Slow & Steady will win the box office race this year, according to JPMorgan analyst David Karnovsky. It projects a 15% year-over-year increase in North American movie ticket sales to $8.49 billion in 2023. The double-digit gain is due to two factors. The first is related to the depressed state of the box office last year. Gross revenue of $7.4 billion in 2022 was up 65% from 2021 but was still down 36% from a three-year average before the pandemic, he said. In other words, comparisons will be easy. The second reason is much more positive: the film schedule is better balanced than it has been since the start of the Covid pandemic. In 2022, consumers may have wanted to go to the movies, but there were big gaps during the summer and fall when new movies just weren’t in theaters. And certain types of films, like family meals or original films intended for adults, were very rare. This is a key factor in Karnovsky’s predictions. “We see at least 30 films with the potential of around $100 million in incremental revenue versus 18 that hit that threshold in 2022,” he wrote in a research note last week. Although the total number of films expected to be widely released remains below pre-pandemic levels, the gap could narrow further as the year progresses. Karnovsky called comments from Cinemark, which said it expects the number of widely released films to increase by 20 to 25 this year from 202, as smaller and midsize studios return to theaters this year. The pace of movie releases will likely be a much bigger factor in the success of the industry than the economy. In past business cycles, going to the movies was a recession-proof pastime. How the Schedule is Shaping Despite the buzz surrounding “Avatar: The Way of the Water,” there will be few new movies in theaters in Q1, but the pace picks up considerably in Q2, starting by a reboot of the Dungeons and Dragons franchise. Karnovsky expects the second quarter to see some of the biggest ticket sales of the year. Easter weekend will feature “The Super Mario Bros Movie.” Then, in May, some of the biggest films of the year come out: “Guardians of the Galaxy: Volume 3”, “Fast X” and then Disney’s “The Little Mermaid” for Memorial Day weekend. June continues with other promising titles, including the first Transformers movie since 2019 and DC Comic’s “The Flash.” Pixar will also return to theaters with “Elemental.” With titles such as “Indiana Jones and the Dial of Fate,” “The Marvels” and “Oppenheimer” by Christopher Nolan, the third quarter should show strong growth compared to 2022, according to the analyst. Gains in ticket sales will be more modest in the fourth quarter, he said. However, if additional films are released, here’s where there could be a benefit to its box office predictions. The timeline has some wiggle room for potential additions. For now, the end of the year will bring several notable titles, backed by established franchises, including “Kraven the Hunter”, “The Exorcist”, and “Hunger Games – Ballard of Songbirds and Snakes”. What does this mean for studios? “Elemental,” for example, is coming to theaters. Since the pandemic, Disney had recorded its Pixar titles, such as “Luca” and “Turning Red”, for Disney+. Instead, the goal is to develop strategies that maximize the value of movies. Shares of DIS 3M Mountain Disney have been boosted by a proxy battle, but box office gains could be ahead. “After a period of experimentation, the industry seems to be consolidating around a 30-45 day exclusive window, or in some cases (e.g. Universal), a 17-31 day exclusive window, depending on performance opening weekend,” Karnovsky wrote. “There are exceptions to this, like Top Gun: Maverick or Black Panther: Wakanda Forever, which had longer exclusivity periods.” While this may be more lucrative for studios than theater operators, he expects there will be benefits for theater chains down the line. For example, underperforming movies could get out of theaters faster, he said. Even streaming companies like Amazon are planning to release more movies in theaters. And there’s been a lot of talk about how much money Netflix could be leaving on the table by not releasing movies like Rian Johnson’s “The Glass Onion: A Knives Out Mystery” in theaters any longer. Still, JPMorgan expects it will take another two years before the industry fully recovers from Covid. Not only has the pandemic halted movie releases, but it has also upended production schedules. The turbulence is still being felt. With all of that in mind, he expects Disney to see the largest percentage gains in global movie theater revenue from the companies he covers. Paramount and NBC Universal are both expected to experience year-over-year declines as they post strong performances in 2022. Paramount’s “Top Gun: Maverick” topped the box office charts last year, while NBC Universal had new films in Jurassic Park and franchised Minions. And this year will test just how much of a “chicken-and-egg” situation it is for the types of content that have struggled in theaters since the pandemic. The industry will test whether audiences keep coming back for animated features or original movies that aren’t part of blockbuster franchises, or fit into special genres like sci-fi or horror. Disclosure: Comcast is the parent company of NBCUniversal and CNBC.
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