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Monday, June 27, 2011

The WEEKLY CineBUZZ Report - 6/27/11

July - Make or Break

The last 5 Julys are ranked as the highest grossing months for the U.S. box office and with Transformers: Dark of the Moon and Harry Potter and the Deadly Hallows Part 2 (both to be released in 3D versions) we're all hoping this July will keep the streak going and outpace last July's, record holding, $1.32 billion take.

Larry Crowne, Zookeeper, and Horrible Bosses are also on the July roster- my bet is on Horrible Bosses as the breakout comedy with legs.  Two other July releases, Captain America: The First Avenger and Friends with Benefits won't do so well.  Captain America is late to the superhero party and Friends, I don't think will have much punch.  However, the sleeper pick is Crazy Stupid Love as a good date night alternative to either Cowboys & Aliens or The Smurfs.
Lets hope for a record breaker July.

Weekly B.O. Recap

It as no surprise the Cars 2 would be the front-runner this weekend - raking in over $68 million (and a tidy $42 million more overseas). In second place was Bad Teacher which grossed a very respectable $31 million  and should come in at $50-60 million during its overall run. Not as good as the other recent adult comedy, Bridesmaids (which has now taken in over $146 million domestically) but very good nonetheless.

Rounding out the top five for the weekend were Super 8 at $12 million and Mr. Popper's Penguins at $10 million.  The Hangover Part II, which grossed $6.6 million for its fourth week in release has now grossed over $243 million domestically.

Best Picture ReDo

Instituted in 2009, Oscar's Best Picture went from 5 nominated films to a mandatory 10. Well,  just two Academy Award years later the Best Picture Award is being revamped.  Starting in 2011 between 5 and 10 movies will be nominated depending on the raw votes received by the Academy's 6000+ members.  Can't they get it down to the 5 outstanding films of the year?  And yes, maybe the Academy should start choosing the best movies based upon box office grosses.  The Academy should stop voting for the high-brow and so-called artistic films and go with the money movies that really move and sustain the cinema industry both in the U.S. and overseas.  I think you will see Hollywood moving in this direction as what passes for great cinema here is not what the rest of the world (nor a huge percentage of  U. S. moviegoers) is interested in viewing.

Exhibition Goes (Far) East

A total of 313 cinemas were constructed in China last year. China now has approximately 2000 cinemas, and by 2012's end is expected have 3200 cinemas - equating to over 10,000 screens.  This compares to about 35,000 screens in the U.S., which is by most counts over-screened.  By contrast, the Chinese cinema market is vastly under-screened. At 2012's end China will have approximately 160,000 people per screen while, if the U.S. holds steady will have about 8,000 per screen.  I don't think the Chinese envision ramping up to the U.S.'s screen count, (it would equate to over 162,000 screens) but the growth over the next 10 years will be significant.

For Chinese exhibitors the goal is to expand in what are termed "second-tier cities" (mainly provincial capitals and affluent suburbs of same) as first-tier cities like Beijing, Shanghai, Shenzhen, and Guangzhou, will see most of the cinema's growth through 2014.

Best and Happy Movie Going!
Jim Lavorato

Monday, June 20, 2011

The WEEKLY CineBUZZ REPORT - 6/20/11

Green Lantern took in $52 million plus in its U.S. debut weekend, which was not the stellar showing Warner Bros. had hoped for their $200 million, highly marketed 3D product.  Once again, 3D disappointed as only 45% of Green Lantern viewers opted for the higher priced 3D version..

Mr. Popper's Penguins premiered in third place over the weekend at $18.2 million, which was Fox's turn at disappointment.  Super 8 held at second place and grossed a very decent $21.3 million in its second week of play.

Total YTD box office now stands at $4.2 billion with 538 million tickets sold at an average price of $7.86.  Still playing catch up to 2010 numbers here are my predictions for some of the pending summer releases:

Hits: Cars 2 (6/24), Transformers (6/29), Harry Potter (7/5), Spy Kids (8/19)

Sleepers: Horrible Bosses (7/8), Bad Teacher (6/24), Crazy Stupid Love (7/2),
                Dirty Girl (8/5)

So-So: Conan the Barbarian (8/19), The Zoo Keeper (7/8), Winnie the Pooh (7/15),
            Captain America (7/22), The Smurfs (7/29)

No-Go: Larry Crowne (7/1), Cowboys and Aliens (7/29), Shark Night (9/2)

Youth Prefer Movies on Mobile Devices

Epix, a pay TV platform owned by Lionsgate, MGM, and Paramount, recently commissioned Ipsos/OTX Media (a media research firm) to study the habits of moviegoers in the 18-64 age group.  The study found that increasingly, people (men and women) in the 18 - 36 age group, are using web enabled mobile devices to access movies.  These devices included: tablets, SmartPhones, and notebooks.  Older viewers in the 35-64 group prefered watching movies on TVs, with web connected HDTVs increasing in importance for movie viewing.

