Movie Superheroes Will Pummel One Another’s Ticket Sales – Analyst

Superhero movies saved the day for several studios during the past few years. But the films might lose their punch as Hollywood prepares to pummel multiplexes with big-budget films featuring characters who defy the laws of physics, Cowen and Co’s Doug Creutz says today in his annual take on profitability prospects for Hollywood.

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There is “cause for increasing concern that the major studios are all moving towards increasingly indistinguishable strategies, as they all put more and more eggs in the franchise picture basket,” the analyst says.

He acknowledges that potential blockbusters including Star Wars VII, The Avengers 2 and the final Hunger Games likely will lift 2015’s box office sales ahead of last year’s “dismal levels.” Still, he’s “not convinced that the overall slate is going to drive performance that is significantly better than what we have generally seen over the past four years.”

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And studios could run into trouble beginning in 2016 as Warner Bros, Disney, Fox, and Sony lead a charge of big-budget releases. The number of movies featuring superpowered saviors will double to about seven or eight per year from an average of three or four from 2011 to 2015. The average major superhero movie generated $260 million in domestic box office (adjusted for inflation) in years when there were three or fewer of them, Creutz says. But the average dropped to $224 million in years with four films.

“We believe that a further doubling of output to seven to eight films per year is likely to drive the per-film [domestic box office] average south of $200M, which begins to get towards the danger zone given the $200M+ budgets of many of these films,” he says.

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It isn’t so much that audiences are tiring of the genre. It’s just that they “become less tolerant of middling/poor quality films as

there are better options in the market.”

The larger problem for Hollywood, and theaters, is that it’s getting harder to persuade consumers to go to the movies. Each year the analyst compares box office sales against perceived quality, indicated by films’ Rotten Tomatoes scores. Last year was the fourth in a row in which “above- average film quality was met by below-average ticket sales.” Indeed, 2014 had “both the best average wide-release film quality in the last 15 years and the lowest overall ticket sales.”

Culprits include rising ticket prices; improving home video experiences, including streaming services such as Netflix and Amazon; and competition from digital distractions such as video games and social networking. It’s possible that “income and debt-pressured consumers are ‘trading down’ to a night at home instead of paying for parking, multiple tickets, and expensive food and beverages (and potentially a babysitter as well),” Creutz says.

Meanwhile growth at overseas box offices is slowing as economies lose steam in mature markets including Western Europe, Japan, and Australia.

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