Pixar’s latest release Inside Out 2 crushed it with critics, audiences, and the box office. Receipts for the weekend were $154M domestically, which was 60% more than the original's opening at $90M in 2015. Adjusted for inflation ($10.78 per admission versus $8.43 in 2015), the original did $115M. Adjusted for inflation, only Incredibles 2 ($216) and Finding Dory ($159M) did better.
After a series of disappointments by Pixar, the strong results are a relief to all stakeholders and support Disney CEO Bob Iger’s assertion that there is nothing wrong with the studio, they just need more time to make sensational films. Moreover, Inside Out 2 wasn’t just a domestic sensation as it did similarly overseas. Critics gave the film a 93% Rotten Tomatoes score and audiences a 96% score – a Pixar best.
The strong weekend is also evident in the strong lift in visits to the Top 3 exhibitors (filtered for visits exceeding one hour) with an increase that roughly matches the box office increase. The week’s visits increased 84%, led by Regal; the weekend box office increased by 106%. (Last weekend’s total would have had a higher average ticket price as opening weekends have more premium theater admissions, i.e. IMAX, Dolby, etc. And as such, the box office dollar increase on a week-over-week basis, would be ahead of the tickets sold increase.)
We’d also observe that weather may have been an additional contributor to the strong weekend with the more mild Los Angeles (and California as a whole) lagging blistering Chicago, Miami, and Dallas, as shown in the second figure below.
In terms of other positive reads of consumers’ interest in the exhibitor window, Dune: Part Two (March 1 release) reached a domestic total of $282M and an international total of $430M. Kung Fu Panda 4 (March 6) did $193M/$350M. Godzilla x Kong: The New Empire did $196M / $371M. Looking forward, Despicable Me 4 releases on July 3 and Deadpool & Wolverine on July 26. In a prior industry analysis, we shared that it wouldn’t be until Q4 2024 that a more expansive release schedule would allow for a better glimpse into the medium- to long-term outlook for the box office.
The two other recent Hollywood happenings of note are Sony’s acquisition of Alamo Drafthouse and the Paramount saga. Regarding Alamo Drafthouse, prior to 2020, studios weren’t allowed to directly own movie theaters, so this is the first tie-up since 1948. (Netflix does own Grauman's Egyptian Theatre and New York’s Paris Theater.) Alamo (35 locations) was expectedly whacked by the pandemic and lacking the balance sheet of Cinemark and the access to public shareholders capital that AMC does, it ran into Chapter 11 bankruptcy. With Sony’s acquisition, they exit well-funded by the parent. Alamo’s current CEO will continue running the differentiated theater concept and there are no plans for changing its consumer offering are expected (Sony management noted in the announcement press release: “We believe strongly in engaging entertainment fans outside the home in fun and distinctive ways as seen most recently with our Wheel of Fortune LIVE! traveling tour, and the opening of Wonderverse in Chicago. Alamo Drafthouse’s differentiated movie-going experience, admired brand and devoted community fit well with this vision. Our Crunchyroll business also aligns well with their audience’s interests. We look forward to building upon the innovations that have made Alamo Drafthouse successful and will, of course, continue to welcome content from all studios and distributors.” We read these words to mean “We are going to begin some experiments with programming both the digital and physical channels.” As we all know, Sony also has a huge video game business. Films, gaming, and alternative content have been blurring and mashing for a decade, so maybe Sony sees this as an opportunity to accelerate the blurring and mashing, with Alamo giving them better control and direct-to-consumer insights. (Recall, that AMC has been highly successful with its experiments in concert shows, most notably being a co-producer and first distributor of the Taylor Swift and Beyonce film events.)
As to Paramount Pictures, they are not being acquired at this time. Apollo Global, Skydance, and Sony have all dropped out. The NBA is nearing a $76B broadcast rights deal with NBC, ESPN, and Amazon per the WSJ. While Paramount Global's CBS Network isn't NBA, the NFL will have taken note of $76B, that’s a figure that will turn the heads of even pro football team owners, as well as the colleges, who now have to pay players. The good news for CBS is that their current deal with the NFL goes to 2033. The Big 10 on CBS goes through the 2029-2030 season. In the near term, Paramount likely disposes of non-core assets, seeks out partners for Paramount+, licenses the library, cuts out layers of expense, and pays its interest on its large debt ($14.6B). Pre-interest cash generation from the business is only 2x the $700M in interest expense. (Their debt maturities seem laddered out well.) Unfortunately, this leaves the holding company and its iconic studio unable to finance large, breakthrough, higher-risk films, which is what drives the box office. The only film in their release schedule this year that can break big is Gladiator 2, where expectations are for a $180M domestic box office total.