These findings show a trend toward accessing movies via an array of streaming devices and that content providers will, in the future, have to use every platform to "serve up" their products.  As movie consumption on mobile and connected devices and platforms continues to grow in popularity content providers will focus on all and any means to distribute their content in its most lucrative fashion.

Cinemas must start NOW to change their business models to cope, survive, and prosper in light of the shift in how people want to view movies.  We don't want cinemas to become Places of No !

3D - A Hollywood Has Been ?

In its fever to cash in on 3D's premium pricing movie distributors delivered what can only be kindly described as a mediocre product.
The public's distain of 3D is becoming readily apparent, due to several factors: high prices, don't like wearing glasses, see no compelling reason for the format, don't like viewing 3D.

Box office issues aside, the shift away from 3D movies by the public has not gone unnoticed by the stock market. Stocks of companies with large stakes in 3D have taken a beating.  Dreamworks shares are down 16% since May end, while Real D (a big 3D proponent) stock plunged 26% during the past month!

Avatar may have been the undoing of 3D, as it set such a high bar in terms of what 3D could offer.  Since Avatar's release it has really been downhill for the 3D format, as recently polled audiences don't consider 3D to be essential to the movie experience.  Of the three top grossing domestic films (Hangover II, Pirates, and Fast Five) only Pirates was released in 3D but only 46% of its admissions were for the higher priced 3D tickets.  Kung Fu Panda 2 the other big 3D disappoint for Hollywood, saw only 45% of its ticket sales for the 3D presentation.

Producing a film in 3D can add as much as 30% to the budget of a high-impact action film and 20% for an animated one.  Green Lantern, a 3D action hero pic was anticipated to gross over $80 million out of the chute but grossed an anemic $52+ million - not good for a film that cost $200 million to produce and market.  Transformers and Harry Potter, both to be released in 3D may well be the tipping point one way or the other for 3D.  34 films are scheduled for release in 3D for 2012, and at least 44 in 2013.  A saving grace for 3D may be the overseas cinema where 3D is very popular.

My bets are on Hollywood's continued push of 3D given its high admission value but I also see the public continuing their resistance with lower 3D ticket sales.  Recommendation: cheaper 3D admission pricing, say an up-charge of $1.

Best and Happy Movie Going
Jim Lavorato

Sunday, June 19, 2011


In May, Netflix increased the number of devices a subscriber can use to stream content to 50 from 5 - the latest being Android SmartPhones.  Now, I hate to beat a dead horse, but this development is like a shot across the bow for movie streaming.  With the addition of Android phones, access points for Netflix now include: all Apple "i" devices, video game consoles, connected Blu-Ray players, tablets, and web-connected HDTVs.  This brings to 10 the number of Netflix enabled devices owned by the average U.S. family.

Worse still, connected TVs sold under the Haier, Memorex, Panasonic, Samsung, Sharp, Sony, and Toshiba brands now incorporate a "red" Netflix button which enable subscribers a direct link to streaming content.

For the moment, Netflix's only competition in the content streaming space is Hulu Plus (see Weekly CineBUZZ Report - 5/30/11) and Amazon Prime (which is available on Roku, TiVo,Logitech, and on select HDTVs from Sony, Vizio, LG, Samsung, and Panasonic).
Cinemas, you need to start changing your business model.  Streaming of first run movies is inevitable so you'll have to adjust to cope.

The MOOLA REPORT - June 2011

Buy As You Watch: Interactive Entertainment

Product placement of beverages/food, clothing, cars, and numerous other "must have" accessories and devices in movies, TV shows and other entertainment vehicles like video games is nothing new, but what's coming next is way cool for merchandisers, consumers, and content providers.

