After a softer-than-expected ending to Q2 2023 and a lighter-than-anticipated domestic box office opening to Mission: Impossible, social media and culture lit up in that uniquely American way on “Barbenheimer”, with Barbie and Oppenheimer producing $235M in box office over the opening weekend (and combined with all the other films playing produced the 3-day weekend box office of $311M). Moreover, the viral nature of the “Barbenheimer” idea created a cultural moment even for those who opted for just one show. The prior weekend, when Mission: Impossible--Dead Reckoning Part One opened, only 2.54% of Cinemark’s visitors saw more than one film/screening. Last weekend, that increased to 3.96% (below). And so, while there were many that binged on Barbenheimer, the 142 basis point increase week-over-week doesn’t seem “massive” or an aberration. Moreover, it suggests that both films, and hopefully Mission: Impossible--Dead Reckoning Part One, will fill seats in the weeks again as consumers take advantage of all three well-rated and well-produced big-screen productions.
$311M is the biggest box office weekend post-pandemic. Per Comscore, this weekend was the fourth-biggest of all time, after Avengers: Endgame (April 26-28, 2019; $402M), Avengers: Infinity War (April 27-29, 2018; $314.8M) and Star Wars: The Force Awakens debuted (December 18-20, 2015; $313M). On Barbie, Variety quotes Warner Bros’ President of Distribution saying, “We have a pink unicorn here. We thought it would be $75 million for the opening weekend. Nobody saw $155 million coming. This doll has long legs.” Moreover, the $235M came without any cast promotion of the films because of the dual SAG-AFTRA and WGA strikes. Below, we show that the large exhibitor groups--which benefited from having more premium large format (PLF) screens--experienced a +20% increase in visits per location compared to the same weekend in 2019 (the second weekend of The Lion King remake). We would expect smaller screen theaters to have enjoyed a far softer lift.
Barbie‘s opening is one of the best all-time for a female-skewing movie (68% currently per Comscore), after Beauty and the Beast ($175M) and The Hunger Games: Catching Fire ($158M). Females under 25 on CinemaScore (at 26%) give Barbie an A+. PostTrak exits are currently at 89% positive and a 79% recommend, with kids under 12 giving it 87% in the top two and a 75% must-see. Such a strong cultural phenomenon is also going to fuel a lot of consumer product sales and that forthcoming increase in merchandise revenue has driven Mattel’s stock price up +25% over the past few months. We expect to see that movie merchandise in the toys, apparel, back-to-school items, Halloween costumes, and food items in a vast number of retailers for Q3 2023, especially at Target, Walmart, and Kohl’s, and we also expect to see an improvement instore traffic as well.
On Mattel’s earnings call, President and COO Richard Dickson (who is to become Gap Inc.’s new CEO) said, “Clearly on the Barbie front, we are incredibly pleased with the Barbie brand performance. I mean the success of the Barbie movie is a milestone moment for Mattel, and it really is a showcase for the cultural resonance of the brand. As we've seen, the success is far beyond the film. We've seen POS impacted on our toy business, on our consumer product partner business, which has really begun to accelerate meaningfully. We all see the world is playing with Barbie, whether it's our toys, fashion, accessories or content. I mean there's no doubt that the brand has reached a new level of cultural relevance...We've announced over 165 different consumer product partnerships and live experiences. All in all, it has been just a tremendous moment for the brand. And our guidance includes expectations for significant growth for Barbie in the second half [of 2023]...certainly with the halo effect of the movie and its economics benefiting Mattel over the next several quarters and years.”
In May we updated our outlook for the box office and the exhibitor industry (2023 Is Looking Bright, but Longer-Term Issues Still Need Resolution) where we shared that the legacy media holding companies’ business model challenges and previous suboptimal business decisions were creating risk to their movie studios and the industry as those would undermine their ability to fund and produce big tentpole releases. We and the public now know that those are what’s at the heart of the strikes per the commentary and reporting. Below is an exhibit from FTI Consulting breaking down the economics of big-budget films from 2016-2019. Pre-pandemic, a significant portion of revenue of a release came after the theatrical window. (Before Netflix these revenues were far larger as a percentage of the box office, usually around 2X.) The pivot to streaming has significantly diminished all of these downstream windows, which is what writers, directors, and actors relied upon for compensation and income. Now they are arguing that they want a larger cut of the streamers’ revenue. But how to give attribution of monthly subscription revenue to a single movie’s or TV show’s contribution is very imprecise and “interpretive.” Moreover, the contribution from a movie to the subscription revenue is likely a smaller “pie” than the prior downstream windows. And so the strike is about how to define the pie, all knowing that pie is smaller, and what sized slice each of the stakeholders get. The strikers also want a larger slice of the theatrical pie to compensate for the smaller size of the downstream pie.
Is this high-profile spat also impacting the current box office? Above we noted that soft ending to Q2 2023 and lower-than-expected results for Mission Impossible ($55M in box office versus a production cost of $300M and a likely promotional budget of around $150M). However, the opening was in line with its 2000 and 2018 predecessors at $60M, but given ticket price inflation, the attendance was far lower which is surprising given the glowing movie reviews and audience ratings. For its second weekend, facing off against Barbenheimer (i.e., an impossible mission in its own right), the film was down a larger-than-normal -64%. It will have to substantially pick up to not be viewed as a disappointment.
One cause for the large drop was the exhibitors gave a large chunk of their PLF screens such as IMAX to Oppenheimer (per Variety) which resulted in a materially lower average ticket price week-over-week. As a mark of that choice, and potentially hurt feelings by Paramount and star Tom Cruise, the tagline to Cinemark’s press release to celebrate the weekend’s success read, “Holdovers from Mission: Impossible--Dead Reckoning Part One and Sound of Freedom, among others, helped bolster the record-setting weekend performance. Consumer enthusiasm to see these diverse films in theaters underscores the power great stories have to bring people together, amplifying the moviegoing experience while creating a buzzworthy cultural impact.” The release went on to read, "The weekend of July 21, 2023, is tracking to be the exhibitor’s best summer weekend box office of all time, as well as one of the highest-grossing box office weekends in the Company’s history.” AMC’s tagline to its press release was also similar to Cinemark's, and read, “The opening weekend of Barbie and Oppenheimer were the primary drivers of AMC’s success this weekend, along with the strong holdover performances of Sound of Freedom and Mission: Impossible--Dead Reckoning Part One.”
Reading between the lines, it's clear that Paramount is troubled that they had to let go of PLF screens to Oppenheimer, which is leading to perceptions that Mission: Impossible was a weak film. It also implies that there are not enough PLF screens to go around for all of the potential blockbusters. We've discussed in previous reports that there are a lot of blockbusters slated for release from now through 2025. In our view, that would imply that the rate of theater upgrades to PLF was about to increase which will, in turn, result in more theater attendance and higher average ticket prices (due to the higher ticket price for PLF). Those combined would produce a substantial lift to the box office in 2024 and beyond, ceteris paribus. Sadly, things are not ceteris paribus because of the uncertainty engendered by the strikes. And so, this is just one more reason that the film industry desperately needs this “family spat” settled.