Bloomberg News

‘Hobbit’ With $40 Tickets Lets Warner Woo Big Spenders

December 12, 2013

The Hobbit

Ian McKellen as Gandalf in The Hobbit: The Desolation of Smaug. Photographer: Mark Pokorny/Warner Bros. Pictures/Everett Collection

For a movie fan with cash to burn, “The Hobbit: The Desolation of Smaug” offers the chance to drop almost $40 before even getting to the snack bar.

So-called super tickets for the second film in Peter Jackson’s trilogy, opening at midnight in the U.S. and Canada, include a plush seat in a big-screen cinema, an advance online copy for mobile or home viewing, and an online version of the first picture, “The Hobbit: An Unexpected Journey.”

Time Warner Inc.’s Warner Bros., the distributor, and two of the largest North American theater chains, Regal Entertainment Group (RGC:US) and Cineplex Inc. (CGX:US), are using “The Hobbit” deal to squeeze out extra revenue at a time when U.S. movie spending shows little growth. Exhibitors, who are opening more large-screen cinemas with reclining and reserved seating and with better sound, get some of the added revenue.

“The exhibitor has an opportunity to participate in this, the first time an exhibitor has had any chance to participate in the ancillary business,” said Dan Fellman, president of domestic distribution for Warner Bros. Pictures. The studio is distributing “The Desolation of Smaug” for the film’s co-producers, its own New Line Cinema unit and MGM Holdings Inc.

Rottentomatoes.com, a website that aggregates reviews, gives the film a 73 percent positive rating, compared with 65 percent for the original.

Market researcher BoxOffice.com estimates “The Desolation of Smaug” will take in $80 million over the three-day weekend in U.S. and Canadian theaters and about $280 million through its entire domestic run.

Earlier Results

“An Unexpected Journey” opened with $84.6 million, generated $303 million in U.S. theaters and went on to do $1.02 billion worldwide, according to Box Office Mojo, another researcher. That places the movie second among the four films Jackson has made based on the works of J.R.R. Tolkien, including the “Lord of the Rings” trio from 2001 to 2003.

Warner Bros. tried out the super-ticket promotion earlier this year with Toronto-based Cineplex and the film “Pacific Rim.” Now it’s expanding with “The Desolation of Smaug.”

For Cineplex, the film marks the fourth and largest super-ticket offering. The 1,635-screen chain, the No. 5 North American exhibitor, offers its own cloud-based Web service where fans can store and access their movies.

“Pacific Rim was much better than we anticipated, being the first time out of the gate,” Ellis Jacob, Cineplex’s president and chief executive officer, said in an interview. “I don’t know if it was because the techies loved it. We were worried because it wasn’t a film that was following a prequel.”

Toronto Prices

At a Toronto Cineplex, a super ticket in an UltraAVX 3-D auditorium costs about C$38 ($36), or C$18 without online rights, according to the company’s website. A premium Regal theater in downtown Los Angeles is charging $19.75 without online rights. A few miles away in South Gate, an adult ticket at a conventional Regal screening is $11.50. The Knoxville, Tennessee-based company, the largest cinema operator, didn’t respond to a request for comment.

“The Hobbit: The Desolation of Smaug” is opening in about 3,900 North American locations, according to Warner Bros., including as many as 3,300 that offer 3-D showings. More than 300 will be premium large-format theaters, Fellman said in an interview. Warner Bros. also has a lock on almost 350 large-screen Imax theaters, which also charge more.

Premium-priced formats now represent about 40 percent of the box office for Cineplex, according to Jacob.

Baggins, Gandalf

In “The Desolation of Smaug,” running 161 minutes, Martin Freeman returns as the hobbit Bilbo Baggins. Ian McKellen reprises Gandalf, the wizard he portrayed in the first Hobbit film and the original “Lord of the Rings” trilogy that Jackson directed.

The story picks up where the last one ended, with Baggins, Gandalf and their dwarf friends continuing the quest to reclaim their homeland, Erebor, from the dragon Smaug. Benedict Cumberbatch provides the voice for Smaug.

The film is “brimming with action, including a show-stopping fight sequence,” Los Angeles Times writer Gina McIntyre said in yesterday’s edition. “In its grand scope and serious tone, it feels far more akin to Jackson’s original trilogy than its immediate predecessor.”

Some theater chains are hosting double features, starting with the first “Hobbit” at about 9 p.m. tonight before the new film’s midnight debut. The ticket costs about $20 at a Cinemark Holdings Inc. (CNK:US) theaters across the U.S., according to James Meredith, a spokesman.

As with the first Hobbit picture, the film’s profitability will hinge more on sales outside the U.S., according to Paul Sweeney, a Bloomberg Industries analyst.

“The international market has become much more important for these tentpole, franchise films,” Sweeney said in an e-mail. “International can make or break a big-budget movie these days.”

Production Budget

The budget to produce three “Hobbit” films may approach $600 million, according to published reports in October based on documents filed in New Zealand, where the movies were shot. The cost of NZ$676 million ($561 million at the time) listed by the Associated Press included 266 days of filming, leaving out two months of pickup shots this year and post-production.

Fellman declined to discuss the budgets. The third film, “The Hobbit: There and Back Again,” is scheduled for release in December 2014, according to Box Office Mojo.

With the latest “Hobbit,” theaters are also making wider use of high-frame-rate technology that director Jackson first employed with “An Unexpected Journey.” The film is shot at 48 frames a second, double the usual speed, providing clearer, crisper images and less flicker.

The faster film speed will be run in more than 800 theaters, compared with about 450 locations previously, according to Fellman.

“What I saw was an evolution in the look and feel,” said Michael Lewis, chairman and CEO of RealD Inc., which supplies projection technology accounting for about 80 percent of the 3-D revenue at theaters. “This had a very cinematic look. You know the technology is used really well when you don’t notice it.”

To contact the reporter on this story: Rob Golum in Los Angeles at rgolum@bloomberg.net

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


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  • RGC
    (Regal Entertainment Group)
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