'In the Heights' makes theatrical debut amid renewed box office optimism

Yahoo Finance's Alexandra Canal breaks down box office expectations as 'In the Heights' makes its big screen debut.

Video Transcript

[MUSIC PLAYING]

(SINGING) --to a couple of days in the life of what it's like in Washington Heights.

- You are watching a clip of "In the Heights," the Warner Brothers film making its theatrical debut today. Ali Canal's been singing that song for a while in anticipation of this movie. Ali, you know, last week, or a few weeks ago, we were talking about the big summer kickoff with Memorial Day as more and more theaters open, more and more people feel a little more comfortable getting out there and watching movies the way we used to pre-pandemic. How big of a bump do you think this movie is going to provide?

ALEXANDRA CANAL: Yeah, and you're right, Kiko, I have been singing this. I'm like, in the Heights! I'm a musical girl, so I'm very excited to see this. But yeah, I think the optimism is certainly there, fueled by how successful "A Quiet Place 2" was, nabbing $57 million over that Memorial Day weekend. Expectations were around $40 million, so it widely surpassed those. And it brought renewed optimism around the whole theatrical experience.

When it comes specifically to "In the Heights," there's expectations that they will generate $20 million-plus over the weekend, with the potential to reach $30 million over its first four days in cinemas. Now, the big difference here is that "In the Heights" is also going to be available on HBO Max, completely for free. That's something new that we've seen, I know with "Cruella" that was available on Disney+ for an extra $30 rental fee. But here, if you have the HBO Max app, you can go and enjoy this film within the comforts of your own home.

Another big difference between "In the "Heights and "A Quiet Place 2" is that this is a musical. It's a more niche audience. Typically it doesn't do super super well in theaters. However, there has been a lot of talk about this movie, a lot of anticipation. It has rave reviews on Rotten Tomatoes. And there was a new Fandango poll that was out. They polled over 1,300 US adults, and 96% said that this film in particular is going to be the first movie that they will see post-pandemic.

So I think, you know, the expectations are high. I think people are excited to get back out there. I don't know if we're going to see as high of numbers as we saw with "A Quiet Place 2." But you never know. This has been a very strange box-office season so far.

- And this-- something you've been pointing to, is going to be another test of how-- which way people are going to go now that there is an option to be watching at home versus the theaters too. Of course, you know, the next few months certainly seems like it's going to be a big test on how big of a bump we're likely to get over at the box office. You've got some numbers out from Bloomberg. What do they say in terms of the expectations with at least this first summer blockbuster season post-pandemic?

ALEXANDRA CANAL: Well, Bloomberg is saying it's really not so much about the summer, but really the movies that we have coming out in the second half of the year. So a new note from Bloomberg Intelligence says that domestic theater companies could see $5 billion in gross sales this year. As I mentioned, that's driven by that second half movie slate. And that includes some very impressive potential blockbusters. We have "Dune," "Top Gun: Maverick," "No Time to Die," "Venom 2," and "Eternals." And those are very, very buzzy films that I think are going to surpass expectations.

Now, this $5 billion projection is higher than some others that are out there. Boxoffice Pro is projecting $4.3 billion in 2021, with about $3.2 billion of those receipts coming from that second half movie slate. But Bloomberg argues that recent outperformance could lead to those higher estimates.

Now, an interesting part of this note is that they did mention the [? meme ?] frenzy around AMC. That stock is up nearly 2,000% year to date. And if you remember, AMC has really embraced those retail investors. They said if you invest in our company, we'll give you a free popcorn. We will give you special movie screenings.

And although that's ultimately not going to make or break the box office, it is something that is going to be special. It really renews that movie theater experience. So we'll have to see where things go from here.

I think streaming is still going to be a pretty significant drag on movies at large. It's still highly competitive. We have that 45-day theatrical window. That is, you know, not a great thing for movie theaters. But what I think we're going to see is that the two are going to have to co-exist. And when that happens, they're both going to have to give a bit of a give and take.

So in terms of movies specifically, I don't think we're going to see the numbers at the box office that we saw in 2018 and 2019. 2018 was that record year, just shy of $12 billion domestically. But we could see upward momentum. But it's all going to depend on what happens when more movies come to the market.

- Ali, another story we're watching in this space-- Netflix, you know, that's a streaming site, now getting into online shopping. I don't know if that's the right way to characterize it. The company's first owned and operated retail outlet opening here to sell products direct to consumer.

What's the strategy? Because Netflix has already had licensing deals in place to sell products tied to their original programming. Why open this up to a retail outlet?

ALEXANDRA CANAL: I think they want options here. I think, as more and more streamers come to market, they don't have the dominance that they've had. I think we've seen that in their subscriber growth numbers. So what they're trying to think of different ways that they could diversify, different ways that they could bring in revenue.

And if you think about some of these series-- I mean, "Stranger Things," you have some of the more anime series that really has a wide-ranging audience. These are dedicated, hardcore fans. They want the merch. They want the sweatshirt. They want the necklaces. They want all of that stuff. So why not cater to that consumer and make some money off of it?

I also think-- I know [? Jared, ?] I think you mentioned this, that this kind of reminds me of Disney. And it's interesting to see all of these different media conglomerates sort of taking little tips and tricks from each other to try to make their own business better.

- Yeah, I think it's notable. I mean, there's still a Disney store in Times Square. I wonder if someday there will be a brick-and-mortars Netflix store in Times Square.

But yeah, a lot of these entertainment companies are able to have an ecosystem like Disney World, where they got the theaters, they got the parks, and it's all symbiotic. But Netflix doesn't really have that. They can't-- they don't have ads, so they got to make money some other ways. They have merchandising agreements with Walmart and some other stores. But I think it's notable too that they chose Shopify to-- Shopify to execute this. And it just strengths to-- speaks to the strength of the Shopify e-commerce platform and how they've come along as well.

ALEXANDRA CANAL: Yeah, and you bring up a good point, that Netflix isn't-- this isn't really what they do. And I think that's part of the reason why they've been so successful in streaming, is that their main focus was only streaming. And I know when Disney+ came to market, a lot of people were questioning, well, is Disney-- are they too distracted by other things, with the theme parks, with the stores, everything else that they have going on in the company? But I think Netflix-- I think this is a good move for them. I think it's something that they needed to do in order to compete, and again, just capitalizing on that consumer that really is craving this type of merchandise, so why not?

- Yeah, Ali, you bring up the point I was thinking about, which is, you know, in many ways Netflix has been successful because they've been so hyper-focused on content. I mean, this feels like sort of staying in that same space, though, because they're not necessarily venturing into other services. They're only building out on what they've had.

You look at a show like "Stranger Things." I mean, they have had products in place. They have been selling it. I guess the strategy here is, if you've already got it, why not cash in and sort of create your own [? moat, ?] if you will, around those-- it's going to be interesting to see how many people actually go to the store, though, to actually buy these products, because they have been on sale in places like a Walmart or a Target before. But we're going to be watching that one closely. Ali, thanks so much for that.