- "Transformers: Age of Extinction" lifts Paramount to big 4th of July box office win.
- "Tammy" latest falter for Warner Brothers, following "Blended", "Edge of Tomorrow" and "Jersey Boys".
- Box office down over 40% year-to-year overall this holiday weekend.
If there's one thing we've seen so far this summer, it's that "Transformers" still rules, and if something can go wrong for Warner Brothers, it likely will. This past weekend emphasized both of those points, as the box office in general fell a sharp 45% year-to-year, sending analysts and executives into an overdrive.
Here's a look at the two studios whose financial bottom line may be the most impacted:
Paramount (a subsidiary of Viacom (NASDAQ:VIA))
"Transformers: Age of Extinction"
Finish: 1st place/Est. budget: $210 million/3-day estimated total: $36.4 million/Total estimated gross: $174.4 million*
It's no coincidence Paramount released "Transformers" last weekend versus this weekend, as overall, the industry doesn't like when the 4th of July falls on a Friday, as it cuts into its profits. Now, with no other studio releasing a major tentpole (action) pic, the studio got to extend its dominance an extra weekend. Following the holiday weekend, the fourth "Transformers" film and the first with new lead Mark Wahlberg sits at an impressive global total of just over $575 million.
You may also notice that Paramount only has one movie on the charts this week. Not just one in the top ten… but just one, period. "Transformers" was the studio's first summer release, and it came right about halfway through the traditional summer season. While other studios have already entered the box office battle (in some cases, multiple times), Paramount has been on the sidelines biding its time, and it certainly made a big splash when it jumped into the fray.
"Transformers'" overall numbers are a big piece of good news for both the studio and investors, as the start to 2014 wasn't anywhere near what executives had expected. Paramount started off the year way back in week one by spinning off its "Paranormal Activity" franchise, in an attempt to appeal directly to Latino audiences. Even though "Paranormal Activity: The Chosen Ones" did put up decent numbers, it failed to live up to the blockbuster status of its predecessors; however, since it was produced for just $5 million, the film did quickly turn a profit.
The same couldn't be said for "Jack Ryan: Shadow Recruit" and "Labor Day", which each opened well below expectations. Luckily for Paramount, despite a wave of negative press pre-release, "Noah" defied projections, and thanks to surprising help from religious audiences, broke the $100-million mark domestically and the $300-million mark globally.
The studio's success with "Noah" allowed Paramount to comfortably wait until it was able to spring its "Transformers" trap last weekend. For Viacom itself, though, TV is more what carries the company and the stock, with channels like Nickelodeon, Comedy Central and MTV providing the most real movement, so when the company's film division gets a major win like this, it's worth noting.
However before investing, you have to look at its future slate. The studio won't have long to rest on its laurels, as it has two more films this summer releasing just weeks apart, including "Hercules", starring Dwayne "The Rock" Johnson, and the live-action re-launch of the "Teenage Mutant Ninja Turtles" franchise.
Now as a warning to investors, both of these films do carry with them a huge upside, but both also carry a huge risk, as many don't believe "Hercules" is a bankable franchise, and die-hard "TMNT" fans have been taking shots at the studios and the film's producer Michael Bay every chance they can get.
These are two summer popcorn films, and each will face stiff competition, but Paramount is hopeful they'll be up for the challenge. Although after seeing Bay work his magic with "Transformers", you can see why expectations are high. Still, these aren't films that should make people run out to buy Viacom stock just yet.
Overall, investors who already had shares of the company have to be happy with the tour de force performance of "Transformers", as it really did beat the odds. Essentially, this is now a critic-proof franchise, and that is incredibly rare.
Short term, Paramount will continue to see a nice bounce, as July is light on tentpoles, which means "Transformers" will be able to pad its gross until Marvel's (NYSE:DIS) "Guardians of the Galaxy" takes over the box office next month.
Warner Brothers (a subsidiary of Time Warner (NYSE:TWX))
Finish: 2nd place/Est. budget: $20 million/3-day estimated total: $21.1 million/5-day estimated total: $32.9 million
Finish: 8th place /Est. budget: $40 million/3-day estimated total: $5.1 million/Total estimate gross: $36.7 million
"Edge of Tomorrow"
Finish: 1st place/Est. budget: $178 million/3-day estimated total: $3.6 million/Total estimate gross: $90.8 million
Warner Brothers has not had the type of summer it initially imagined when it first devised a slate that included films starring Adam Sandler, Melissa McCarthy, Tom Cruise and Channing Tatum. For the moment, though, McCarthy's is the one with all of the attention.
"Tammy" opened this weekend to a three-day total of $21 million and a five-day total just above $32 million, which, given its meager budget, would seem like a hit. However, if you look at McCarthy's recent track record, you'd see that's not the case. The talented actress' last two films both opened to three-day totals of over $30 million and ended their runs topping the $100 million mark. It is unlikely "Tammy" will clear $75 million (domestically), and that is not what Warner's executives envisioned when they greenlit this pic.
The studio can spin "Tammy's" opening any way it wants, but it is just the latest in a long line of misfires for Warner Brothers this summer. After defying expectations and starting off so hot with "Godzilla", the studio took a hit with Sandler's "Blended", saw Cruise's "Edge of Tomorrow" falter, Clint Eastwood's "Jersey Boys" adaptation fail to connect with audiences, and Channing Tatum's "Jupiter Ascending" fall off the 2014 roster completely.
Yet, given the small budgets of "Blended", "Tammy" and "Jersey Boys", plus a ton of help from international ticket sales with "Tomorrow", Warner Brothers will still see each film recoup its production costs, so the studio won't hemorrhage money and it stock price won't see a massive hit (yet).
Of course, having HBO and the Turner network of channels (TBS, TNT, Cartoon Network) thriving will help Time Warner balance out in the end. Still, it will take it on the chin pretty hard from an ego perspective, as Warner Brothers put a lot of marketing and promotion behind this slate, and it keeps seeing flop after flop.
To make things more interesting, the studio still has two more films slated for this summer, with tornado disaster pic "Into The Storm" and the adaptation of the young adult novel "If I Stay" both being released in August. Realistically, neither film was ever going to make or break Warner Brothers' summer, but now the pair is going to be tasked with at least helping to right the ship.
Remember, Warner by far has the most films on the roster this summer, which also means it has the most chances for success or failure. This has been a rough one for the studio, and it hasn't given investors a reason to flock to own stock in its parent company... just yet. It's worth noting that the studio's 2015 summer slate includes "The Entourage Movie", disaster pic "San Andreas", a sequel to "Magic Mike" and the reboot of the "Mad Max" franchise, so eventually, that will change.
More importantly, though, while it's easy to bet against the studio now, investors should still keep Time Warner on its radar, as this is a studio primed for growth, as rumors are swirling it will soon announce plans to rival Marvel for comic book film supremacy that could prove to be a game-changer. The announcement could come as early the San Diego Comic Con at the end of the month. If that does indeed happen, it will move the stock price of its parent company, but in which direction depends on the announcement itself.
Regardless, the studio does also has a stronger fall slate, including Oscar bait movies "The Good Lie" (with Reese Witherspoon) and "The Judge" (with Robert Downey Jr.), as well as blockbusters "Horrible Bosses 2" and the final installment in "The Hobbit" trilogy, "The Battle of the Five Armies", so it's possible the studio can turn itself around before year-end.
Next week, 20th Century Fox (NASDAQ:FOXA) takes center stage as "Dawn of the Planet of the Apes" arrives in theaters.
All box office grosses/budgets come from The-Numbers.com, unless otherwise noted.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.