Weak euro could whack summer boxoffice
Studios could absorb a 10% regional hit in theatrical revenueWhat the currency markets giveth, the currency markets can taketh away. Hollywood's major studios are learning that hard truth this summer as they roll out seasonal tentpoles in Continental Europe and the U.K.
A couple of summers ago, a weak U.S. dollar and stronger world currencies resulted in a generous "exchange-rate bonus" to international boxoffice, and even last summer, the euro and British pound were in much better shape than they are now. But with European currencies hovering at longtime lows, studios could take a double-digit-percentage bruising this summer.
Last year's foreign boxoffice received an estimated 10% lift from favorable exchange rates during a 12-month span. But with decidedly unfavorable conditions prevailing in Europe of late, studios could absorb a 10% regional hit in theatrical revenue during the all-important summer release season.
It's a problem executives could do without in a summer already challenged by global preoccupation with soccer's World Cup.
"There will be a hit versus last summer," Warner Bros. international distribution president Veronika Kwan-Rubinek said.
As a point of comparison, she cited Warners' release of "Sex and the City" two years ago and its imminent global release of "Sex and the City 2."
"If we had released the first film today, it would have made 17% less internationally in the U.S., or approximately $44 million less at the boxoffice," Kwan-Rubinek said.
The situation didn't develop overnight -- but it didn't take too much longer.
In less than six months, the value of the euro against the U.S. dollar has dropped nearly 20%, and the British pound sterling has hit a 14-month low. One euro is worth $1.24, down from $1.51 on Dec. 3; one pound equals $1.44, off from $1.64 on Jan. 19.
Meanwhile, foreign boxoffice gathered in local currencies is converted into dollars by the publicly held companies that own the major studios. So the stronger the local currencies, the higher the company revenue.
Countries using the euro include Europe's biggest theatrical territories -- France, Germany, Italy and Spain -- and Britain is the No. 1 foreign boxoffice market. (In Japan, another big territory, the yen has stayed relatively stable.)
If European currencies remain at present levels for the balance of the summer, studios would take an 11% hit in seasonal grosses. The euro averaged about $1.40 in summer 2009.
"Should the euro's current value of $1.24 continue through the summer, and the summer 2010 gross equals 2009's international summer of $5.8 billion, it would reduce the majors' boxoffice total by about $210 million," Sony international distribution president Mark Zucker said.
Countries using the euro account for about 32% of major studios' international boxoffice, he estimated.
Fortunately for the majors, international boxoffice has been robust so far this year thanks to the record performance of "Avatar" and 3D premiums from "Alice in Wonderland" and "Clash of the Titans." "Titans" distributor Warners on Monday passed $1 billion in year-to-date foreign boxoffice in studio-record time, and the industry collectively is outpacing year-ago comparisons overseas.
"After only four months, major studios have already posted $4.7 billion in overseas boxoffice, or 76% greater than last year's record pace over the same time frame," Disney vp international distribution David Kornblum noted.
So the betting is that a weak euro will hamper but not halt studios' foreign feasting.