While Hollywood wonders if a big part of the financing for Jeff Robinov’s new shingle will come from Huayi Brothers Media, others with less luster are tapping China for funding. Producers Robert Simonds and Gigi Pritzker announced in The New York Times they have teamed with backers including TPG Growth and Chinese private equity firm Hony Capital to form a venture they call “a next generation film studio” that will finance, produce and self-distribute eight to 10 star-driven theatrical films per year for the global market with budgets at around $40M. They expect the venture to spend over $1B over the next five years. The strategy: Hollywood’s devotion to tent poles has pushed them away from star vehicles, and the venture wants to bring those back. Of course, that happened because new stars are few and far between, and even the dependable ones no longer deliver strong opening weekends like they once did. Simonds, who had an early strong run with Adam Sandler comedies but whose last hit was 2006′s The Pink Panther, will be chairman and CEO of the venture with former Viacom Entertainment Group exec Thomas McGrath as COO. OddLot Entertainment CEO Pritzker will also sit on the board. She is coming off the disastrous Ender’s Game, but has also been involved in tasteful fare like The Way Way Back, Drive and the upcoming Jon Stewart-directed Rosewater. They say they have made direct distribution deals with North American …
The atmosphere is “very different than [in 2011] when we had the premium VOD conversations,” Regal chief Amy Miles said this morning at the MKM Partners Investor Day Conference. “Conversations” is a polite word for exhibitors’ angry response back then when they forced Universal to abandon its plan to show the Ben Stiller-Eddie Murphy caper comedy Tower Heist on VOD just three weeks after it opened in theaters. But studios have pretty much given up any talk about offering new releases directly to consumers in the two-month period when films are still in theaters, she says. “When we look at most recent trends in windowing it’s not encroaching on theatrical” as studios look for help to encourage people to stop renting films and buy movie digital downloads. Regal is glad to help: “We can partner with studios and say, ‘We have this great data base’ ” from its Crown Club loyalty program that includes members’ movie preferences. Exhibitors are in no mood, though, to make financial concessions to help studios that are licking their wounds from the summer’s over-supply of big-budget action and family films. “Studios are doing a lot of things to adjust the cost side of their models,” she says, but “meaningful gains are not going to come from our side.” She doesn’t fear that studios will retrench to the point where theaters won’t have enough strong films. “I don’t expect the next few years to look much different from the last 20 or 30 years.”
In an inventive way to try and get the Comic-Con crowd behind a small comedy entering the fray alongside the blockbusters later this month, CBS Films has joined with Regal Entertainment Group and Foursquare to marketing The To Do List directly to the Con crowd. It is the first time Foursquare has worked directly with a film studio to promote a movie directly to users. When users of the service check in at the convention center, some will get freebies to see the film opening weekend at Regal Cinemas, United Artists or Edwards Theatres. The promotion runs through Sunday. The Maggie Carey-directed film opens July 26. “Foursquare is the app that helps our users make the most of where they are, and where they are going. People love checking in when they go to the movies, so this partnership was a natural fit,” said Foursquare’s Steven Rosenblatt. “Foursquare users who check in at Comic-Con events during the show will receive more information about The To Do List in the app, and get free tickets to see the movie. It’s another way for Foursquare users to be engaged and rewarded for using our service.”
Plenty of people harrumphed Wednesday when George Lucas told a crowd that “going to the movies will cost 50 bucks or 100 or 150 bucks” in the future. Well, one day later that has become a reality. Well, sort of. Paramount said Thursday that it will offer the film world’s first “mega ticket” for an advance screening of the Brad Pitt zombie actioner World War Z in five Regal theaters around the US. For $50 — that’s a $75 value, mind you — a moviegoer with said golden ticket from Fandango gets admission to the June 19 3D showing of the flick, a download or stream of the film when it’s released on home video, custom 3D glasses, a limited-edition official movie poster and a small popcorn. (What, no soda?) The offer is good at megaplexes in Irvine, San Diego, Houston, Atlanta and Philadelphia. Maybe it’d be wise to invest that $50 in some serious running shoes in case those mega-speedy WWZ zombies really do attack.
