscar winner.
Critical and audience ratings tell us Batman v Superman: Dawn of Justice isn't in the same league as either of those two movies. Yet it's even worse than that: A faster-than-expected exit from theaters goes further and tells us it's a failure for Warner investors -- even at over $800 million in worldwide grosses.
