Los Angeles: Hollywood studios bet big on the summer of 2016, yet only a few winners emerged alongside several epic bombs.
Because of those big-budget disasters, which cost $100 million or more each, the movie industry’s peak season is a disappointment even though ticket sales were about equal to 2015’s haul. Projections by researcher The Numbers underscore the pain felt by some studios whose films failed to live up to their high hopes, such as Ben-Hur, from MGM and Viacom Inc.’s Paramount Pictures, and The BFG, a megaflop from Steven Spielberg and Walt Disney Co.
Summer moviegoing, from the first weekend in May through Labour Day, is a vital stretch for Hollywood, when studios release many of their biggest pictures and generate about 40% of annual sales. This year’s results reveal flaws in the industry’s focus on costly remakes and sequels, casting doubt on a strategy they’ll be relying on for years.
“Overall it was pretty awful,” said Doug Creutz, an analyst at Cowen & Co. “We have been talking about the increasingly bad ecosystem that we see theatrically and I think it definitely played out this summer.”
Of 32 summer movies released through 19 August by the six major studios, 17 lost a total of $915.6 million, according to The Numbers, which looks at film costs and projects revenue for movies all the way through their release on commercial TV. Last year the studios released a total of 15 bombs with losses of $546.3 million.
Some studios dispute The Numbers’ calculations, saying they leave out projected sources of sales that can boost the performance of films over time. A person close to Warner Bros., for instance, disputes the $67.7 million loss projected for War Dogs. Still, the estimates provide one of the best ways to compare individual movies, since studio finances are opaque and the companies seldom disclose such figures.
Disney proved its strategy of acquiring Marvel, Pixar and Lucasfilm is a winner, despite having three of the 10 biggest losers. The studio generated the highest profit, earning $521 million mostly from Finding Dory and Captain America: Civil War, sequels that became the two most lucrative summer movies, according to The Numbers.
Industrywide, only 3 of 14 sequels this summer outdrew their predecessors, according to ComScore Inc. analyst Paul Dergarabedian.
Warner Bros., part of Time Warner Inc., had a better summer than last, according to the studio. It ranks second, with $350 million in profit. Despite a mauling by critics, the studio’s Suicide Squad turned out to be a profitable hit, ranking No. 4 with The Numbers.
“The overall market remains constant, if not up, from last year,” Veronika Kwan Vandenberg, Warner Bros.’ president of worldwide distribution, said in an interview. “We are very pleased with our summer; it will be one of our most profitable.”
Warner Bros. was helped by two low-budget horror movies. Lights Out, made for $4.9 million, was the most successful movie of the summer relative to its budget, according to Doug Stone of Box Office Analyst. The Numbers put its profit at almost $53 million. The Conjuring 2, a $40 million production, earned $102.6 million.
Comcast Corp.’s Universal Pictures ranked third in profit for the summer, earning about $309.6 million on the strength of one particularly strong film, The Secret Life of Pets, an original animated feature from its Illumination Entertainment.
One way studios hedge their risks is by taking on investors in movies, or participating in projects from independent filmmakers. The estimates from The Numbers don’t take into account those arrangements.
Disney, for instance, will share losses on The BFG with its partners. The studio’s deficit on Pete’s Dragon will be less than the $64.1 million estimated by The Numbers, said a person with knowledge of the matter who asked not to be identified discussing the finances. Likewise, Universal Pictures was only the distributor on Kubo and the Two Strings, meaning it’s not exposed to the $60 million production.
Losses on Ben Hur will be close to $75 million, a person with knowledge of the matter said, compared with the $121.7 million forecast by The Numbers. Paramount said its share of the loss will be about $13 million.
Sony Pictures disputes the $58.6 million loss estimated for its Ghostbusters remake. According to Box Office Mojo, the film was made for $144 million, a sum that doesn’t include marketing costs, and the studio will split worldwide ticket sales of $217.8 million with theaters. Overall, The Numbers estimates Sony’s five big summer releases earned $45.9 million, before accounting for the surprise horror success Don’t Breathe, which opened 26 August with sales of $26.4 million.
“These calculations are seriously flawed,” the studio said in an e-mail. “The loss estimate for Ghostbustersis wildly off the mark and does not factor in numerous revenue streams we are anticipating across the lifespan of the film.”
Creutz advises investors to stay away from the movie business. He expects more volatility in film performance and more turnover in the executive ranks of the studios.
“People aren’t going to the box office as much as they used to,” Creutz said. “The only way out of this problem for Hollywood is fewer studios, and that ain’t going to happen.” Bloomberg