Interactive Entertainment is coming, and it's coming fast.  Why just look at a product while watching a show. How about freeze framing, clicking or better still voice or gesture activate, on the product you're interested in, getting a search on that product and all of its particulars, and then deciding to purchase that product/service right then.  Talk about point-of-sale and impulse shopping.  Interactive Entertainment will be the next huge development in consumer spending and advertising/sales of products.  It will transform media devices, like connected TVs into interactive purchasing mechanisms. It gets the technology out of the way.  All content and search become effortless and approachable for everyone. 

This is not years to come technology but it's here now.  It's only a matter of aligning the players.  This fall, Microsoft will be launching X-Box 5. It will be a gesture and voice activated  media controller where all of your content will reside in one place (probably a cloud) and from which any and all types of entertainment will be available via streaming whenever you want it.  And, shortly thereafter, be used as a point-of-sales device.  Microsoft will not be the only one offering this immersive technology,  cable companies, telcos, and others like Apple, Amazon, and Netflix plus the content providers (which will get a piece of each transaction) will partake.
Look for it at a living room near you.

Moola Cinema Stock Chart

                                                        Share Price        Share Price       I/(D) %
                                                            1/1/11                 6/19/11                      
Ballantyne Strong (BTN)                 $  7.77               $  5.04             (35.1)
Carmike Cinemas (CKEC)                   7.72                   6.86             (11.1)
Cinedign Digital (CIDM)                     1.68                   1.87               11.3
Cinemark Holdings (CNK)                 17.20                 20.02              16.4 
Disney (DIS)                                       37.51                 38.04                1.4
Dolby Labs (DLB)                              66.70                 42.70             (35.9)
Dreamworks (DWA)                           29.26                 21.52             (26.4)
Entertainme Prop. Mgnt. (EPR)          46.25                  45.55              (1.5)
IMAX (IMAX)                                    28.07                  29.59                5.4
Natl' CineMedia (NCMI)                     19.91                  16.36            (17.8)
Netflix (NFLX)                                  175.70                245.67              39.8
Regal Cinemas (RGC)                         11.74                  12.48                6.3                  
Real D (RLD)                                       25.92                  24.76              (4.5)
Technicolor (TCLRY)                            3.56                    6.22             74.7
Time/Warner (TWX)                            32.17                  35.13               9.2    

The stock market has not been kind to cinema stocks of late.  The in-cinema advertising companies (Rentrak and Natl' CineMedia) have taken a real beating, as have, those related to 3D technology like, Dreamworks and Dolby.
The large theatre circuits have not fared very well either posting small gains. Carmike Cinemas, our featured stock of the month - see below, is down 11% for the year and I believe it will trend down for the remainder of the 2011.

Featured Cinema Stock of the Month : CARMIKE CINEMAS
Carmike Cinemas is the 4th largest U.S. cinema exhibitor with 240 theatres and 2,241 screens.  All of its screens have been converted to digital cinema and 591 are 3D enhanced.  Headquartered in Columbus, Georgia, Carmike promotes itself as "America's Hometown Theatres" as it has targeted small and mid-sized markets in which to operate.
In March, Penn Capital Mgnt. Co. upped its stake in Carmike and now owns 10.67% of the company. The investment is valued at slightly over $9 million.  Carmike emerged out of Chapter 11 bankruptcy in 2005 and has focused on controlling costs and reducing debt although it appears that their decision to be an early adopter of digital cinema may prove to be, not only costly, but foolhardy.  Carmike's debt currently totals $338 million. Its enterprise value is $409 million.  First quarter revenue was down 22% y/y and its current book value per share is a negative $1.38.
Earning per share are expected to be a negative $2.15 for 2011 and there appears to be no reason for Carmike's operating except to pay off its creditors and large investors.
Outlook:  The numbers speak for themselves.  Carmike has so little management flexibility given its very poor financial condition that adjusting its business model to accommodate the coming media streaming technology is not going to happen.  Coming out of bankruptcy and investing in digital cinema conversion of the entire circuit may have been a fatal decision.  The digital cinema platforms Carmike invested in just a few years ago are now obsolete and have done nothing to enhance presentation or this cinema chain's utilization.  These factors, coupled with the public's apparent fatiguing of 3D movies, does not bode well and I don't envision much upside for Carmike going forward.

