New Batman Movie Gives Time Warner Much Needed Boost

The highly anticipated release of the latest installment of the Batman movie series has not disappointed as “Dark Knight” rode huge momentum into the biggest opening weekend in history. The movie—made by Warner Brothers, a division of Time Warner (TWX)—raked in an estimated $155.3 million, beating the old box office revenue record held by “SpiderMan 3”. The buzz surrounding the movie’s release was palpable, partially due to the untimely death of Heath Ledger, whose portrayal of the Joker has been critically acclaimed and may earn him a posthumous Oscar nomination.

Having seen the movie, I am among those that believe that the movie was worthy of the hype. It will be interesting to observe whether or not the glowing reviews of critics and average movie goers will be enough to sustain the hugely successful box office results of this weekend.

Estimates for weekend revenues for “Dark Knight” ranged anywhere from $110 million to $130 million, but reality beat even those lofty estimates. Overall box office sales of $255 million shattered the previous best weekend of $218 million from July of 2006 (that weekend’s blockbuster was Disney’s (DIS) “Pirates of the Caribbean: Dead Man’s Chest”). This weekend was an important one for movie studios that have seen a slow but steady decline in ticket sales recently. Studios have often claimed that their industry in highly resistant to economic slowdowns because it is still one of the cheapest entertainment options around for cash-strapped consumers. Even though box office prices have been rising, they are still cheaper than sporting events, theme parks, and travel. 

The success of this movie could be a shot in the arm for Time Warner, which it desperately needs. Warner Brother’s studios took a heavy loss earlier this year on “Speed Racer”, which cost well over $100 million to make but brought in a paltry $43 million at the box office. Some estimates have “Dark Knight” breaking even relatively soon, and potentially bringing in over $800 million over the next five years due to everything from box office sales, DVD sales, and merchandise, among other revenue streams. The movie has had an amazing opening but the true money maker is in the film’s longevity. The performance of Heath Ledger should go a long way to keeping the movie significant for longer than it otherwise would have.

Now, it goes without saying that even if TMX makes $1 billion from this one movie, it is still little more than a drop in the bucket for Time Warner, whose revenues were over $46 billion in 2007. However, this is a very visible and news worthy success thus far, and it is a timely reminder of what a company that looks undervalued by our methodology can do. Historically, Time Warner has traded between 9.4 and 16.1 times cash flow but currently it trades at 6.9 times. However, Time Warner is such a diverse company that this success could be swallowed up by the behemoth, but it certainly has not hurt.

Dark Knight may have a much larger effect on a smaller company, IMAX (IMAX). The demand for Dark Knight tickets in IMAX theatres has been huge, as it played in 94 of their U.S. theatres, many of them sold out of all show times weeks in advance. The IMAX theatres brought in nearly $7 million, and the IMAX screens continue to be in demand as some of the scenes from “Dark Knight” were shot specifically for IMAX’s unique technology. Currently, Ockham has IMAX rated a hold mainly because in the last year the stock is up 63%, but it may still have further to go as the company continues to grow rapidly and blockbuster releases such as this heighten the profile of the relatively small company.