A Barclays media analyst thinks that the new “Star Wars” movie would not live up to the hype.
Next Saturday, “Star Wars: The Force Awakens” will be released. And, Barclays’ Kannan Venkateshwar says that given all the anticipation since we got the last “Star Wars” movie ten years ago, the new instalment would likely disappoint.
From his client note on Friday:
“Given the strength of the Star Wars franchise, it is not surprising that Star Wars has had among the most successful box office track records among long running franchises. While we expect the movie to be very successful, we believe a global box office performance of ~$2bn is likely to be seen as an “in line” performance and anything below that is likely to be considered a disappointment based on our conversations with investors.
To put this into context, there are only 2 movies which have achieved a global box office higher than $2bn (Avatar & Titanic). Consequently, given the expectations already baked in, one of the best performances of all time could actually be perceived as a disappointment.”
So essentially, the hype is so much that the bar to be cleared is very, very high.
As for indicators of box office performance in the upcoming weeks, Venkateshwar is getting mixed signals.
There’s been a spike in interest based on Google search, but it’s not as much as the surge when the last movie was released, despite heavy promotions this time.
Advance ticket sales have reached $50 million according to the Wall Street Journal, double the record that “The Dark Knight Rises” set in 2012. However, it doesn’t follow that everyone who gets an advance ticket would actually go to see the movie.
Looking at 15 years of data, Venkateshwar found that very successful movies like “Avatar” and “Titanic” hit 85% of their total domestic box office sales within the first four weeks after release, when the release was in December. He thinks these two movies were exceptions to the general rule, and Star Wars would have to prove to be one, too.
The movie would also have to be a huge hit internationally. Domestic box office revenues made up only 34% of the worldwide total for the most successful movies of 2015, he says. And so, if “The Force Awakens” is to be one of the biggest movies of all time, it has to outperform internationally, especially in China, which has the biggest cinema audience outside the US, and where “Star Wars” is not as big a cultural phenomenon as it is in America, according to Venkateshwar.
“Even if these numbers are achieved, we believe the multiples today are already pricing in this outcome with a high degree of certainty which limits the upside to the stock.”
Disney’s stock has been slammed in recent months as investors became more concerned about the threat of cord-cutting to traditional media networks.
A regulatory filing last month indicated that ESPN lost seven million subscribers between 2013 and this year. Disney shares have fallen 8% since that filing, although it’s rallied 15% year-to-date.