Exhibition industry watchers wondered whether Regal still had an appetite for acquisitions in November, when it announced a $155M special dividend. But today’s deal, following Regal’s $250M bond offering in January, should put that question to rest. Hollywood Theaters, which has 43 venues with 513 screens, had been looking for help before June, when $157M of its bonds are due. The companies say that Regal’s $191M cash payment will cover that. The No. 1 exhibition chain also picks up $47M in lease obligations. Investors seem pleased by the deal, which increases Regal’s screen count by 7.5%: Its shares are up about 2% in early trading. Even with the outlay, “Regal is well-positioned to once again generate results above expectations in 2013 driven by its leading industry position on a robust film slate (with higher 3D penetration) along with a well-capitalized balance sheet to take advantage of additional M&A opportunities,” B. Riley Caris’ Eric Wold says. Here’s today’s release:
Everything seemed to be working for the No. 1 exhibition chain at the end of 2012. In the last three months of the year it generated $37.3M in net income, up from $4M at the end of 2011, on revenues of $723.1, +17.8%. The revenue figure was well ahead of the $705.8M that analysts anticipated. And adjusted earnings at 28 cents a share topped forecasts for 21 cents. Attendance rose 14.8% to 54.8M and the average ticket sold for $8.86, +2.1%. Concession sales came to $3.44 per patron, +3%. The strong results made 2012 “a record year for Regal,” CEO Amy Miles says. She adds that she’s “encouraged by the early 2013 box office results and the films scheduled for release in the coming months.”
UPDATE, 2:30 PM: Regal CFO David Ownby said during the company’s conference call that the lower results were mostly attributable to tough comparisons with the year-ago quarter. That was especially true for 3D offerings, when only The Amazing Spider-Man among the top films were offered in the format (the top three films in Q3 2011 were in 3D), meaning the exhibitor couldn’t charge its higher prices for premium tickets. Regal also said that Open Road Films, its indie acquisition and distribution joint venture with AMC, lost $14 million in the quarter owing to costs associated with promoting its movies Hit And Run and Silent Hill: Revelation, which comes out Friday. CEO Amy Miles said she was “very pleased” with Open Road, which has released six movies to date since its formation that have grossed a total of $155 million domestically.
PREVIOUS, 1:29 PM: Regal Entertainment Group reported third quarter revenue and net income that were lower compared with a year ago and below analysts’ estimates. It also declared a cash dividend of 21 cents per share, saying it intends to pay a regular quarterly dividend for the foreseeable future. Regal, the nation’s largest exhibitor, saw diluted earnings per share of 15 cents for the quarter, down a penny from 2011 and analysts’ estimates. CEO Amy Miles said the company had its highest Adjusted EBITDA total ever for the first nine months of the year. “Industry box office …
Shares in both companies are up slightly in early trading after they announced the expansion of their revenue sharing agreement. It will raise the number Regal’s IMAX venues to 87. The change is a key part of Regal’s “strategy to offer premium moviegoing experiences to our customers,” CEO Amy Miles says. Regal is taking a two-pronged approach to large-screen theaters, where the company hopes to benefit from premium ticket prices: In addition to its arrangement with IMAX, it’s building its own RPX: Regal Premium Experience sites. That’s led some analysts to wonder whether IMAX is running out of domestic growth opportunities. IMAX chief Rich Gelfond says that the new agreement shows that the company has “continued growth opportunities in the North American market, including strong demand in areas within and outside of large cities.”
Big Media 3Q Corporate Earnings Roundup: Are CEOs Really Worried About Recession? Or Just Looking For Convenient Excuse?
