Doug McIntyre, a partner at Wall Street firm "24/Wall St" explains how investors were hoping that Warner's film slate would do better this year. A recent downgrade of the TWX stock by JPMorgan was based, in part, on the projections that the financials of the company's film unit would get worse.
"Things are not looking up at the Time Warner film unit. It has had no hits this year, and even "Jackass" ($51.4 million so far), could ultimately pass "Superman Returns" ($198.5 million), which is Time Warner's biggest box office release in 2006. "Superman" cost so much to make that it almost did not matter how much money it brought in. It was going to lose money under even the best of circumstances."Although we're very skeptical ourselves that an idiotic picture like Jackass 2 will pass even Singerman's domestic box office (unless of course he's talking about profitability?), McIntyre's sentiment is one that's been echoed around Wall Street about WB and their summer film slate. Tack onto this the implosions of Poseidon, Lady In The Water, and Ant Bully and the picture gets even more grim. All "fanboyism" aside, it's the opinion of "the Street" and in turn Time Warner shareholders and its board of directors that's going to determine where their film division goes from here. Singerman was expected to lead the way for the WB summer slate, and when it fell flat, there wasn't much else for the studio to fall back on to show it's stockholders. With Singerman struggling to get to $200 million domestic and $400 million worldwide, it wont see a profit until long after it hits the home video market. (Assuming WB gets about 55% of the worldwide B.O., and it cost about $300 million to produce and market.) McIntyre goes on to add:
Pretty interesting stuff, especially considering Disney had what was largely considered the most successful summer of all studios with POTC2 and Cars. Personally I'd expect to see budgets for WB films scaled back considerably in the coming years. The real question then becomes, can superhero franchises survive under those restrictions? And if so, can they be done well?
"The film-making business is notoriously fickle. But the costs of running a studio are not. Disney decided to cut 450 people at its production unit earlier this year and cut the number of movies it would put out. At least if it had a dry spell its costs should be less.
For Time Warner and its stock to stage a full recovery, it will not suffice that its cable and network businesses do well. The film unit will have to pull its own weight. Right now, it isn't."