'Hobbit' Franchise Casts One Last Spell For Warner Brothers As 'Five Armies' Beat Expectations In Box Office Win

|
Includes: DIS, FOX, FOXA, LGF.A, SNE, TWX
by: The Entertainment Oracle

Summary

"The Hobbit: The Battle of the Five Armies" over-performed at the box office and gave distributor Warner Brothers a much-needed win.

"Hobbit" fans showed up in force to support the final film in the franchise.

Despite expectations that other new releases would impact its returns, "Hobbit" still delivered.

Fox and Sony also had new films out this pre-holiday weekend, but neither Night at the Museum 3 or Annie managed to make much noise.

If any studio needed a big win to close out the year it was Warner Brothers (a subsidiary of Time Warner (NYSE:TWX)) … and now it has it.

Following disappointing domestic returns for films like Edge of Tomorrow, Blended and Horrible Bosses 2, the studio hit it big with the final installment of The Hobbit trilogy. The Battle of the Five Armies amassed a five day total of around $90 million, which is above last year's The Desolation of Smaug ($86.1 million), but behind the original An Unexpected Journey ($100.2 million).

Yet here's the rub, both of those totals are over a three-day frame. Armies is the only Hobbit film to open over a five-day period, so its three-day haul isn't really a fair comparison. Not that $56 million is anything to scoff at, but it is important to note.

What also needs to be mentioned is that 49% of the larger combined total came from 3D and 15% of it from IMAX ... both options that were not available for a tentpole like Lionsgates' (LGF) The Hunger Games: Mockingjay - Part 1, which had opened to lower numbers last month than its predecessors. It just goes to show how important those premium upcharges are to a film's earnings.

The Hobbit wasn't the only film to open this weekend as both Fox (NASDAQ:FOX) (NASDAQ:FOXA) and Sony (NYSE:SNE) released the last of their 2014 slate with Night at the Museum: Secret of the Tomb and Annie. It had been expected that those films would pull audiences away from Five Armies, but that wasn't the case. As I mentioned in a earlier column, you can't underestimate the appeal of J.R.R. Tolkien's iconic novels and its readers.

As a result, Museum opened to a franchise low of $17.3 million and Annie to a $16.3 gross for a second and third place (respectively) finish. In terms of silver linings, both films will likely get a nice Christmas weekend and holiday period bounce once the diehards have gotten their fill of Hobbit.

Investor Analysis

So what does this mean for the studios and their financial futures? Let's go studio by studio.

For Warner Brothers, this is a big win as the numbers topped the $70 million to $75 million range many had expected. The Lord of the Rings and Hobbit franchises have both been big successes for the studio (in association with subsidiary New Line) and this holiday it will be the gift that keeps on giving.

After a year of films that entered with high expectations and left with the complete opposite, this was a huge win. In terms of 2015, the slate looks strong, but I don't know if Mad Max, San Andreas and the Entourage movie will be enough help them top Disney's (NYSE:DIS) Avengers follow-up and Universal's stellar slate of sequels. Luckily investors know sister companies HBO and Turner Broadcasting are poised to keep profits high.

In terms of Fox, the studio has released four films in a four-week span and none of them met the level of expectations executives had hoped for. Animated spin-off The Penguins of Madagascar (made in partnership with DreamWorks Animation), low budget horror film The Pyramid, religious-based pic Exodus and now Museum 3 all couldn't do a lot of damage. Counter that to the studio's earlier summer films like X-Men: Days of Future Past and The Fault In Our Stars, which were mega-hits. It just goes to show the ebb and flow of the box office. Luckily, Fox's next big release Is Taken 3, which re-teams Liam Neeson with his profitable first quarter timeframe and should lead to solid returns.

Sony's remake of Annie meanwhile got completely lost in the shuffle courtesy of the hacking scandal with The Interview and that could be a good thing. While the film did a little better than expected, the movie got destroyed by critics, who would have been even more merciless had this been the Will Smith/Willow Smith collaboration it was originally supposed to be.

Many forget Sony had been having a solid year domestically at the box office (The Amazing Spider-Man 2 aside) thanks to adult fare like 22 Jump Street and Think Like A Man Too. This fall, the studio saw No Good Deed, Equalizer and Fury turn in high earnings and the hope is that will continue into 2015 should the hacking story not completely engulf the company.

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.