The numbers are strong, although apparently not enough to excite investors. Shares are up 0.2% post market after the leading exhibition company said it generated net income of $75.1M, +212.9% vs last year’s Q3, on revenues of $813.1M, +17.4%. Analysts expected revenues to come in lower at $800.4M. Adjusted earnings at 38 cents a share beat the consensus forecast of 30 cents. The chain says that it sold 62.4M tickets in the quarter, +16.4%, with an average ticket price of $8.79, unchanged from last year. That resulted in admissions revenue of $548.4M. The average visitor spent $3.59 on concessions, +2.6%, driving total revenues of $224.1M. CEO Amy Miles says that she’s “encouraged by the year-to-date industry box office results and [is] optimistic regarding the box office prospects for the upcoming holiday season.”
Regal and NCM Fathon Events will host midnight screenings of Syfy’s strangely popular Sharknado! on August 2, with the TV movie set for about 200 screens in NCM’s Digital Broadcast Network. Sharknado! premiered on Syfy on July 11, drawing …
CEO Amy Miles seems confident that consumers will continue to flock to theaters, even with the higher admission costs. “Sometimes we joke and say we are an industry that has been dying for the past 50 years,” she told investors today at Barclays Global Technology, Media and Telecommunications Conference. But “as long as we continue to provide that great, affordable out-of-home experience…people are going to continue to go to the movies.” What’s “affordable” is in the eye of the beholder: Regal CFO David Ownby told the group that his company’s ticket prices for 2D movies “will go up in that 3% to 4% range” that’s been the pattern over the last few years. He notes that for IMAX movies Regal adds as much as $6.50 to the price of the basic 2D ticket. The chain’s own RPX large-screen venues have as much as a $5.00 upcharge while regular 3D films cost about $3.50 more than conventional 2D. This year’s potential blockbusters should help the cause.
The stock is up 3.9% in post market trading after Regal declared a $1 a share special cash dividend, on top of its previously announced 21 cent quarterly payment. The company says that it intends to keep paying …
Nomura Equity Research’s Robert Fishman and Michael Nathanson slashed Q3 earnings forecasts for exhibition chains Regal and Cinemark after noting that industry sales in the quarter will be -8% vs last year — which is “worse than we expected.” They cut Regal by nearly 49% to 16 cents a share, which they say is 6 cents lower than the consensus forecast from their peers. And they took Cinemark down 22% to 35 cents a share, 7 cents below the Street’s expectations. Theaters were hurt because only about seven films in Q3 are likely to generate $100M or more at domestic box offices vs nine films that did so in the period last year. As a result, the analysts cut their domestic box office projection for the year to $10.6B (it had been $10.9B), which would still be up 4% for all of 2011. They remain optimistic that holiday releases including Lionsgate’s The Twilight Saga: Breaking Dawn Part 2, Warner Bros’ The Hobbit: An Unexpected Journey, and Sony/MGM’s James Bond film Skyfall will contribute to a bounce-back resulting in a 7% increase in Q4 sales vs last year.
The exhibition chains are weighing in with their response to the Colorado theater shooting.
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Don’t become too giddy over the MPAA’s optimistic forecast last week for the theatrical movie business, and the record sales for The Hunger Games. Nomura Securities analyst Robert Fishman warns today in a 91-page first look at the exhibition business that chains are in for a tough couple of years after 2012 is over, with admissions falling slowly but steadily from 2013 through 2016. He says domestic box office sales slid 3.8% last year to $10.2B while attendance dropped 4.2% to 1.3B, and that’s “just the beginning of emerging secular headwinds facing the box office.” MPAA data shows that from 2000 to 2011 the percentage of people who frequently go to the movies dropped to 10% from 30% while the ranks of those who never attend grew to 33% from 26%, Fishman says. The biggest drop was among young people. The analyst also says theaters could suffer as the major studios begin to slash the number of movies they make. Although smaller producers have picked up some of the slack, “we do not think the scale of the majority of these other films will be sufficient” to draw the same number of ticket-buyers who typically turn out to see big studio productions. Fishman also notes that consumers are rebelling against high priced tickets — including for 3D. And he fears that theaters will be hurt by changing release patterns, including premium VOD. “Based on our discussion with different studios,” Fishman says, “we believe there is likely to be another push for premium VOD either towards the end of the year or next year.”
