Since the rise of television and the fall of the studio system in the 1960s, Hollywood has sought to develop new and exciting products and technologies to get people to leave the comfort of their living rooms and into movie theaters. Sometimes, as in the mid to late 1960s and early 1970s, the somewhat successful solution has been boundary-pushing adult fare, such as 1967’s independently produced and distributed “The Graduate,” one of the highest grossing films of all time (adjusted for inflation) and shot on a modest budget of $3M. At other times, Hollywood has turned to generation-defining blockbusters, exemplified by the tremendous success of “Jaws” and “Star Wars” in the mid-to-late 1970s.
2012 could be a banner year for Hollywood and comic books. Already, three films from this year have recorded the top 5 opening weekend grosses of all time, including Lionsgate’s (LGF) “The Hunger Games” at number 5, Warner Bros’s (TWX) “The Dark Knight Rises” at number 3, and BuenaVista’s (DIS) “Marvel’s The Avengers” at number 1 of all time, according to Box Office Mojo. Taking a look at the rest of the top 10 opening weekend grosses, which includes two “Twilight” films, “The Dark Knight,” “Spider-Man 3”, the last “Harry Potter” film, “Iron Man 2,” and “Pirates of the Caribbean: Dead Man’s Chest,” indicates that Hollywood seems to have found a recipe for success: sequels to popular action and adventure films based on novels, comic books, and graphic novels (known in the biz as “pre-sold properties”).
Splitting The Box Office
What differentiates “The Dark Knight Rises,” which grossed $161M last weekend, from “The Avengers,” which grossed $207M its opening weekend last May, is where their respective box office grosses end up.
Walt Disney Pictures, which distributed “The Avengers,” only kept 33.7% of the opening weekend gross, leaving the majority of the box office receipts with the theater chains. By contrast, Warner Bros. Pictures will keep every cent from their weekend opening gross, according to Box Office Mojo. This is a reflection of the relative clout of “The Dark Knight Rises” due to the box office success of “The Dark Knight” and the immense anticipation for this finale. Typically, the higher the expected total gross, the more leverage the distributor has in negotiating opening weekend splits with the exhibitors (AMC, Regal, Cinemark, etc).
With each successive week, the exhibitors tend to keep an increasing share of the gross and hopefully make enough money selling overpriced popcorn and soda to keep them afloat.
The success of movies like “The Dark Knight Rises” and “The Avengers” means a heck of a lot to all the parties involved. Hollywood studios typically rely on a production system known as tent-pole programming. Studios will release a major summer blockbuster like “The Dark Knight Rises” and expect it to do so phenomenally well that its outsized profits will support the studio’s investment in riskier properties (ie, the non-blockbusters), like the R-rated “Magic Mike” (R-rated films tend to be riskier properties than PG films), the upcoming 3-D adaptation of “The Great Gatsby,” and other “prestige films” that Warner Bros. might hope will bring in Oscar nods and critical acclaim if not profits. Thus, the success or failure of a tent-pole film could mean the financial success or failure of the entire production company.
Of course, these financial risks are further diffused by the fact that Hollywood has conglomerated, which provides many ancillary markets, like home video, digital sales and rentals, merchandizing, spin-offs, music, etc, that allow Hollywood to capitalize on the popularity of any given property.
Lifeblood of 3-D, IMAX
The success of these summer blockbusters can also have widespread repercussions throughout the industry. Take, for example, the incredible success of “Avatar” several years ago. This was the first film to demonstrate the possibility of tremendous profitability of expensive 3-D technology. Although no film since has replicated the success of “Avatar” in 3-D (2-D is still much more cost effective and profitable than 3-D for most films), Hollywood continues to invest in 3-D technologies, which is the lifeblood of the major 3-D companies.
Accordingly, the increased use of IMAX filmmaking, a visually superior but more expensive film format, in “The Dark Knight Rises” could lead to the increased use of IMAX filmmaking in the future if “The Dark Knight Rises” can make a significant profit in its release at IMAX theaters, which would boost revenues for IMAX Corporation and could boost revenues for the theater chains that provide IMAX screens.
Business Section: Investing Ideas
“The Dark Knight Rises” has opened on a very strong note. And, given the track record of the previous Batman film and Christopher Nolan’s recent films, “The Dark Knight Rises” should have no problems meeting its financial expectations.
