Market Overview

Hollywood's Still Not Getting It (Bring On The Sky Pirates)

The Associated Press' David Germain reported Sunday that Hollywood's holiday season is off to a poor start. In a time of the year when the film industry expects many to head to the theaters, domestic revenue has been lackluster. Germain: "Fewer people went to the movies the last two weekends than during the box-office hush that followed the Sept. 11 attacks 10 years ago."

According to the article, this past weekend "domestic revenues tumbled to a 2011 low of about $77 million." The much-anticipated holiday romance comedy "New Year's Eve" took the top place, but reaped a weak $13.7 million. Commenting on the dire state of Hollywood box office revenues, Hollywood.com analyst Paul Dergarabedian said, "It's unbelievable how bad it is."

Germain noted that taking into account the average ticket price, "Harry Potter and the Deathly Hallows: Part 2", the year's top-grossing film, brought more people to the theaters by itself at its opening weekend. According to Germain, domestic revenues have been slow this year while "many studio executives expected to do record business." Dan Fellman, head of distribution at Warner Bros., stated that "the audience certainly is available. Unfortunately, they have not come out in the numbers they have in the past." Fellman continued, "I'm hoping this is just a glitch, and starting next weekend, the box-office will expand."

Where poor box office revenues may be a shock to analysts and studio executives, some of us are not surprised. Given the struggling economy, many movie-goers are not willing to shell out money for movies that may be speculative in their entertainment. With rising food and fuel prices, Americans understandably have less money for discretionary spending on things like movies and going out to restaurants. And while the US economy is contracting, perhaps our creative abilities are contracting as well. Even further, I imagine that it can be difficult trying to create films that will be entertaining and appealing to a cultural diverse, incohesive national audience. Even so, from comedies to dramas to science fiction films, movies are something that can bond people from around the world; movies are things that can bring people together.

It shouldn't take a genius to see that in this time period, the movies that are doing the best are those with tried-and-true franchise storylines and established devout fan bases. Star Trek, Indiana Jones, Harry Potter, Batman, et al. In other words, with high ticket prices, Americans do not have funds for roll-of-the-dice entertainment at movie theaters with unfamiliar storylines. Even so, at one point even Harry Potter and Indiana Jones were unfamiliar storylines. The economic component may be driving box office numbers down, but the substance of recent movies may also play a big part of problems in Hollywood. As Germain conceded in his article, "Studio bosses generally blame bad weekends on bad movies."

Nearly two months ago, I discussed issues with Hollywood and movies that are coming out. I wrote, "Just for fun and laughs I sometimes like to look at the movie listing and accompanying plot summaries at nearby local movie theaters." In taking a look at the current listing of movies that are out, not too much is catching my eye as something that I'd be willing to pay eight bucks to go see. "New Year's Eve"...no; Hollywood has come out with too many holiday-season romantic comedies. "Twilight Saga: Breaking Dawn - Part 1"...that may be appealing for some, but not for me. "The Muppets"...I can wait till it comes out on DVD. "Jack and Jill"...I'm still laughing about South Park's parody of that trailer. "Arthur Christmas"...nah, don't think so. "J. Edgar"...I don't need to be seeing that.

The crux really does come back to audience appeal. Germain wisely noted that the situation with Hollywood movies "might be a different story now if one of the upcoming action movies had opened around Thanksgiving, offering Hollywood's main audience -- young males -- something to see." And I have read that young males are Hollywood's target audience before. Nikke Finke's article from deadline.com that I previously discussed claimed that younger males, who used to be Hollywood's target audience, "have been no longer consistently (and indiscriminately) going to the movies since August." High youth unemployment, anyone?

Analysts may say that young males are Hollywood's target audience, but if that is the case, why are movies like "the Muppets", "Arthur Christmas", "Breaking Dawn", "Puss in Boots", and "New Year's Eve" the biggest and most advertised movies currently out in the theaters? How can anyone say that young males are Hollywood's target audience given the movies that are out in the theaters today? Okay, so "Immortals" is out in the theaters...we already had "300", "Percy Jackson & the Olympians: the Lightning Thief", and a remake of "Clash of the Titans". You've got to try harder in this economy, Hollywood.

As I previously wrote, there are creative options that the film industry could use in order to create movies that people would want to go see. The one option I previously mentioned was that of Somalian pirates. I think an action movie about Somalian pirates would be entertaining. I think people enjoy seeing various naval action movies; some of the most famous action movies ever created dealt with epic naval battles. And in that light, perhaps there is hope for Hollywood -- because the film "Battleship" is due to come out in May 2012. After watching the trailer for "Battleship", I am about 75 percent confident that I will go to see "Battleship" in the movie theater.

I actually saw the trailer for the movie "Battleship" today as an advertisement prior to the music video for "On Melancholy Hill" by the Gorillaz, which is a really good song by the way. The trailer for "Battleship" was quite entertaining, and for the first time in quite a while, while watching the trailer, I have to admit that I thought to myself, "Wow, now that's a movie I might want to see in the theater."

And I'm not sure if it was a coincidence with the naval-battle connection, but apparently the Gorillaz get what it means to make entertaining videos. Machine guns, pirates that fly planes, good music...these may be the things that audiences who like action movies want to see. The opening to the video for "On Melancholy Hill" shows sky pirates using planes to attack a cruise ship. And see, I think even the Gorillaz get it! Those who prefer action movies over romantic comedies would rather see sky pirates attacking a cruise ship over Tom Hanks and Julia Roberts hanging out at a coffee shop! (I would like to know how many romantic comedies Hollywood can make before they start repeating themselves (if they haven't reached that point already).) It could just be me, but I think those who like action movies tend to enjoy movies that take them out of their familiar setting to an adventurous and exciting new world. That's what so great about seeing movies in the first place, they take us from the world we know and put us in some other more interesting and exciting faraway land.

Thus, if Hollywood is targeting young males, bring on the action movies. Science fiction, historical, fantasy, western, post-apocalyptic, monster, naval, cloak-and-dagger, gangster, pirate, ninja, whatever. I mean, seriously, what about a "Halo" movie? Maybe Quentin Tarantino, one of my favorite directors and screenwriters, has got some good movies that are going to be coming out soon. Maybe those rumors about a Doctor Who film in the works are true, and at the very least, we can look forward to an exciting science fiction film in the near future. Hopefully, soon Hollywood will get the message, and movies will get better in 2012. We can only hope.

ACTION ITEMS:

Bullish:
Traders who believe that box office revenues will increase substantially in 2012 owing to Hollywood making more movies that are appealing to Americans might want to consider the following trades:

  • Go long on Dreamworks SKG (NASDAQ: DWA), Imax (NYSE: IMAX), and Lions Gate Entertainment (NYSE: LGF).

Bearish:
Traders who believe that box office numbers will continue to lag owing to the economy and Hollywood's failure to make decent movies that attract audiences may consider alternate positions:

  • Look into going long on Netflix (NASDAQ: NFLX). Traders could also short Regal Entertainment Group (NYSE: RGC) and Cinemark Holdings, Inc. (NYSE: CNK).

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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