Three months ago, when Big Media CEOs wrapped up their 2Q earnings, they were still relentlessly upbeat about the business. Any worries about the economy? Not then. But the messages they delivered over the past few weeks, as they discussed 3Q, were different. Although they’re still optimistic — remember, they’re paid to be salesmen — now and then you could hear expressions of concern about where things are headed. It stood out when Viacom CEO Philippe Dauman noted that “ad sales growth will face some headwinds.” Other CEOs who are known for speaking bluntly warned that other shocks may bedevil the business. For example, Dish Network Chairman Charlie Ergen said that his satellite company — and others in pay TV — have to fight harder against rising programming costs because “there’s a limit to the price increases that could be passed on to consumers.” Time Warner Cable CEO Glenn Britt warned that premium channels such as HBO, Showtime and Starz “are clearly impacted by the economy as consumers try to cut back.” Either they’re genuinely worried, or they want a scapegoat to blame for things that are going bad, or may soon do so. Whatever the case, we can expect to hear a lot more about the economy when it’s time for the post-mortem on the all-important 4Q earnings.
As for industry performance matters, parents of movie studios had their usual mixed results to brag about or explain away: Time Warner benefitted from Harry Potter And The Deathly Hallows Part 2. Viacom was up on Transformers: Dark Of The Moon. And News Corp beat its chest about Rise Of The Planet Of The Apes and X-Men: First Class. But Disney’s Cars 2 was no match for last year’s Toy Story 3. Comcast’s Universal Pictures had nothing to compare to last year’s Despicable Me. Lionsgate suffered from Conan The Barbarian and Warrior. And DreamWorks Animation’s Kung Fu Panda 2 didn’t contribute as much in the quarter as Shrek Forever After did in the same period last year.
Over at the TV networks, Comcast’s NBC underperformed the Street’s already modest expectations. Execs at almost all the companies were eager to talk about the cash they expect to collect soon from political ads — as well as their favorite new ATM machines: retransmission consent deals and digital streamers including Amazon, Hulu, and Netflix. Speaking of Netflix, CEO Reed Hastings once again tried to reassure investors that he’s focused on “building back our reputation and brand strength” after his decision in July to slap a 60% price increase on customers who wanted to continue to rent DVDs and stream videos. In 3Q Netflix lost 57.7% of its market value and 800,000 subscribers. And since that customer loss was bigger than projected, Netflix shares continued to fall — they’re now down 67.3% since July 1.
Here are some other themes from the latest earnings reports:
Ad sales: They’s good, but for how long? Most television networks report that scatter prices are comfortably above the upfront market from this past summer. CBS chief Les Moonves says prices in 4Q are up by “mid-teens” on a percentage basis, while Discovery says it sees least high single digit percentages. But Disney’s Bob Iger noted that scatter prices have “slowed slightly these last few weeks.” Kurt Hall of National CineMedia — the leading seller of ads in movie theaters — was far more direct when he spoke to analysts after ratcheting down his company’s financial forecasts. “I’m sure that the broadcast and cable guys are sitting there now counting their lucky stars they got their upfront done before August,” he told analysts. “There’s a lot of uncertainty.”
The exhibition company’s per-share earnings of 16 cents narrowly beat the 15 cents that analysts expected. But the 3Q revenues of $743.6M, up 6.8% from the period last year, were well ahead of the $729.2M forecast. Net income came in at $25M, down from $42.6M last year — but that included a $31.4M one-time gain from the sale of stock in National CineMedia. “We are pleased that industry attendance growth combined with our continued focus on cost control allowed us to achieve significant growth in both adjusted EBITDA and adjusted EBITDA margin for the second consecutive quarter,” CEO Amy Miles said. She added that the company is “encouraged by the record summer box office and remain(s) optimistic regarding the upcoming holiday film slate.” In addition to the earnings news, Regal declared a cash dividend of 21 cents a share that it will pay on December 16 to stockholders of record on December 7. Regal says that it “intends to pay a regular quarterly dividend for the foreseeable future.”
