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Summer 2013 Box Office Wrap: Winners and Losers, Lessons Learned

Summer 2013 Box Office Wrap: Winners and Losers, Lessons Learned

Soon after the summer season started off strong four months ago with the launch of giant Marvel sequel “Iron Man 3,” the story shifted from scoring a $5 billion at the box office to Steven Spielberg’s forecast of apocalypse, as too many big-budget behemoths were tanking. 
As of Labor Day weekend, 46 films opened between May 2 and August 30 that played in at least 750 theaters and/or grossed over $10 million total. The results confirm neither prediction. On paper, the figures are a bit of a wash. The total domestic (U.S./Canada) grosses came in around $4.6 billion, up around 10% from last year, and in raw numbers the highest ever. Adjusted for inflation and counting actual ticket buyers, it lagged a bit behind 2007 and 2009, and came about equal to 2011.
But production costs were too high, up roughly 10-15% from last year. And with a few more titles in release, and each requiring separate marketing expense, it is hard to make a case for the industry on the whole, based on domestic numbers, to claim more than sighs of relief that things weren’t even worse.
Also, despite the decent raw figure jump from 2013, the net result for the year so far is just slightly ahead of last year, with January through April down a massive 30% from the previous year. No question that there are smiles given that despite the high risks this summer, that early trend was reversed as the season’s revenues went up 10-12%.
Remember that international revenues for Hollywood studio releases are more crucial than ever, making up 65-70% of the ultimate grosses. These days many studio pictures are foreign produced. With some of the films that opened in the U.S. still having to play out or even open in many countries, the final accounting on individual films and studios remains incomplete.
Check the Summer Box Office Chart below which ranks all 46 films by their performance overall on both the domestic and international front. The overall ranking of the top six, even if second-ranked “Despicable Me 2” never plays in China, will likely be the same worldwide as domestic. But the international take saved several expensive films, which would otherwise have been disasters (“Pacific Rim,” “The Smurfs 2”). Even a film that was pronounced DOA after a bad U.S. opening –“After Earth” could wind up only a small loss for Sony. of course such a costly tentpole was designed to win big.
The studios build all this into their financial models (which include non-theatrical revenues and marketing costs). And miscalculations can be huge — “The Lone Ranger,” while it managed to gross a quarter billion dollars worldwide, simply cost too much and yielded a $190 million wire-off for Disney. But despite all the noise (usually based on overestimating the initial weekend take in the U.S.), only two other $100 million-plus budget films will be big losers: “R.I.P.D.” and “White House Down.” (“Turbo” still has much of the world to play). That definitely is at the low end of fears.
Too many films cannibalized each other.  The general rule of thumb is that a successful film should triple its opening weekend gross over the course of its domestic run. This year 12 of the top 20 films achieved this, including surprisingly, “The Lone Ranger”–maybe the word of mouth wasn’t that bad after all. The biggest multiples were achieved by “Despicable Me 2” (an incredible four times its huge opening weekend of $83 million), “The Heat,”  “We’re the Millers” and “Now You See Me,” the last two surprise hits. Last year 13 of the top 20 did this (“The Dark Knight Rises” with its massive opening came close), and the average multiple overall was higher. So it does appear that a plethora of high-profile new openings reduced the grosses of most if not all films to some extent.
Look at “Man of Steel,” Warner Bros.’ latest reboot of their Superman franchise. Widely expected to challenge “Iron Man 3” at least domestically for top grosser, it ended up #3, some distance behind surprising #2 “Despicable Me 2” in the U.S. and failing to reach $300 million despite a $117 million opening. #5 worldwide at $657 million, it should be a moneymaker for Warners. But the surprise announcement that the next entry in the franchise will team Superman with Batman suggests concern that the elements that went into this success weren’t enough to sustain another $225 million + cost before marketing. 
While 17 summer films have reached $100 million domestically so far (“The Butler,” “Elysium” and “Planes” should join the club as well), an incredible eight were never the #1 film for any weekend. These include one $200 million film– “World War Z”–and three others, “The Heat,” “The Great Gatsby,” “Grown Ups 2” and “We’re the Millers,” that should do better than any of the three non-#1 films that passed $100 million last summer. This speaks to strength rather than weakness as all these films managed to sustain audiences despite opening against a higher profile release.