Payment By SmartPhone

All cinemas should start accepting admission and concession purchases via mobile payment if they haven't already done soSquare, a SmartPhone payment system provides small businesses the necessary gear that converts just about any SmartPhone into a credit card swiper and its free!  Users are charged a small transaction fee, which is about one-half the rate of credit card bank fees, and Square accepts all credit cards. Other mobile payment systems offer readers that can be placed in cinemas which scan a bar code displayed on the SmartPhone's  screen.
There are no staff training issues and the public will be moving toward this type of credit payment given the fact that all that is needed is to have your phone at the ready.
iPhones, Blackberries, and Android enabled phones can process payments.  This will have broad usage as all age groups use/have cell phones.  Mobile payments are quicker to process and easier for both customer and vendor.
Don't miss this opportunity.  Provide for mobile payments at your cinema now and get ahead of the curve on this technology!

Best and Happy Movie Going
Jim Lavorato

Tuesday, June 14, 2011

The WEEKLY CineBUZZ REPORT - 6/13/11

Box Office Review

Last week's box office gross dropped over 11% from the previous week's take (which was down 29% from May's final week's gate).  At June 9th, YTD domestic box stood at $4.33 billion, down $315 million or 7% on a Y/Y basis.

Super 8 came out of the chute with a somewhat lackluster $37 million gate, far below the top weekly grossers of May. Pirates Of The Caribbean: On  Stranger Tides is the big winner for 2011 thus far, with a worldwide tally now over $800 million.  Fast Five holds second with a global gross of $556 million.  My guess is that the high price of moviegoing (whether real or preceived) hampers repeat attendance and the folks are waiting for Cars 2 (6/24 release), Transformers: Dark of the Moon (7/1), and Harry Potter And The Deathly Hallow-2 (7/15) before going back to the local cineplex.

Look for good grosses from Bad Teacher (6/24) and Crazy, Stupid, Love (7/29).  I also think there will be a good summer home stretch with August releases.  My picks being: Dirty Girl, Don't Be Afraid of the Dark, Conan The Barbarian, Fright Night, and Spy Kids 4.

The Trend Report

                  Rising                         Falling                       Splat           

          Web Streaming           Satellite Feeds           Set Top Boxes             
               Tablets                       Notebooks                       PCs
       SmartPhone Payment     Credit Card Pymt.             ATMs

Retail-Ready Packaging for Cinemas

RRP is used to improve merchandise appearance on the retail shelf through the use of self-contained display boxes or trays.  This type of packaging makes it easier for customers to identify products and should be used in cinemas for candy and other concession products.  RRP is environmentally friendly because it reduces material usage. Additionally, using RRP eliminates the need for unit stocking and is easy to open as many of the RRP packing/display cartons use pull tabs and slide-off lids.

The key to RRP is that it is setting a trend in retail sales which eliminates extraneous material in packaging while maintaining structural integrity and the shipping box is use as a display feature.

Cinemas should insist on RRP for all if their candy and other concession items. Its use improves point of sales transaction rates while being environmentally friendly.

Best and Happy Moviegoing
Jim Lavorato

Sunday, June 12, 2011

Digital Cinema/3D Bulletin - Issue #104

It's hard to believe, but some folks in the industry are still pushing the need for Digital Cinema conversion. Now more then ever, cinema exhibition is under attack:

- The studios are moving to further shorten the theatrical release window
- Even with a stellar May box office and a great June (thus far) total gross is
   still down almost 7% vs. 2010.
- Digital Cinema does not provide any presentation enhancement value.
- 3D is fatiguing due to high admission surcharges and under-whelming

It's time for exhibitors to reassess the landscape and adjust.  As the future unfolds, content streaming (movies included) through a myriad of outlets and web enhanced devices is inevitable.  There is no logical reason for the studios to give cinemas first dibs on movie releases.  The new distribution outlets will demand quicker and quicker release dates and they will have mass viewership and revenue dollars in their favor.  Not to mention the fact that this would virtually eliminate Hollywood's piracy issue.

Netflix, just one player in the streaming game, has 25 million subscribers. Amazon, another, 80 million users worldwide. For example, with an admission price of $10 a $70 million blockbuster movie is seen by 7 million moviegoers over a weekend.  If that same movie were streamed to an array of web devices from SmartPhones to tablets and it was not $10 but say $7/view - do ya think 10 million people would download it. How about 15 or 20 million.  Hell, American Idol gets over 23 million viewers each week. You can see where I'm going with this, there is just too much money involved for the studios to pass this up.

