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Box office palooza, weekend update: Positives amid Shrek shocker
Street could be shocked, but there were positives. Shrek 4 [SHRK4] opened with only $71.3M domestically, below our recently reduced $88.5M est, and down 41% from Shrek 3, a figure that could shock investors and prompt a Monday sell-off of shares of DreamWorks Animation. However, there were mitigating positives, including a very favorable audience reaction that argues for a strong, How to Train Your Dragon-like tail and signs of solid international potential. So for now we’re sticking with our estimates for a $295M domestic and $394M int’l run that underlie our BUY rating on DWA. To hit our domestic estimate the movie could fall a modest, Dragon-like, 30% next weekend — very possible with good word of mouth heading into Memorial Day with Shrek as the only meaningful family and 3-D movie. Shrek would then have to hold to down only 38% in week three and down 36% week 4 before falling 57% in week 5 when Disney’s Toy Story 3 hits.
Good/Bad/Ugly ogre. First, the good. The movie, according to the LA Times, fetched an average CinemaScore grade of A from audiences, in line with Dragon and above the B+ for the maligned Shrek 3. And while the core int’l run will kick in after the World Cup, the movie pulled in $26M from nine countries, including $20M in Russia to top Avatar as the biggest debut ever there, a hopeful sign. But this is the second DWA film in a row to open light despite pleasing audiences, stoking questions about DWA marketing. Also, 3-D plus Imax receipts were only 61% of the total, making our 3-D/Imax attendance estimate only 52% of the total, versus 59% for How to Train Your Dragon. This argues against the idea that more 3-D screens will hike 3-D audiences. Shrek 4 had more than 4,000 3-D screens, versus ~2,922 For Dragon. This also argues against DWA’s hope to walk 3-D surcharges up from the current average near $3.50.
Weekend rundown. Box office for the top 12 movies over the weekend fell 15.4% y/y to $143.6 million, according to preliminary data from boxofficemojo.com, $21.3 million below our estimate for a 2.9% dip, due mainly to the miss by Shrek, although Universal’s MacGruber also missed, ranking sixth with just $4.1 million, $5 million below our estimate.
Next weekend outlook. We forecast a 19.5% y/y rise in domestic box office for the top 12 movies next weekend to $192.4 million, with Warner Bros.’ Sex and the City II [SATC2] first with $56.8 million in its opening weekend, followed by Shrek 4 with $53.7 million. In third we see Disney’s Prince of Persia [PRSIA], with $40.8 million in its opening weekend. Last year’s top movie, Up, made $68.1 million in its opening weekend.
Industry estimates adjusted. We now see domestic box office in 2Q10 pacing for a 3.1% decline, versus mid single digit growth assumptions in Regal and Cinemark models that predate Shrek and Iron Man misses and are near or below consensus. Quarter-to-date, box office is down 0.1% to $1,401.8 million, accounting for 50.8% of our 2Q10 estimate. In 3Q10 we see 10.7% growth, versus 11.3% previously. For 4Q10, we continue to model a 6.6% decline against tough Avatar comps.
Peer inside for more movie palooza. Please look inside this note for bottom-up box office estimates for the year, including predictions of top 20 movies for the year and by quarter, top movies by week, top 10 movies by studio, and our take on the 3-D and animated slates for year.
Tag(s): SHRK4, SATC2, PRSIA
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By Barton Crockett on Tuesday, May 25, 2010 @ 05:32 PM
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