The Dow Jones U.S. Media Index was down 3.5% today while the DJ Industrial Average was off 2.4% — and Goldman Sachs may have contributed to the imbalance: It downgraded the entertainment sector today to “neutral” from “attractive” saying that ad sales will be weaker than expected as the overall economy softens. That came as the market also reacted to Greece’s report over the weekend that it will fail to hit its deficit-reduction targets for the year — increasing the possibility of a default. CBS, -7%, was the biggest loser among the major media companies. It was followed by Viacom (-5.1%), Sony (-4.7%), Disney (-3.9%), Time Warner (-3.4%), and Comcast (-2.2%). In the broader media market, broadcasters Westwood One, LIN TV, Rado One, and Entercom were down by more than 10%. Pandora, Live Nation, Crown Media and Cumulus Media lost more than 8% of their market value. A few companies were up for the day including Yahoo (+2.7%), Regal Entertainment (+2.0%), Coinstar (+1.6%) and Time Warner Cable (+0.2%).
The battle lines are starting to harden around who’ll pay for those lame-looking 3D glasses. I’ve learned that other studios might line up behind Sony’s decision to stop paying the average 50-cents a pair fee beginning in May. Rival studios tell me Fox is on board. “We’re studying our options, but haven’t made any decisions yet,” denied Fox Filmed Entertainment spokesman Chris Petrikin. Remember, Fox was first in line to try to stop paying for glasses back in 2009 when it released Ice Age. But then had to abandon that effort after theaters rebelled. Sony was technically correct today when it said in a statement that “there never has been” a formal agreement stipulating that studios would shoulder the cost of 3D glasses. But it’s easy to understand why exhibitors are stunned by Sony’s stoppage. Because it changes an understanding that’s been in place since 2005 when Disney’s Chicken Little kicked off the 3D movie phenom.
“It is a radical departure from what the practice has been,” National Association of Theater Owners President John Fithian tells me. Now Regal CEO Amy Miles warns that if studios end the practice then it could “result in fewer screens exhibiting 3D films”. That’s bad news for Hollywood, which plans to release 39 films in 3D next year, vs. 36 in 2011. Exhibitors might encourage consumers to bring their own 3D glasses. That may be the future anyway. But BTIG analyst Rich Greenfield says if theaters require payment for 3D specs on top of the typical 3D surcharge ($3.25 to $4 a ticket), then “the U.S. moviegoer will reject this as another way for exhibitors to milk them and further decrease their interest in 3D (and perhaps going to the movies in general)”.
The fight is over glasses manufactured for RealD which it, in turn, supplies them to theaters. RealD’s stock price was down -14.7% today on the Sony news. The 3D tech company won’t disclose
Open Road Films, the recently launched theatrical distribution company from exhibitors AMC and Regal, has signed a multiyear agreement with Universal Studios Home Entertainment to handle all marketing, sales and distribution services for Blu-ray, DVD and digital platforms of Open Road’s titles. The first film to be covered in the deal is also Open Road’s first film: Killer Elite, the actioner starring Jason Statham, Robert De Niro and Clive Owen that will be released Sept. 23. The announcement of the home entertainment deal was made today by Open Road CEO Tom Ortenberg and USHE president Craig Kornblau.
Regal Entertainment Group, the nation’s largest exhibition chain, reported first-quarter results that were down across the board compared with last year. Revenue for the quarter ended March 31 was $570.9 million, compared with $719.8 million in 2010. Much like fellow exhibitor IMAX’s sluggish first-quarter results reported earlier in the day, Regal CEO Amy Miles cited “a challenging first-quarter box office environment” as reason for the decline, and also like IMAX is looking to summer tentpoles to regain momentum. The Regal board did announce a cash dividend of $0.21 per Class A and Class B share as part of what the company plans to be a regulary quarterly offering.
In March, Regal partnered with fellow big chain AMC to create Open Road, a venture headed by Tom Ortenberg that will acquire and distribute films that can play in wide release on about 2000 screens.