DreamWorks (DWA): Why a Movie’s Opening Weekend Isn’t Everything

by Geoff Gannon


Quan here.

The media and the stock market pay too much attention to a movie’s opening weekend at the U.S. box office. The opening weekend is important. But it’s not everything. This post will help you put a movie’s opening weekend in perspective. This is a critical skill when analyzing a stock like DreamWorks (DWA).

 

Two DreamWorks Movies: Monsters vs. Aliens vs. How to Train Your Dragon

Today I’m going to tell you about two movies targeting the same audience, produced by the same studio (DreamWorks), distributed by the same distributor (Paramount), shown on almost the exact same number of screens – that opened exactly a year and a day apart.

You couldn’t ask for a cleaner comparison. And yet…

One made $495 million in total box office gross. The other made $382 million. One has a sequel in the works. The other doesn’t. One has a television series in the works. The other doesn’t. One was a big success. The other wasn’t.

One of these movies made $59 million in the opening weekend. The other made $44 million.

The one that made $44 million was the success. The one that made $59 million – didn’t quite cut it.

I’m talking about Monster vs. Aliens and How to Train Your Dragon. How to Train Your Dragon is the super successful one. And yet it only made $44 million in its opening weekend:

 

Monster vs. Aliens

How to Train Your Dragon

Opening Weekend

$59,321,095

$43,732,319

Domestic Box Office

$198,351,326

$217,581,231

Foreign Box Office

$183,158,344

$277,297,528

Worldwide Box Office

$381,509,870

$494,878,759

DVD sales

$82,268,845

$121,591,477

Rotten Tomatoes Critics

72%

98%

Rotten Tomatoes Audiences

65%

90%

 

Opening Weekend is About Buzz

The opening weekend box office is driven by buzz. That buzz can be created by big marketing, stars, rumors, or the novel concept of a movie.

The death of Heath Ledger definitely seemed to contribute to The Dark Knight’s $158 million opening weekend.

The Avengers opened big because of the biggest marketing campaign ever in the movie industry. And, of course, the fact that it built on the momentum of earlier movies in a way pretty much no series had ever done before.

 

Movie Stars

Characters can create buzz. But so can stars. A “star” is someone who can open a movie. Shia Labeouf has been in some huge movies. But he’s not a star. Johnny Depp has been in some really big movies and some really small movies. Yet he is a star.

What’s the difference?

If the actor is the main attraction – something that actually gets people in the seats – he’s a star. Some middle sized movies make heavy use of stars. While some huge movies make almost no use of stars. In fact, the story – not any one actor – is the star of many of the biggest movies of all time.

Being famous is not the same thing as being a star. I’m not sure how famous Channing Tatum is to most Americans. He was, however, the star element in a recently released little movie called Magic Mike. That movie opened to $39 million. And cost $7 million to make. Magic Mike wouldn’t be in the top movies of the weekend – it was #2 behind Ted – if it weren’t for its star: Channing Tatum.

The momentum of Channing Tatum from his earlier hits this year – The Vow and 21 Jump Street – created more buzz for Magic Mike than anyone could have hoped for when the studio decided to make the movie.

DreamWorks Animation tends to use movie stars as the voice actors in its movies. A good example of this strategy is Megamind which featured the following cast:

  • Will Ferrell
  • Brad Pitt
  • Tina Fey
  • Jonah Hill

Megamind was not one of DreamWorks big hits. In contrast, How to Train Your Dragon was one of DreamWorks's lowest profile voice talent movies ever with:

  • Jay Baruchel
  • Gerard Butler
  • Craig Ferguson
  • America Ferrera
  • Jonah Hill

Those are known names. But nowhere near the level of Will Ferrell and Brad Pitt when it comes to a movie role.

 

Concept

What about the story as star?

The concept of a vulgar teddy bear definitely helped Ted in a time when animated movies led the box office for 3 consecutive weeks. If you wanted to be entertained at the theater – and you didn’t want to bring the kids – Ted was one of your very few choices at a time when both Brave and Madagascar 3 were taking up screens.

 

How They Opened: Monsters vs. Aliens vs. How to Train Your Dragon

Monster vs. Aliens was released in March 2009. It was the first 3D movie by DreamWorks. I think that helped the movie in the opening weekend.

