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Analyst Projects Rental Surge Over the Next Two Weeks

8 Jul, 2013 By: Erik Gruenwedel

Wedbush Securities’ Michael Pachter says upcoming movies each surpassed $50 million at the box office compared to year-over-year releases

Rental revenue from new releases over the next two weeks should substantially exceed rental revenue from movies released during the same period last year, said Michael Pachter, analyst with Wedbush Securities in Los Angeles.

Pachter, in a July 8 note, reiterated Wall Street scuttlebutt that the second half of the year portends a strong home entertainment opportunity as studios slowly migrate a busy summer theatrical slate into the retail channels.

Specifically, over the next 14 days studios are releasing several titles that generated in excess of $50 million each at the box office. The higher a movie’s theatrical haul, the more desirable it is seen as a rental (and sellthrough) release, according to conventional wisdom.

Upcoming rental/sellthrough titles include Tyler Perry’s Temptation: Confessions of a Marriage Counselor from Lionsgate on July 9, which generated $51.9 million at the box office; Jackie Robinson bio-pic, 42, from Warner Home Video on July 16 ($94.6 million); and Evil Dead from Sony Pictures Home Entertainment ($54.1 million).

DVD releases during the same period last year included Wanderlust ($17 million) from Universal Studios Home Entertainment; Lockout ($14 million) from FilmDistrict; Friends with Kids ($7 million) from Roadside Attractions; Casa De Mi Padre ($6 million) from Lionsgate; Silent House ($13 million) from Open Road Films, and Mirror Mirror — the latter from Relativity Media with a $64 million box office.

“DVD rentals for the upcoming two-week period should outperform the same period last year,” Pachter wrote.

Meanwhile, the analyst says there are 22 films with budgets greater than $100 million slated for theatrical release this summer. This compares to 15 last year and an average of 12 – 15 titles most years. The crowded release slate makes it impractical for consumers to see all of them theatrically, according to Pachter.

“As a result, we believe that people are far more likely to rent a greater number of these films when released on DVD,” he wrote. “The average time from theatrical release to DVD is under five months, and even for movies falling within the 28-day window (around half of Redbox’s supply), DVDs are generally available within six months of release.”

Redbox parent, Outerwall Inc., in the last earning’s call issued guidance calling for Redbox revenue growth from $1 billion in the first half to $1.2 billion in the second half of 2013.


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