The Hunger Games Develops Taste for New Direction

Earning the title as one of the biggest movie franchises of all time is not enough to keep Gary Ross in the "Hunger Games" director chair. The man responsible for putting the book in motion picture has decided to leave the pending sequels for someone else to develop, as his schedule has deterred him from writing and preparing the Lions Gate Entertainment LGF films. As the story goes with many sagas, not everyone stays on board for each movie. Take Twilight, for example. Each of the four vampire films has had a different director than the last. Scheduling conflicts, family planning or just plain loss of interest can lead to the exit of higher profile actors, actresses and directors. Luckily for the" Hunger Games", its leading star, Jennifer Lawrence, has been locked in for all four films. However, Ross got away without the same contractual obligations. According to Wunderlich Securities, "Despite the noise around director Gary Ross' exit, the domestic potential of the franchise appears quite predictable with upside being Patrick Wachsberger's ability to improve the modest 36.6% foreign share of global box office. We estimate that first cycle profits on the first movie should readily near $265mm. Directing Catching Fire is a marquee win, but Lionsgate needs to move fast in securing a new director to meet an 11.23.13 release." Regardless of the news of Ross' departure, the movie is expected to continue to do well. Just this past weekend, "The Hunger Games" took the number one spot, making it a four-time consecutive winner. Eventually, though, the film will be dethroned by upcoming releases with potentially greater anticipation. Time Warner TWX has experienced a quiet first quarter despite the fan-eagerness surrounding its not-so-secret weapon, The Dark Knight Rises, which is lurking in the shadows until its July 2012 release. Researchers feel comfortable that recovery is inevitable and the film will take the box office by storm. According to J.P. Morgan, "We are lowering our Q1 EPS on a write-off at HBO, but maintain our full year estimate, as we expect an improvement in filmed entertainment margins in 2H, driven by growing anticipation for The Dark Knight Rises. Our Q1 EPS comes down to $0.64, from $0.66 previously, (operating margins come down to 18.8% from 19.3% previously) but our full year 2012 EPS remains at $3.19." Solid ad trends are supposed to benefit networks in Q1, with J.P. Morgan predicting Time Warner to report strong results on Wednesday, May 2nd. Franchise films are certainly not a force to be reckoned with, as they consistently bump one another off the peak of the new release mountain, with "The Hunger Games" and "The Dark Knight Rises" being no exception to this historical trend. LGF is currently trading at $12.21, up +89.3% YoY, while TWX is currently trading at $35.67, down -1.05% YoY.