Bloomberg News

Biggest Cinemas Delay ‘Iron Man’ Ticket Sales in Dispute

April 18, 2013

Regal Entertainment Group (RGC:US) and AMC Entertainment, the largest U.S. theater chains, halted advance sales for Walt Disney Co.’s “Iron Man 3” in a revenue-sharing dispute that threatens the start of the summer movie season.

Regal, the biggest cinema operator, stopped selling tickets this week to the superhero sequel from Disney’s Marvel unit, a person with knowledge of the situation said yesterday. AMC, based in Kansas City, Missouri, said this week it wasn’t offering advance sales for the May 3 opening because it hadn’t reached terms with Disney. Studios and exhibitors in the U.S. split the revenue from theatrical ticket sales.

The biggest chains’ united front makes it tougher for Disney, owner of Marvel, Pixar and Lucasfilm, to obtain better terms for “Iron Man,” the summer’s first likely blockbuster, and future films. Regal and AMC account for about 30 percent of U.S. screens, according to the National Association of Theatre Owners. A negotiation this close to a big opening is unusual, said Dale “Bud” Mayo, chairman of exhibitor Digital Cinema Destinations Corp. (DCIN:US)

“I’ve never heard of it,” Mayo, whose Westfield, New Jersey-based company isn’t involved in the dispute, said in an interview.

Tickets weren’t for sale today on the website of Cinemark Holdings Inc. (CNK:US), the third-largest U.S. chain. Cinemark spokesman James Meredith didn’t respond to requests for comment.

Revenue Split

“Iron Man 3,” which stars Robert Downey Jr. and Gwyneth Paltrow, is projected to gross $151 million domestically in its first weekend, the estimate of researcher Boxoffice.com. That would be the biggest opening weekend so far in 2013. The first two “Iron Man” movies, made for a combined $340 million, generated $630.8 million in the U.S. and Canada, according to Box Office Mojo, which tracks ticket sales.

“We hope to reach agreement and get tickets on sale as soon as possible so it doesn’t affect opening weekend,” Ryan Noonan, an AMC spokesman, said in an April 16 e-mail.

Through its Pixar, Lucasfilm and Marvel units, Disney controls many of Hollywood’s most popular movie properties, including “Star Wars” and “The Avengers.” The studio is trying to use its box-office muscle to win better terms on future releases, said Eric Wold, a cinema-industry analyst at B. Riley & Co. in San Francisco.

“They’re realizing they’ve got a very valuable set of properties and they want to get paid more for it,” Wold said in an interview.

Studios typically get about 52 percent of ticket revenue after cinema operators deduct a small percentage for overhead, Wold said. Bigger movies may command more.

Revenue Split

Studios and theater owners usually agree on a general revenue split well in advance and then refine after the theatrical run based on outperformance or underperformance, said Mayo, 71, who is founder and chief executive officer of Digital Cinema.

Burbank, California-based Disney, the world’s largest entertainment company, didn’t respond to requests for comment. The company has reduced its movie output over the past several years to focus on franchise material.

Wold, who estimates the cost of “Iron Man 3” at $200 million before marketing costs, said any loss of ticket sales from the delay would hurt Disney (DIS:US) more than theater owners. Cinema operators don’t have any costs to recoup, he said.

“The exhibitors don’t want to lose this movie, but for a Regal or AMC, it’s just one movie out of the year and they don’t have a lot of sunk cost,” he said.

Chinese Version

Domestic box office receipts are down 11 percent this year to $2.62 billion, according to Hollywood.com. Marvel had the top-grossing film last year with “The Avengers,” based on comic-book characters including Iron Man.

The U.S. flap follows a decision by Disney to release a separate version of “Iron Man 3” in China. The company said on March 30 that it won’t seek official Chinese co-production status. Co-productions aren’t counted against foreign-movie quotas and can provide studios with a larger share of revenue.

“Iron Man 3” was partly made in China with Disney’s Beijing-based partner, DMG Entertainment. A release date for the Chinese version wasn’t announced.

Disney slipped 1.1 percent to $59.99 today in New York. The shares have advanced 20 percent this year, closing at an all- time (DIS:US) high earlier this week, compared with an 8.1 percent gain for the S&P 500 Stock Index.

Regal, based in Knoxville, Tennessee, has 6,777 screens, while AMC, which was acquired by China’s Dalian Wanda Group in September 2012, has 5,336, according to the theater association.

To contact the reporters on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net; Michael White in Los Angeles at mwhite8@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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Companies Mentioned

  • RGC
    (Regal Entertainment Group)
    • $20.03 USD
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