On the other hand, How to Train Dragon is about Vikings and Dragons. American audiences don’t have much of a history of racing to movies about Vikings or Dragons. Viking and dragon movies like Eragon and Beowulf did not fare well in the U.S. especially considering how high their budgets were and how much better they did overseas.

A concept with some negative past associations - there have been low quality dragon and viking movies in the past - might explain the weaker opening weekend for How to Train Your Dragon. The concept – Vikings and Dragons – was definitely not associated with quality in the U.S.

Monsters and Aliens have mixed associations for American audiences. Overall, the look of the movie was more conventional than How to Train Your Dragon. Probably the most conventional looking movies DreamWorks has made would be Megamind and Monsters vs. Aliens. From an earlier era, Over the Hedge would count too. But there were a lot fewer animated movies back then. So anything in good CG was much more differentiated back then than it is today.

 

Unique Story vs. Unique Design

For both Monsters vs. Aliens and Megamind, the story was probably less conventional than the character design. That suggests high differentiation in moviegoers’ minds. But this is tricky. Geoff and I have talked about this in the past. And, generally, we feel differentiation in terms of story – especially tone – is more effective in the U.S. than overseas. Differentiation in look – especially character design – may work better overseas. And it still plays fine in the U.S. too. The ideal animated movie would be differentiated both in tone (story) and look (character).

Megamind is a good example of a movie that probably felt a lot more differentiated to American audiences – because the main character is the villain and because of the amount of ironic humor running throughout – than it did for foreign audiences. The look of Megamind is not as differentiated as the look of How to Train Your Dragon.

For example, How to Train Your Dragon is lit very unusually for an animated movie. Audiences may not think about this when they see the trailer. But it’s part of the overall impression they form. The lighting in Monsters vs. Aliens is totally forgettable. It’s what audiences expect. The lighting of How to Train Your Dragon is unique.

In terms of both story and design, How to Train Your Dragon stands out more as unique than Monsters vs. Aliens.

This may help explain its performance after the first weekend. A movie that is both good and unique probably does better than a movie that is good but lacks anything special.

 

After the Buzz...

The performance after the opening weekend tells more about how people like a movie. How to Train Your Dragon made almost 4 times its opening weekend in later weeks. Monsters vs. Aliens made only 2.3 times. I think Monster vs. Aliens is more predictable. Meanwhile How to Train Your Dragon is one of the best animated stories in the last decade. People love the story. How to Train Your Dragon was rated 90% by audiences at Rotten Tomatoes compared to 65% for Monster vs. Aliens. How to Train Your Dragon had a long run in theaters before being cannibalized by Shrek Forever After.

 

The International Market is Important to the Success of a Movie

Another key performance that people usually overlook is international box office. As the international market becomes bigger than the domestic market (and remember, DreamWorks may never again have a movie with a bigger U.S. box office than foreign box office), a movie needs commercial success from both markets.

People talk about DreamWorks getting a smaller take from international markets. In other words, the theaters themselves keep more of every ticket they sell. That’s true. But I think investors exaggerate the difference. As a rule of thumb, movie theaters keep 50% of box office. (Remember they also sell popcorn, soda, etc.) Theater take varies by country. Studios tend to accept a smaller take in developing countries to help grow the movie market. In DreamWorks’s 10-K, the company says its distributor – Paramount – collects anywhere from 37% to 44% of international box office on its behalf. The rest stays with the theater owner.

So let’s put this lower margin in perspective. We’ll use a big international success – Kung Fu Panda 2 – as an example of how the lower margin international business can still be a huge moneymaker. Kung Fu Panda 2 did $165 million in U.S. theaters. At a 50% take that leaves $82.5 million for DreamWorks and their distributor. The movie did $500 million overseas. Even at a 37% take that would leave $185 million for DreamWorks and their distributor. Remember much of the cost of a movie is the same even if you just release it in the U.S. Production costs – which make up half of a DreamWorks movie’s total release cost – don’t change whether you release the movie in China or not. But ticket sales definitely do. Yes, marketing costs rise the bigger your planned worldwide release. But individual movies scale very well. Each additional ticket sale – whether in the U.S. or overseas – is very, very profitable for a studio. It’s the sunk cost of making the movie that is the biggest expense. And that doesn’t rise along with more international ticket sales.  

