With the passing of Labor Day comes the official end of the summer movie season and it's not been kind to Hollywood this year. In fact many analysts have essentially been giving the season a "F," which isn't surprising given that this year will mark an eight-year box office low with revenue down nearly 15% and attendance falling 5%.
Yet it's not all doom and gloom as some trends did emerge this summer that can help any investor with a media stock in their portfolio make the right moves to beat the box office at its own game.
This summer saw at least 15 films (spread out across nearly every studio) that were either sequels or were created with the idea of it spawning a sequel. Many studios are in fact now doubling-down on franchises and it's not hard to see to why, but before investing know there are risks.
For Paramount (a subsidiary of Viacom (NYSE:VIA)) though, it was able to take those risks and overcome them. In fact all of Paramount's summer films were meant to capitalize on that trend and for the most part the idea worked. Transformers: Age of Extinction dominated the summer with a billion dollars worldwide and the Teenage Mutant Ninja Turtles made a triumphant return to the big screen with $166 million earned so far.
While the third film in the equation, Hercules, starring Dwayne "The Rock" Johnson couldn't quite grow to mythical proportions it didn't matter in the long run. Here the other two movies not only helped Paramount, but helped the company's consumer products divisions. In the case of the Turtles it also benefited Viacom subsidiary Nickelodeon which will use that success to help launch the sophomore season of its own well-received Turtles animated series. Synergy at its best.
Again, while it worked beautifully for Paramount, other studios took a big hit. Sony (NYSE:SNE), for example saw major success from 22 Jump Street and Think Like A Man Too, but its big summer tentpole smash The Amazing Spider-Man 2 short-circuited.
Saddled with a $200 million budget, the movie needed a huge showing to become profitable and ended up with just $202 million at the box office. That poor performance actually helped negate the success of its two adult comedies as the web-slinger was all most analysts wanted to focus on.
Now to be fair Spider-Man 2 was saved by foreign audiences that pumped $500 million into the film, ballooning its total to just over $700 million, but the fact remains the film made $60 million less domestically and $49 million less internationally than the original did back in 2012.
As a result Sony pushed the already greenlit third film in the series to 2018 and gave its originally slated 2016 slot to Sinister Six, an ensemble film highlighting Spider-Man's rogue gallery. It's the complete opposite of the success Marvel's had with its multiple Avengers universe branded film series and a big reason why Disney (NYSE:DIS) looks like the better buy if you had to choose between the two.
Yet no matter what, Lions Gate (NYSE:LGF) had it worse as its only summer films (Step Up: All In, The Expendables 3) crashed and burned in back-to-back weeks. Step Up: All In earned just $6.4 million its first week out…the lowest performer in the series thus far and Expendables netted just $15 million. Both film franchises actually opened to less and less money with each new edition. Even international audiences are abandoning Expendables as this one has earned just $93 million overseas where the last one took in $311 million. Granted the movie hasn't opened in every market yet but it's not likely it will climb to that height.
The moral here is that big budget doesn't always mean big return. With Spider-Man 2, Step Up: All In and The Expendables 3 audiences tuned them out because they were cookie cutter and paint by numbers. There was nothing new with any of them, whereas something like Disney's Guardians of the Galaxy brought something radically new to the table and is being rewarded for that type of risk. It's the same thing with Warner Brothers' Godzilla which was not only the studio's only real hit of the summer but one of the season's biggest surprises.
Keep that in mind when looking ahead to next year's slate which features an insanely high number of sequels, including ones from The Avengers, Jurassic Park, Ted, Terminator, Magic Mike and The Fast and The Furious. In the short term though if you want to invest in a studio with an upcoming sequel that's likely to draw a big crowd and not see a big upset, go with Warner Brothers (a subsidiary of Time Warner (NYSE:TWX)) which seems destined for success with Horrible Bosses 2 and The Hobbit: The Battle Of The Five Armies. Ironically you could also go with Lions Gate which will more than likely bounce back thanks to The Hunger Games: Mockingjay: Part 1 film this November.
Still, the safer long-term bet is going to be Warners, as it looks increasingly strong given its just announced slate of DC Comic-centric films that kicks off in 2016 with Batman V. Superman: Dawn of Justice. Pay close attention to what the WB is doing with its super heroes as that stock could skyrocket if they come anywhere close to the success its main rival has had in recent years.
Audiences have proven this is a brand they want to see on the big screen and now that it may finally be done right, Superman and his friends could be flying high for years to come.
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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.