What I am saying will happen but will take some time to evolve. However, cinemas must react now and change their business model. It can be done but it won't be easy.  One thing I know for sure - investing in D-Cinema equipment and conversion is not the answer to exhibitors' problems or their future.

Best and Happy Movie Going
Jim Lavorato

Monday, June 06, 2011


Rave Cinemas and Deluxe/EchoStar recently inked a deal whereby movies, both 2D and 3D, as well as, alternative content, such as the Met Opera and other concerts, will be transmitted to Rave's 800+ screens via satellite.

Sounds great on its face, but the problem is that this is really old and really expensive data transmission technology, it's yesternow !

I was fortunate to consult on a project for the Boeing Company back in 2001.  Boeing was doing a proof of concept for the Hollywood studios. Their goal was to transmit movies via satellite to cinemas using the, then, new Digital Cinema projection systems.  To validate their concept, it was decided to transmit what was going to be a blockbuster film to six D-Cinema platforms at four separate cineplexes in the San Diego area - the film was Star Wars - Attack of the Clones.  This was the first such transmission of its type in pure digital format.  The whole process worked flawlessly and was a great technological success.  The data was triple encrypted, transmitted via Boeing's satellite, automatically ingested into the D-Cinema server, and projected on a regular matte white screen with a terrific image and digital sound.   Unfortunately, Hollywood chose not to utilize the system, and instead decided to ship encrypted hard drives - as is the current practice.
For its part, Boeing was satisfied that the process was a success and went on to use and sell the technology to the health care industry.

Having had first hand experience with satellite transmission of movies I can say that the process works very well but is expensive and somewhat cumbersome as compared to content streaming via the internet, which is the technology the movie industry is moving toward.

So, good deal for Deluxe/EchoStar - bad deal for Rave Cinemas.  Hmmm, Rave should have called for some advice.

Jim Lavorato
Best and Happy Movie Going !



Netflix and Miramax inked a deal last week whereby Netflix will have the rights to stream hundreds of Miramax films to Netflix subscribers. The agreement does not, as yet, include new films but the stage is being set for Netflix (and others) to stream new releases in the future.
In signing the deal, Miramax stated that it believes this is the only way its films can get the exposure (distribution) they deserve.  The deal calls for Netflix to pay Miramax $100 million for the streaming rights to 700+ films on a rotating basis.  The films will be accessible to tablets, PCs, SmartPhones, and SmartTVs.
And so, it has begun. Movies will be streamed and cinemas will be but one outlet for film content. There is just too much money involved for the studios to allow cinemas first dibs on films.  This will not happen overnight but the stage is being set.  Please take note cinema operators and start now (if you haven't already) to change your business model.

3D FATIGUE - Is It Already Here !

Time is not boding well for 3D movies.  Data is starting to reveal that 3D films are not resonating with moviegoers and that 3D attendance is dropping as compared to 2D showings.  The studios have countered by insisting that cinemas play the 3D version and not release the 2D version to the same cinema and push for 3 weeks runs of the 3D movie.
Obviously, the studios like the high admission surcharge on 3D flixs (on average $3/admission) but this is, in my opinion, one of 3Ds problems.  Moviegoers don't perceive the extra expense as value based.  Another reason is that many people (young and old) don't like the 3D experience and are quite satisfied with 2D viewing.
My suggestion: Have a 3D surcharge of $1.  Think about it.


At over $165 million domestically, Hangover II stumbled and bumbled its way to a record boxoffice of $225 million on a global basis.  The month of May ended with a bang and racked up a total domestic box office of $ 1.07 billion with Pirates of the Carib contributing over $167 million and over $700 million world wide.  No doubt May was a stellar box office month but it was also a very wet month which helped bolster in-door admissions.

Total domestic box office now stands at approximately $3.96 billion equating to about 500 million admissions.  This compares to 2010s total of $4.35 billion, so total box office receipts are still down 9% vs. last year.  This has been a big comeback however, as at first quarter end gross box office receipts were down by over 25% vs. 2010.  Several potential big earners are in the wings, including: the final Harry Potter and Cars.

Pray for Rain!