Business
Superheroes came to Hollywood's rescue this summer. Is it enough to save movies?
Foul-mouthed superheroes, babbling Minions and plenty of Anxiety (the animated kind) have propelled this summer’s box office past the winter and spring theatrical doldrums, marking one bright spot in an otherwise industry-wide gloom.
Boosted by a bevy of sequels, the summer’s gross box office receipts (starting from the first Friday in May) is projected to total roughly $3.6 billion through the Labor Day weekend, according to Paul Dergarabedian, senior media analyst at Comscore.
That’s short of last year’s “Barbie” and “Oppenheimer”-fueled haul of $4 billion, but still higher than summer totals in 2022, 2021 and 2020 — a positive sign for theater owners and studio executives who weathered a tough January-to-May stretch of limited and underperforming films.
And with a much-anticipated fall and winter slate of films including “Beetlejuice Beetlejuice,” “Wicked” and “Moana 2,” industry insiders are sounding more upbeat for the end of the year and beyond.
“If we can carry this same momentum that we have this summer currently into the fall and then into the beginning of 2025, I think exhibition will be very pleased,” said Jim Orr, president of theatrical distribution at Universal Pictures. “We can truly say we’re back.”
The optimism is a far cry from earlier this year, when the industry collectively wrung its hands as the box office struggled to captivate audiences. That concern turned into panic by Memorial Day, when films such as “Furiosa: A Mad Max Saga” and “Garfield” did not perform up to high expectations, leading to the worst Memorial Day weekend box office in almost three decades.
(“Garfield” ended up grossing more than $257 million in global box office on a reported budget of $60 million.)
Industry observers now see that five-month stretch as the low point in the theatrical slump, fueled in part by a lingering slowdown from the pandemic and the dual strikes by writers and actors, which disrupted the production and marketing of films.
“This industry took a double gut punch,” said Charles Rivkin, chairman of the Motion Picture Assn. “First we had COVID, which turned our $11-billion industry into zero overnight. And then when we were recovered from that, we immediately had the strikes.”
Morale was low at the outset of the season. Save for a few successes, such as Disney’s “Kingdom of the Planet of the Apes,” May releases — from Universal’s “Fall Guy” to Warner Bros.’ “Furiosa” — mostly fell flat.
“The expectations for ’24 were definitely tempered,” Dergarabedian said. “We didn’t have a Marvel movie kicking off the summer.”
But starting with June’s “Bad Boys: Ride or Die,” the box office started to pick up. It would be the first of several sequels to power the all-important summer box office.
Animated films helped to power the rebound.
“Inside Out 2” and “Despicable Me 4” put up blockbuster numbers, which is notable because animation was one of the slowest genres to recover from the pandemic due to families’ wariness to return to theaters and the ease of watching movies on streaming platforms.
With several animated films set for release later this year, worldwide family box office revenue could reach $6.1 billion, which would surpass 2018’s total, said David A. Gross, who publishes the FranchiseRe movie industry newsletter.
“It’s fair to say that since ‘Super Mario’ in spring of 2023, family moviegoing is back to pre-pandemic levels,” he said.
To date, the domestic box office has generated about $5.6 billion, down from $6.6 billion at this point last year, according to Comscore. But the summer box office has made up a lot of ground.
“I don’t like to spike the ball on the five-yard line, but I think we’re in the right direction,” said Rich Gelfond, chief executive of Imax Corp., the giant-screen technology company that operates out of Playa Vista. “We’re certainly on the road back.”
One reason for the recovery: Walt Disney Co. got its groove back this summer, with the help of “Inside Out 2.”
The Pixar animated sequel to 2015’s “Inside Out” drew $1.6 billion worldwide, making it the highest grossing animated title of all time, and the top movie of the summer season. Then, Disney-owned Marvel Studios packed a punch with the R-rated “Deadpool & Wolverine,” which amassed $1 billion in global revenue and became the second-highest grossing film of the summer.
“Historically, there’s been a bit of a ceiling for R-rated movies just because a bunch of kids can’t come,” said Greg Marcus, chief executive of Marcus Theatres, a Milwaukee, Wis.-based chain with about 80 locations spanning 17 states.
But the reception for the movie “speaks to the … clamoring for product. The people are saying, ‘If you build it, we will come,’” he said
The box office showing for Pixar and Marvel was significant, as the key Disney brands have struggled to consistently deliver in recent years. The House of Mouse’s uncharacteristically weak post-pandemic track record was one reason box office analysts drastically lowballed opening weekend projections for “Inside Out 2.”