Monsters vs. Aliens’s total domestic gross of $198 million is not bad. DreamWorks even considered producing a television series for Monster vs. Aliens. But the movie didn’t do well overseas. That's a key part of understanding the movie's financial performance for DreamWorks. A poor international result was the biggest factor in deciding not to make a Monsters vs. Aliens sequel. 

 

Different Audiences Have Different Tastes – Overseas Audiences Like Sequels

International audiences seem not to like parodies as much as Americans. Movies with proven but predictable formulas are easier to sell in the international market. Americans are a little more likely to want a “twist” on a genre. That’s less true overseas. For example, sequels – especially unloved sequels – see plummeting U.S. box office even while international box office rises. For a good example see Pirates of the Caribbean: On Stranger Tides. Or DreamWorks’s own Shrek Forever After.

True duds, even sequels, often bomb everywhere though. Happy Feet Two was a disaster in the U.S. and overseas. While Puss in Boots - which is kind of a Shrek sequel - did over $400 million overseas without a China release. That's a great performance. In the U.S., it only did $150 million. So DreamWorks movies have started to perform well overseas even without great domestic performance. That used to never be true. 

 

International Box Office: Monsters vs. Aliens vs. How to Train Your Dragon

How to Train Your Dragon did best with $277 million overseas. That was a good number. But not as big as what Kung Fu Panda made. International audiences like something familiar. A sequel of How to Train Your Dragon would be huge. So, How to Train Your Dragon will get a sequel in 2014. It was a great success for an original movie. I’m sure the sequel will be even bigger overseas. And the first movie was so well liked by American audiences that if the sequel has a great story it might even top the original’s U.S. box office too. But that’s harder to say. Outside the U.S., How to Train Your Dragon 2 will definitely do more than $277 million when it is released in 2014. That’s an easy prediction.

 

Home Video

The major source of revenue after theatrical release is DVD sales. This is another measure of how much people love the movie. DVD rental is significant for live action movies. But it is insignificant for animated movies. Children watch movies dozens of times. And parents usually buy DVDs as a toy. So for a DreamWorks movie it is DVD sales rather than rentals that matter. About half of buyers of a DreamWorks DVD are people who already saw the movie in theaters. This is very different from home video rental. 

In the heyday of DVDs, a DreamWorks movie’s DVD sales were about 2 times a movie’s total domestic box office less the opening weekend. So, a movie that had $200 million in total U.S. box office and $50 million in its opening weeknd might have once done $300 million in DVD sales ($200 million - $50 million = $150 million; $150 million x 2 = $300 million). DreamWorks usually makes sequels for movies that make more than $600 million in combined box office and DVD sales. This is not an announced company policy. It's just a pretty clear pattern from the past. And a good rule of thumb to keep in mind. 

Total DVD sales of How to Train Your Dragon were $121.6 million compared to Monster vs. Aliens’ $83.3 million. We all know that DVD sales is declining as the home entertainment market is in a transitional period. But How to Train Your Dragon’s DVD sales is huge by today’s standards.

 

Odds of a Sequel Topping the Original

Another factor in DreamWorks's decision to make a How to Train Your Dragon sequel was probably the likelihood of a sequel outperforming the original. For How to Train Your Dragon - worldwide - this is almost certain given the terrific audience goodwill the first movie had. For Monsters vs. Aliens this would be much more questionable. Especially because the fastest growing part of the movie business is foreign box office and that's exactly where Monsters vs. Aliens fell short. 

 

Licensing

How to Train Dragon made the most licensing and merchandising revenue in DreamWorks’ history. It made nearly $60 million for the studio. That’s more than the total merchandising of the whole DreamWorks studio in a normal year. Kids like dragons. Especially cute dragons. 

 

Opening Big in the U.S. is Good – But a Big, Long Run Around the World is Better

Two movies with two different results. One opened big. One didn’t. One became a franchise. One went nowhere.

Monsters vs. Aliens was still profitable for DreamWorks. But How to Train Your Dragon will be a franchise.

It didn’t open big. But it opened big enough. And it did everything else right.

Talk to Quan about Why Opening Weekend Isn’t Everything