B. Riley analyst Eric Wold says it will in a major look-forward report today for the film business. He predicts 4% growth in box office sales this year — the result of a 1% uptick in attendance and a 3% rise in average ticket prices. What makes him so confident, especially following the 3.9% drop in 2011? Wold says that more consumers would have gone to the movies last year if Hollywood hadn’t released so many dogs. He dismisses another theory: that tickets are becoming too expensive. If that were the case, he says, then we would have seen soft numbers throughout the year — instead box offices set records in Q2 and Q3. He’s also optimistic about 2012 because there’ll be at least 25 sequels of films that collectively generated $3.64B at box offices. Sequels typically deliver about 6% less in ticket sales than the originals. But even if 2012′s films slip 20%, consumers will spend 12% more than they did for sequels in 2010. That could “set up 2012 for a potential rebound,” Wold says. He’s also encouraged to see that there’ll be at least 40 wide-release 3D
The weak box office sales this past weekend made it clear that the year is going to end with a whimper. Regal’s shares fell 8.7%, making it the biggest loser among the theater chains followed by Carmike (-4.9%) and Cinemark (-2.9%). Companies closely aligned with theaters also suffered: 3-D technology provider RealD fell 6.2% while ad seller National Cinemedia was off nearly 3%. “The hoped-for 4Q11 box office pop is slipping away,” says Lazard Capital Markets analyst Barton Crockett. Ticket sales so far this quarter are down about 6.9% vs the same period last year, he says. He predicts the quarter will end down 1.9% following an expected surge of Christmas weekend turnout for Paramount’s Mission: Impossible Ghost Protocol as it goes into wide release, Warner Bros’ Sherlock Holmes: A Game Of Shadows, Sony’s The Girl With The Dragon Tatoo, Fox’s Alvin And The Chipmunks: Chipwrecked, and Paramount’s The Adventures Of Tintin.
Now that Big Media’s 2Q earnings season is over, the big question on Wall Street is: Did it give us any insight into the future? CEOs’ cheery talk about strong ad sales in TV’s upfront market, the expected bump next year from political ads, and the revenues coming in from online streaming services may be irrelevant if the economy sinks into a deep, new recession. CEOs say they see no evidence of trouble yet. The industry’s leading cheerleader, CBS chief Les Moonves, channeled his inner Buzz Lightyear last week saying that he has “every reason to believe that we will deliver strong results throughout the rest of the year, into 2012 and beyond.” Investors still sliced 6.3% off of CBS’ market value. The Dow Jones U.S. Media Index is down about 16% in the last month as traders anticipate cuts in ad spending, ticket buying, subscriptions — the works. If the pessimists are right, then the race is on: Which company will be the first to change its message from “people will buy media because they have cash” to “people will buy media because it helps them to forget their problems”?
Here are other themes from the latest earnings reports:
Jobs: Media companies still aren’t hiring. No one said that so baldly, but it’s there between the lines: CEOs talked more about financial engineering – cutting costs and returning cash to shareholders – than about spending to become more competitive. Time Warner recorded $24M in layoff-related expenses, quadruple the amount from the same quarter last year, while Viacom spent $14M, up from zero last year. Yet virtually every media company is repurchasing shares or increasing its dividend. The message? CEOs can’t persuade investors that the companies know how to make a decent profit from their cash, and shareholders want it back.
Pay TV: This was “the weakest (quarter) in the industry’s history,” says Bernstein Research’s Craig Moffett. Analysts were startled to see the largest cable, satellite, and telco companies collectively lose about 195,000 video customers. The cord cutters don’t fit the stereotype of well-to-do technophiles. Moffett says that “all the evidence” shows that a growing number of people – especially young adults — simply can’t afford pay TV. Dish Network seemed to confirm that thesis by saying that it will shift its marketing focus to upscale consumers instead of bargain hunters. With the U.S. market stalled, it’s easy to see why cable programmers want investors to look at their expansion efforts in growing markets overseas such as India, Russia, China, and Brazil. “It is the current momentum and potential of our international assets that present a meaningful, unique opportunity for us,” Discovery Communications CEO David Zaslav told analysts.