Roughly halfway through this summer’s movie blockbuster season, Carmike Cinemas’ David Passman said Wednesday the “year of sequels” has been a healthy tonic for the industry and his company.
“For 2010 there were a lot of risk takers making movies, and they just didn’t perform well in the second half of the year at all,” said Passman, president and chief executive officer of Columbus-based Carmike, which operates 240 theaters in 36 states.
Installments of “X-Men: First Class,” “Pirates of the Caribbean: On Stranger Tides,” “Cars 2” and “Transformers: Dark of the Moon” all have performed well this summer and helped the movie industry make up financial ground lost amid the poor box-office results in late 2010 and the first three months of this year.
Now comes “Harry Potter and the Deathly Hallows: Part 2,” which is actually the eighth and final installment of author J.K. Rowling’s book series gone Hollywood. On the eve of the film’s debut, Passman said it has potential to be the biggest blockbuster of the year.
“We would not be surprised for it to be the biggest of the season. But there are really three competitors for biggest movie,” the CEO said. “The first one just previewed, ‘Transformers,’ and it was a phenomenal special effects kind of movie. Harry Potter, of course, is the final, final, final of the Harry Potter series. So people are expecting that to be really big, and advance ticket sales have been very, very strong.”
The other major contender, he said, is “Twilight Saga: Breaking Dawn Part 1,” the vampire series that will be released in November, just before Thanksgiving.
The only disappointment so far this summer, Passman said, has been “Green Lantern,” which underperformed, but wasn’t a disaster at the box office. A pleasant surprise was the R-rated chick flick, “Bridesmaids.”
“Most of the other movies have come in pretty close to what people were expecting them to,” he said of the summer season, which typically kicks off May 1 and runs through Labor Day.
Yet to come in the next few weeks before kids head back to school and attendance slides at theaters in September and October are the anticipated hits, “Captain America: The First Avenger,” “Cowboys and Aliens,” “Smurfs” and “Conan the Barbarian.”
As the entertainment season unfolds, Carmike Cinemas is preparing to release its second-quarter earnings report in early August. The motion-picture exhibitor posted a loss of $18.4 million, or $1.44 per share, in the first quarter of this year. That was on total revenue of $96.2 million.
Passman has read articles and reports on the industry suggesting that movies coming out of Hollywood are subpar, and that 3D films won’t necessarily be the savior of a sector that is grappling with competition from early DVD release dates, Netflix rentals by mail and Internet, and the shortening attention span of movie fans.
The CEO pointed to “Transformers,” which debuted two weeks ago. Attendance dropped by 50 percent in its second week and is expected to be cut in half again this week.
“Every week there’s a huge new, expensive, cool movie coming out,” Passman said. “So people try to see it that week and then go on to the next thing. And if they miss it, they still want to see the next newest thing. They basically just forget about (last week’s films) until the next advertising wave comes out for DVD or rental.”
Raymond James analyst Joseph Hovorka, in a report issued Monday, noted that much of Carmike’s business -- and that of other industry players -- is out of its hands.
“As with all theaters, Carmike does not control the quantity, quality or marketing of its product,” he wrote. “Carmike’s studio partners choose what films to make, in what genre and for what budget. The marketing of these films is also controlled by the studios. Should the product not fit with Carmike’s audience or the number of films be reduced dramatically, revenue and earnings for Carmike could suffer.”
Analyst Karen Berckmann of Moody’s Investor Service, in a July 7 report, noted that attendance has declined two years in a row and that the industry “is viable but it is mature and business risks are increasing.”
While Berckmann said Carmike’s operating metrics are among the weakest of its competitors, she said the firm’s persistence in paying down debt has helped offset shortcomings. Since 2007, the company has paid off $100 million in debt, the report said.
But Carmike has continued to spend at the same time. It has invested heavily in digital technology over the last decade and is pushing forward steadily with its “BigD” format in certain markets. “BigD” is a mix of high-quality digital picture and audio, large screens and comfortable seating.
The company has opened “BigD” auditoriums here in Columbus, and in Franklin, Tenn., and Canton, Ga. Others will debut in the next week in Savannah, Ga., Billings, Mont., and Tyler, Texas. About two dozen cities should have the enhanced auditoriums within three years, the CEO said.
As for 3D, of which Carmike has nearly 600 screens designated for the format, Passman said the company faces very little financial risk if it does become a fad and fades away.
“We’re big believers in it, but here’s the good news for Carmike,” he said. “We have almost nothing invested in dollars and cents for 3D. All of the investment is on companies like Real D, who are the ones who make the lens things, and the studios, who have to spend the extra bucks to spin out a 3D” movie.
The only loss, Passman said, would be $2.50 of the $3 fee charged for 3D moviegoers to rent the glasses required for proper viewing of the eye-popping films. Real D makes 50 cents from each 3D customer, he said.
With or without digital, the CEO said, digital is the biggest draw and here to stay. Nearly 2,100 of Carmike’s 2,223 theater screens have that technology.