3-D sales are down, accounting for a declining percentage of ticket buyers. But even so, 10 of the top 20 domestic grossers were available in this format (“Fast and Furious 6” is the top 2-D picture). This is up from seven of the top 20 last year, although all seven of those were in the top 10, the same as this year. The increase overall this year is more a factor of a higher percentage of top releases being released in 3-D more than an increase in interest.
The clear studio winner of the summer was Universal, although none escaped without sustaining some bruises. Universal had the #2 and #3 biggest films worldwide — “Despicable Me 2” and “Fast & Furious 6” — both with multiples of four times their budgets. Two low-budget horror films, “The Conjuring” and “The Purge,” grossed 1,000 to 2,500% of their pre-marketing costs — huge profit margins. They weren’t perfect. “2 Guns” underperformed (though still has much of the world to play), “R.I.P.D.” was the lowest-grosser for any $100 million + budget release from any company, and “Kick-Ass” was a late summer disappointment. But coming atop six $100-million dollar films last year, “Identity Thief” and the low-budget “Mama” earlier this year, and adding Legendary Films as a production partner over the summer gives them the clear top spot among studios at the moment.
Despite “The Lone Ranger,” Disney came out well, with “Monsters University” joining “Iron Man 3” near the top of the summer’s successes, and the lower budget “Planes” looking to end up a solid moneymaker. Paramount, continuing its recent trend of fewer releases than its rivals, had two decent performers in “Star Trek Into Darkness” and “World War Z”, although both at close to $200 million production costs won’t be huge profit makers. 
Warner Bros., led by “Man of Steel” and “Pacific Rim” and coming off a terrible first four months of the year while undergoing major internal executive drama, managed to end up with five of its six releases heading toward breakeven or better, even with a combined cost of close to $700 million (only the late summer lower budget “Getaway” flopped). 
Twentieth Century Fox, aided by strong international results for “The Wolverine” and a major domestic hit with “The Heat” fared respectably, although its animated returns (including with new partner Dreamworks) fell far short of the astounding $877 million “Ice Age: Continental Drift” took in worldwide last year (“Epic” from Dreamworks scored ahead of that film in the U.S.). In a summer where both comedies and family films often prospered, Fox’s “The Internship” and “Percy Jackson: Sea of Monsters” fell short of expectations. 
Lionsgate boasted the biggest sleeper of the summer with “Now You See Me” and made a nice profit with their Kevin Hart concert film, but also stubbed their toe with their more expensive sequel “Red 2” and “Peeples” from the usually reliable Tyler Perry.
Sony received the most negative press. Their international arm, regarded as the best in the business, managed to improve their grosses from what seemed greater problems as the summer proceeded. Only “White House Down” among their own productions will be a major loss (the German-financed “The Mortal Instruments: City of Bones” has them on the hook only for domestic marketing expenses). Low budget “This Is the End” fell just shy of $100 million domestically. “Grown Ups 2” should end up making money, as should “The Smurf 2” eventually, while foreign interest will make “After Earth” far closer to breakeven than initially anticipated. They don’t have any films in any of the top 10 rankings though, so overall it wasn’t an impressive performance.
More than ever movies are led by international considerations. That is what keeps so many of the most expensive films driven by male stars and keeps plots simple and action-oriented. But perhaps the most important lesson for the summer is that quite a few of the most profitable films were made at a lower budget with the U.S. audience in mind (particularly with female leads). And the business remains unpredictable — anyone who had “Despicable Me 2” and “Fast & Furious 6” as two of the top three films of the summer would have been making a real long shot bet.
The summer ends as it began against the backdrop of the distraction of major film festivals. Cannes opened with “The Great Gatsby” (an Australian film half-financed locally, along with the director, most of the cast and crew supplemented by American money and stars), and ends with “Gravity” (a British made film with a Mexican director) getting huge attention ahead of its release in a few weeks. Though it can seem like the world of festivals and the blockbuster interests of the studios are polar opposites, in reality they are closely related. Close to half of the directors of these wide releases first got noticed at film festivals. As the final third of the year begins with a large number of acclaimed premieres, whether 2013 turns out to be ahead of 2012 is now largely in the hands of films made by filmmakers who would find themselves at home at Cannes (where Spielberg and Ang Lee served on the jury this year) and other leading festivals.

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