Summer Box Office Success Overseas Could Lead to New Industry Record

12:48 PM PST 09/09/2011 by Frank Segers
Warner Bros.

The existing foreign benchmark -- $12.7 billion in 2010 – appears to be well within reach.

First -- a record summer.  Now – a record year?
 
The $6.57 billion overseas box office surge for films released offshore by the six major Hollywood studios from May through Labor Day could well presage a new industry record on the foreign theatrical circuit for calendar 2011.

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The existing foreign benchmark -- $12.7 billion in box office revenue recorded by the majors in 2010 – appears to be well within reach given 2011’s robust summer boost.  
 
From January through Labor Day, the six studios have collectively notched overseas box office of $10.3 billion, just $2.4 billion shy of the current record.  With nearly four months left to the year – and a busy year-end holiday season ahead – the early betting is that the majors should have little difficulty in closing the gap, and setting a new annual record.

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Foreign distribution execs surveyed by The Hollywood Reporter seemed a bit surprised at just how strong summer 2011 proved to be.
 
“Although the year started slow, once again the theatrical doomsayers were proven wrong,” said Mark Zucker, president of Sony Pictures Releasing Int’l. “Strong summer product generated another big season for our industry. International box office for 2011 is running ahead of the record set in 2010.”  
 
“This marked a record summer for Warner Bros., and a record summer for the industry,” said Veronika Kwan-Rubinek, the company’s president of international distribution, who added that this year was fastest that Warner’s surpassed the $2 million mark in foreign box office.
 
Year-to-date and summer tallies for the majors: Paramount (YTD $2.427 billion, summer $1.865 billion); Warner Bros. ($2.240 billion, $1.6 billion); Disney ($1.820 billion, $1.2 billion); Fox ($1.724 billion, $781 million); Sony ($1.203 billion; $575.1 million) and Universal ($871.3 million, $551.1 million).

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What strikes studio execs is the disparity between foreign and domestic revenue returns for the season’s biggest hits.  
 
Warner Bros.’ Harry Potter and the Deathly Hallows -- Part 2 drew foreign box office of $938 million, two-and-half times its U.S. and Canada gross. Disney’s Pirates of the Caribbean: On Stranger Tides registered $800.9 million, a full three-and-a-third times more than its domestic tally. Paramount’s foreign box office record holder, Transformers: Dark of the Moon, delivered $761.2 million, more than double its domestic return.
 
What’s propelling this disparity?
 
Unlike in the U.S. and Canada, where the format is losing its luster, “3D continues to be a major driver in international box office growth,” asserts Kwan-Rubinek.  Andrew Cripps, president of Paramount Pictures Int’l. agrees, noting that the higher ticket prices charged at 3D locations “contributed to the big summer.”  

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Also, he adds, “sequels tend to do better internationally, and there was a series of very high profile sequels this summer.” Another helpful factor was the currently weaker U.S. dollar, which translates into an “exchange rate bonus” when box office in a strong local currency is converted to dollars for repatriation to American distributors.
 
Also, “a relatively cool and wet summer in Europe helped,” says Cripps, along with an absence of major sporting events that “helped ensure that film going was not an afterthought.” (2010’s summer returns were depressed by the overseas fixation on the World Cup Soccer tournament in South Africa.)
 
But what most impressed the execs surveyed was the 3D phenomenon on the foreign circuit.
 
“In Russia, China and parts of Latin America, 3D is still just gangbusters,” said Paul Hanneman, co-president of Fox Theatrical International. “These are places where (theatrical) infrastructure is new” including more multiplexes with 3D screens.  “It’s just opened the eyes of a whole new generation of people.”
 
In Russia and China, two markets that have grown the most rapidly in recent years, revenues from 3D locations regularly throw off an average of from 70% to 80% of the box office in each territory. That’s reflected in this summer’s box office in each territory – about double summer 2010 in China, and up 27% in Russia.
 
3D remains a powerful exhibition force in Germany, providing from 75 to 80% of territorial box office, a big reason why the market’s summer returns were 27% ahead of comparable 2010 box office. The revenue share from 3D situations in other markets is typically less: 60% in France, 50% in the U.K., 40% to 50% in Italy and 35% to 40% in Spain.
 
In all, 2011 is shaping up to be an extraordinarily good year on the foreign theatrical circuit. “An important trend,” says Sony’s Zucker, “is that international’s contribution to global box office continues to grow, and may exceed the proportion of 2:1 with domestic (box office) experienced last year.”

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