Analyst: Cowboys And Aliens May Be The Only 3Q Movie Write-Down As Overseas Ticket Sales Grow

Movie moguls usually have to grit their teeth during the media company quarterly earnings season as they begrudgingly acknowledge the bombsthey had to write off. But the 3Q reports that will begin to come out in two weeks could be different, RGC Capital Markets analyst David Bank says this morning. Only one film from the quarter — DreamWorks’ Cowboys And Aliens – “looks likely to be a write-down.” And the outlook for 4Q is encouraging due to “the strong existing slate, combined with the likelihood of surprise ‘tentpoles’ and…relatively easy comps” vs 4Q10. He’s particularly impressed by the soaring returns from overseas where the number of movie theaters is growing. He notes that this year major films are generating more than 1.65 as much from international box offices as they do from domestic, up from 1.45 last year. Bank says that Hollywood is zeroing in on the right investment formula: Spend big on “culturally neutral action/adventure movies” that play well abroad — and slash budgets for comedies that often don’t travel well. For example in 2003 overseas ticket sales for Disney’s Pirates of the Caribbean: The Curse Of The Black Pearl were only slightly ahead of domestic. But overseas audiences spent more than three times as much as U.S. ticket buyers did this year on Pirates of the Caribbean: On Stranger Tides. It’s not a fail-safe formula, he says, pointing to the so-so international results for Sony’s The Green Hornet. But the strategy paid off for the studio with Bad Teacher, which only cost about $20M to produce.