MEDIA REPORTER
For the past week, Ellis Jacob has been dealing with the lingering effects of The Hangover.
The film, a guy-driven comedy about a stag party gone off the rails in Vegas, has created an unexpected problem for the chief executive officer of Canada's largest theatre chain, Cineplex Galaxy Income Fund CGX.UN-T.
The first big comedy of the summer movie season can usually be relied upon to hit theatres with a bang, then start to decline at the box office before it is overtaken by a parade of others courting the same audience.
But The Hangover is showing no signs of doing that soon. With a $116-million (U.S.) take at North American theatres so far, exhibitors like Cineplex are now trying to figure out how they can push this overachieving title past $200-million.
"It's doing better than we thought," Mr. Jacob said. "Last week it had one of the strongest weekday businesses of movies in the last couple of years." While a typical summer blockbuster usually averages $5-million a day between Monday and Thursday, The Hangover has been pulling in about $7-million.
However, therein lies the challenge for Mr. Jacob this summer. As much as he'd like to keep that movie around to milk the profits, he can't. For a variety of reasons - from hedge funds to the DVD market - the industry is grappling with a scheduling logjam.
In a year that is heavy on big-budget films such as Star Trek, Terminator Salvation and the forthcoming Transformers: Revenge of the Fallen and G.I. Joe: The Rise of Cobra, screen-management is now critical.
The crunch is the result of a surge in private equity investment in film studios over the past few years that's caused production budgets to balloon and more movies to be made. But the bigger factor may be DVD sales, analysts say.
Studios have pushed more of their big films into theatres early this year - from late May to mid-July - so that they can be ready to hit the DVD market by U.S. Thanksgiving in November, which kicks off the holiday shopping rush. While this is not a new trend, it's more pronounced this year, analysts say. Fewer titles have been held to August.
"The DVD market is the single largest cash flow window for the studios, as the marketing spend is a fraction of what it is for the theatrical release," said analyst Ben Mogil of Thomas Weisel Partners.
With a movie taking about five months to hit store shelves, "there is a push to make sure that big movies open in the summer in order to be on DVD for the Christmas season," Mr. Mogil said. "This year that is accentuated because the studios got a ton of hedge fund and private equity money from 2005 to 2007, ramping up production."
A studio decision last year to delay the latest Harry Potter instalment, The Half-Blood Prince to July 15 has only crammed the slate further. And despite the unexpected success of The Hangover, the busy schedule has taken its toll on some movies.
In a perfect world, each big summer film would be given three or four weeks to command the attention of theatregoers in its particular target demographic. This is known in the industry as "the runway" for a new release.
That strategy played to near perfection last summer when two of the best box office performers were released within days of each other, but were from different genres. The Dark Knight and Mama Mia both outperformed - particularly The Dark Knight, which went on to gross more than $500-million in North America - because they didn't cannibalize each other's audiences.
This year, movies have less time to establish themselves before they face competition from similar contenders. Runways are now as short as one or two weeks for many films.
Star Trek is so far the highest-grossing movie of the summer, raking in $233-million domestically, but Mr. Jacob points out that it was important for that movie to get out in May because "once Transformers opens up, Star Trek is pretty well done."
On the other hand, Terminator Salvation was expected to do much better than the $115-million it has drawn. Its fate was sealed when the studios tried to open it 13 days after Star Trek, much too close for two big budget movies of the same ilk.
"If you are opening The Dark Knight and Mama Mia, that's not a problem because it's a different clientele," Mr. Jacob said. "But if you are opening Star Trek, Terminator and then Transformers, they are all the same target audience, so it makes it a little more difficult. You start eating the same demographic."
The 63-day gap between animated films Monsters vs Aliens and Up is how the industry would rather schedule movies, Mr. Mogil said. "A shorter runway means films have a shorter time frame to capture audience before the next release in its sweet spot comes out," Mr. Mogil said.
There is no film projected to be as big as The Dark Knight in 2009, but the six-week gap between Transformers and GI Joe should mean those films will have enough of a runway to stretch out ticket sales, with Transformers likely passing $300-million.
Despite the industry fixation on the summer, Mr. Jacob is an advocate of opening big movies outside of the May-to-September window. "I think big movies can open any time of year, because there is demand for them," he said, pointing to the success of action movie 300, which opened in March of 2007 and sold more tickets than most of the summer movies that year. "It's better to spread it out because you get a longer run in the theatres and you pretty well have that audience to yourself."
If there is a bright side to the casualties of the packed schedule this year - which includes other weaker-than-expected performances, such as Night at the Museum 2 and action movie The Taking of Pelham 1 2 3 - it's that the number of screens dedicated to a dud can be scaled back to make room for the surprise hits.
It's those sorts of calculations that Mr. Jacob is now performing to see if he can accommodate screens for The Hangover into July. "For every one that is a success, there are some that just don't make it the way you expect them to," he said.
Cineplex Galaxy (CGX.UN)
Close: $14.98 (Cdn.), down 12¢
***
THE MEASURING STICK: THE DARK KNIGHT
Box office: $533-million (U.S.) in total
Last summer's Batman instalment has cast a long shadow over the industry a year after it was released. It made $533-million at North American theatres on its way to a $1-billion worldwide box office haul.
*
THE OVERACHIEVER: THE HANGOVER
$116-million in 12 days
The raunchy guy comedy was expected to do well, but most theatre chains did not expect the buzz to linger so long. With a $116-million box office take after its first 12 days (up until Tuesday), The Hangover is being talked about as a potential $200-million movie, and exhibitors are now looking for ways to keep it around longer than initially intended.
*
THE CASUALTY: TERMINATOR SALVATION
$115-million in 27 days
The fourth Terminator movie was expected to do better than the $115-million it has made so far, but studios were faced with a problem in choosing the release date. It had to be out before Transformers and GI Joe, but by the time Salvation was released, Sci-Fi audiences were still flocking to Star Trek - and both movies ate into each other's box office.
*
THE BLOCKBUSTER: TRANSFORMERS: REVENGE OF THE FALLEN
Release expected June 24
This summer's projected big money maker, Transformers: Revenge of the Fallen, is expected to pull in just over $300-million. Though it won't come close to the half-billion Dark Knight made in North America last year, the robot explosion flick will likely split that number with G.I. Joe: The Rise of Cobra.
Sources: Box Office Mojo and Cineplex
© The Globe and Mail
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