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Box Office: Minions Hammers Thor and Zaslav Hammers Streaming

Thomas Paulson
Aug 5, 2022
Box Office: Minions Hammers Thor and Zaslav Hammers Streaming

Over the past year, we have developed a narrative that the foundation of confidence in streaming was breaking and that the studios would likely pivot their business priorities back to the box office and exhibitors. By doing so the studios would assure that the fuel stock for the exhibitors’ business and industry model was full and secure. Additionally, we have shown that the return of audiences is well-rounded, and not driven by fanboys or some type of "sugar rush." This week brought significant support to this narrative (as we discuss below) and we expect further affirmation next week in Disney’s 2Q22 update (Disney is #1 at the box office).

  • Warner Bros Discovery reported its first quarter as a combined entity and its strategic and financial position is far worse than Wall Street (and potentially Discovery’s management) expected. The outlook for linear subscribers and viewers has appreciably deteriorated over the past six months, resulting in a far lower revenue and profits outlook. Given $50B in debt and 5.0X net debt/EBITDA, there is added concern about the company’s liquidity in a declining EBITDA period.
  • In the news this week from many news outlets – a significant PR effort – was Warner Bros. canceling Batgirl and CEO David Zaslav changing the Warner Bros. and HBO+ strategy for big budget movies from DTC+ to direct-to-theaters-first. Zaslav, "Strategically we’ve looked hard at the direct-to-consumer streaming business. This idea of expensive films going straight to streaming, we cannot find an economic case for it."
  • Zaslav continued, "There's been a lot of experimentation in our industry, and we are all smarter for it...We believe strongly in the importance of preserving optionality and driving returns through a strategic mix of distribution and windowing options. For example, we will fully embrace theatrical as we believe it creates interest and demand, provides a great marketing tailwind and generates word-of-mouth buzz as films transition to streaming and beyond...Our streaming strategy has evolved over the past year and really reflects the importance of, rather than the dependence on, this segment of our global content monetization...Our focus will be on theatrical. And when we bring the theatrical films to HBO Max, we find they have substantially more value. We have an ecosystem where we can have the premier motion picture business. That's why most people move to Hollywood [and] that's why most people got in this business to be on the big screen when the lights went out and that is the magic. And the economic model is much stronger."
  • AMC Entertainment reported 2Q22 results which showed $1.2B in revenue and attendance of 59M (owing to Maverick, Doctor Strange, Minions, Thor, Jurassic Park, Elvis, and Lightyear) versus $1.5B in revenue and attendance of 97M in 2Q19 (Shazam, Avengers: Endgame, Jon Wick, Aladdin, MIB, and Toy Story 4). AMC's spend-per-patron in the U.S. was $19.04 in 2Q22 versus $15.02 in 2Q19.
  • AMC CFO Sean Goodman noted that, "The admissions revenue per patron growth was driven by guests choosing to upgrade to the very best possible site and sound experiences that are found in our premium large-format offerings, such as IMAX....Premium large-format attendance represented 15.6% of domestic attendance in 2Q22 and this can be compared to 10.9% in 2Q19."
  • The company generated $107M in EBITDA, but operating cash flow was down $77M due to the payment of deferred rent and other accruals.
  • CEO Adam Aron warned that 3Q22 will be a soft period for the box office before heading into an extraordinary 4Q22 and 2023. Aron expects 2023 to be "billions of dollars" larger than 2022. Assuming that this year’s domestic box office does $8.5B, then adding two billion to that takes it to $10.5B, which is just under the $11.3B posted in 2019.
  • Weekend Box Office: This weekend's big release is Brad Pitt's and Sandra Bullock’s Bullet Train, with the opening weekend expectation over $100M. Such an opening would suggest that it could eventually tally to $300M+ domestically.
  • On other successes and misses at the box office, Minions: The Rise of Gru has now exceeded $326M domestically, above Hemsworth’s and Portman’s Thor: Love and Thunder. While many commentators are again questioning the future of the "superhero" genre, we would remind that Doctor Strange did $954M in May (without China and Russia) and Spider-Man did $1.9B in December (without China). The Black Panther: Wakanda Forever comes out in November.

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Thomas Paulson

Director of Research and Business Development,

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more.

He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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