Disney/Marvel’s “Iron Man 3” opened in 11 territories Wednesday, with a reported $13.2 million gross. That’s more than previous series entries and more than the first day for last year’s Disney/Marvel smash “The Avengers” in France. And perhaps not coincidentally, AMC and then Regal, the two largest North American exhibitors, announced that they were finally putting pre-sale tickets online –after resolving disagreements over their terms with Disney. (Watch a new clip of “Iron Man 3” after the jump.)
Following a recent pattern of major wide-audience films opening in much of the world before the U.S. (as did “The Avengers” last year), “Iron Man 3” also opened in Italy and Australia among top territories, with most of Europe and South America’s biggest countries opening today and tomorrow (as well as Mexico). Along with North America, Germany, Russia and China (in a slightly edited version) open next week.
The announcement of the resolution of difficulties between Disney and exhibitors comes after these openings, with Disney likely gaining bargaining leverage once initial results were clear (AMC has international theaters, so they would have had limited first-hand knowledge). Both companies, along with #4 chain Carmike, had halted advance sales when it appeared that they and Disney were far apart.
In recent years the first weekend in May has become the unofficial start of the summer blockbuster movie season, with various franchises openings, and this year, after an extended box office slump, industry expectations for the domestic release on May 2 have been that “Iron Man 3” will kickstart a major box office rebound, with each week in the month featuring at least one new potential major hit.
One barrier to how much “Iron Man 3” will gross initially in the U.S. has been the unusually late availablity of advance on-line tickets from three of the four largest exhibitors. Disney (through its distribution arm Buena Vista) had used its anticipated success to renegotiate existing film rental deals with theater chains. In recent years, the norm has become for most films to have pre-set terms rather than be negotiated after they’ve played, the traditional method much of the time (a practice known as “settling”). Some distributors have deals in which final terms — which annually across all films average around an even split between theaters and studios — are determined by the ultimate total national gross, with studios keeping a higher percentage for bigger hits.
In the case of Disney, the opening of “Iron Man 3” led to their trying to redo their existing deals with exhibition chains (negotiating with each individually, with details confidential between the parties), which in turn led to resistance and some brinksmanship that threatened to interfere with plans to maximize opening weekend grosses.
Economic reality has always kept studios and theaters — whose dependency on each other remains high even as ancillary sources of revenue continue to evolve — from boycotting each other, with executives on both sides keeping an eye on the prize. As separate entities — the studios function as both producers and wholesalers, while separately-owned theaters are the retailers — each has different sources of revenue. The studios have international, DVD, cable and other outlets, while theaters earn much of their profit from concessions. But studios need theater play not just for revenue but for establishing their brands for the world, while theaters are dependent on audiences coming in for specific films to maximize their revenues.
While no one expected Disney and exhibitors to not reach terms, both sides had an interest in an early resolution. Many first-day fans buy tickets early, and the resulting sell-outs help increase overall sales as word gets out about the difficulty of getting in. (“Les Miserables” and its Christmas Day revenues almost certainly were increased when word got out about sold-out shows, and overall elevated interest in the film). And tickets bought in advance are banked by theaters, rather than relying on impulse buying on the first weekend. Then as shows are filled up, theaters make plans to schedule additional showings which increase available seating and as a result total revenue.
With AMC and Disney’s deal initially resolved, it seemed unlikely that Regal would hold out much longer. Although direct competition between individual theaters has decreased, in most big cities and suburban locations moviegoers have a choice of places to see top hits, even if it means traveling a bit further. So it seemed unlikely that this would take too long to resolve with others. However, with the deal set up extending beyond this one film, and other distributors viewing the chains’ response to Disney’s demands as a sign of what they might demand, the logic behind fighting as hard as possible becomes more apparent.
Studios work on a more variable economic scale than theaters, with their expenses rising and falling based on the cost of individual films, while exhibitors have more fixed costs. The grosses for 2013 releases are down more than 20% for the year so far (total gross is somewhat higher with late 2012 having strong lingering returns). Paradoxically, this steep drop increases pressure on exhibitors when a promising new blockbuster lurks, positioning Disney, as the first of these to be released, in prime position. It didn’t hurt their stance that they also released “The Avengers,” last year’s biggest hit, as well as “Oz: The Great and Powerful,” up to this point the top grosser of 2013.
“Iron Man 2” opened to $128 million its opening weekend three years ago, a figure that has been bested six times since, led by “The Avengers” ($207 million). Estimates have been that “3” could take in $160 million or more, equal to or above “The Dark Knight Rises” (the best since “Avengers.”)
But more importantly for theaters, the following weeks are full of potential strong films. May 10 brings Cannes opener “The Great Gatsby” from Warner Bros. (with its festival showing coming after the U.S. release), “Star Trek Into the Darkness” (Paramount) on May 17 (with initial tracking suggesting an $85 million + opening haul). Then Memorial Day weekend brings “The Hangover Part 3” (Warner Bros.), “Fast and Furious 6” (Universal) and 20th Century-Fox’s animated “Epic,” with Sony landing on the final weekend with Will Smith’s “After Earth.”
2012 didn’t live up to expectations: “Dark Shadows,” “The Dictator,” and “Battleship” all underperformed, while “Men in Black 3” delivered the best of the post-“Avengers” May openings at $54 million. The lineup this year has the potential of reversing the course of 2013 so far, at least on paper, even if “Iron Man 3” doesn’t equal “The Avengers.”
New clip below.