Do you share this upbeat view? Are you a cinephile who will pay to see this multiple times in theaters? Do you think this film will rake in the dough? If so, below is a list of companies involved in the production, distribution, and exhibition of the grand finale of the acclaimed “The Dark Knight” series of films.
(List sorted according to market cap.)
Use the Compar-O-Matic from Kapitall to compare changes in average analyst ratings for the companies mentioned below:
1. Time Warner Inc. (TWX, Earnings, Analysts, Financials): Operates as a media and entertainment company in the United States and internationally. Market cap at $37.3B, most recent closing price at $38.86. Time Warner produced and distributed The Dark Knight series. DC Entertainment, the parent of DC Comics, is a subsidiary of Time Warner. Warner also owns almost over 1,600 screens in over 170 cinemas in 11 foreign markets.
2. Sony Corporation (SNE, Earnings, Analysts, Financials): Designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide. Market cap at $12.14B, most recent closing price at $12.08. Sony Classical Records, a division of Sony Music Entertainment, provided a selection of recordings for the soundtrack of The Dark Knight Rises.
3. Mattel Inc. (MAT, Earnings, Analysts, Financials): Engages in the design, manufacture, and marketing of various toy products worldwide. Market cap at $11.71B, most recent closing price at $34.39. Mattel is manufacturing and distributing licensed Batman: The Dark Knight Rises toys and action figures.
4. Hertz Global Holdings, Inc. (HTZ, Earnings, Analysts, Financials): Engages in the car and equipment rental businesses worldwide. Market cap at $5.01B, most recent closing price at $11.94. Hertz Entertainment Services provided vehicles for use on The Dark Knight production.
5. Dolby Laboratories, Inc. (DLB, Earnings, Analysts, Financials): Develops and delivers products and technologies for the entertainment industry worldwide. Market cap at $3.78B, most recent closing price at $35.41. Dolby technology was used to master the soundtrack of The Dark Knight Rises.
8. IMAX Corporation (IMAX, Earnings, Analysts, Financials): Operates as an entertainment technology company worldwide. Market cap at $1.58B, most recent closing price at $24.02. Director Christopher Nolan filmed over 50 minutes of The Dark Knight Rises using large format 70mm IMAX film and cameras, a film format larger than traditional 70mm film stock and significantly larger than 35mm film stock, which has been the standard film format for feature films for most of filmmaking history.
Written by Andrew Dominguez. Data sourced from Finviz and IMDB.com
Use Kapitall's Tools: Looking for ways to analyze this list?
Use this article snapshot as a launch pad (click here for help): Simply click on the links, and use Kapitall's tab navigation to browse through the data…
Analyze These Ideas: Getting Started
- Read descriptions for all companies mentioned
- Access a performance overview for all stocks in the list
- Compare analyst ratings for the companies mentioned
- Compare analyst ratings to annual returns for stocks mentioned
- Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, Filings
- Time Warner Inc. (TWX, Chart, Download SEC Filings)
- Sony Corporation (SNE, Chart, Download SEC Filings)
- Mattel Inc. (MAT, Chart, Download SEC Filings)
- Hertz Global Holdings, Inc. (HTZ, Chart, Download SEC Filings)
- Dolby Laboratories, Inc. (DLB, Chart, Download SEC Filings)
- Cinemark Holdings Inc. (CNK, Chart, Download SEC Filings)
- Regal Entertainment Group (RGC, Chart, Download SEC Filings)
- IMAX Corporation (IMAX, Chart, Download SEC Filings)
New to Kapitall?
1. New to the site? Click here to register for a free account, and gain access to more tools and data
2. Looking for more investing ideas like this? Click here to sign up for your free copy of Kapitall Weekly
3. Follow us on SeekingAlpha, Motley Fool, Nasdaq and Twitter
ABOUT KAPITALL WIRE
Kapitall Wire, which is not a broker/dealer, offers free cutting edge investing ideas, lively commentary and timely analysis of companies enhanced by interactive tools. And the Investing 101 section breaks complex concepts down to their basics, offering education to novices that doubles as a refresher course for more seasoned investors.
Kapitall Wire is a division of Kapitall Inc. Securities products and services are offered by Kapitall Generation, LLC, member FINRA/SIPC . Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.