“Everyone had high hopes for that film,” said Sean Gamble, CEO of Cinemark, the Plano, Texas-based theater chain with more than 300 locations, including 20 in Southern California. “We certainly did, but that proved out to be way beyond what we expected. It’s probably one of the biggest outperforming films … we’ve seen in a very, very long time.”
Tony Chambers, executive vice president of theatrical distribution at Disney, said, “Quality matters, and quality delivers” — echoing a key point from Disney CEO Bob Iger, who has ordered sweeping cuts across the company to stem losses from its streaming business and has directed creative departments to focus on theatrical and not crank out as much content.
Appealing to broader, multicultural audiences doesn’t hurt either, Chambers said.
“It sounds very simple, but if you cast your net wide enough, the more fish you’re likely to get,” he said. “That’s been the common denominator for all the movies that have worked successfully this summer.”
To be sure, the movie industry still faces massive challenges, regardless of this summer’s slight reprieve. Box office revenue is still below pre-pandemic levels, and it’s unclear whether it will ever fully rebound as viewing habits shift.
So far this summer, theaters across the U.S. sold 274 million tickets, an 18% decline from last summer, according to industry data firm EntTelligence. That pales in comparison to the 406 million tickets sold in summer 2019 — a time when moviegoers weren’t yet accustomed to watching major releases at home on streaming services.
What’s more, film financing has become more difficult as interest rates have increased. China is no longer a reliable market for boosting American films’ box office revenue. And studios have slashed budgets and laid off thousands of employees as they struggle to balance their massive spending on streaming services with the lower-than-expected returns.
Still, if box office returns for the second half of this year are down by only 10% compared to pre-pandemic levels, that would be a good result, Gross said.
And this summer, the charge was led by a plethora of sequels.
“Sometimes people question, ‘Are there too many sequels?’’’ Gamble said. “Across the board, with compelling stories, they work. And we’ve seen many, many examples of that throughout the course of this summer.”
Of course, simply adding more chapters to a franchise doesn’t necessarily guarantee success (see: “Furiosa”). But this summer’s sequels have been “solid,” leading to some level of reassurance for the industry.
“When these things are hitting, and when the box office is flowing, it just helps everything about the business,” Gross said. “It helps everyone relax.”
While original and nonfranchise films didn’t lead the box office this year, they certainly gave it a boost.
Surprise breakout hits such as Neon’s masterfully marketed horror flick “Longlegs (the indie studio’s biggest movie to date) and Sony’s adaptation of the bestselling Colleen Hoover novel “It Ends With Us” weren’t nearly as lucrative as the likes of “Deadpool” or “Inside Out 2.” But they played an important role, exceeding expectations and keeping the popcorn lines moving.repeats “flowing” from quote.
“Every dollar counts in the summer, and those … films added significantly to the bottom line,” Dergarabedian said. “Every $20 million times five … is $100 million. So it all adds up to what turned out to be a pretty magnificent summer.”
Emelyn Stuart, owner of Stuart Cinema and Cafe in Brooklyn, N.Y., said summer business has been “amazing” compared to the previous year. Her theater has only one screen, which means she has just one chance at a time to pick a winner.
Last year, some of her choices included “Indiana Jones and the Dial of Destiny,” as well as the DC Comics superhero film “The Flash,” which grossed just $271 million worldwide amid a controversy surrounding its star, Ezra Miller.
This year, she chose “Bad Boys: Ride or Die,” “Despicable Me 4,” “Deadpool & Wolverine” and “A Quiet Place: Day One.” The variety of available films led to a winning combination, she said.
For the fall, she’s planning to add a second screen to expand her options — particularly for attracting family audiences.
“With ‘Wicked’ coming, with ‘Beetlejuice,’ with ‘Joker,’ I think we’re going to end the year strong,” she said.
Business
Startup Varda Space Industries snags former Mattel plant in El Segundo
In an expansion of its business of processing pharmaceuticals in Earth’s orbit, Varda Space Industries is renting a large El Segundo plant where toy manufacturer Mattel used to design Hot Wheels and Barbie dolls.
The plant in El Segundo’s aerospace corridor will be an extension of Varda Space Industries’ headquarters in a much smaller building on nearby Aviation Boulevard.
Varda will occupy a 205,443-square-foot industrial and office campus at 2031 E. Mariposa Ave., which will give it additional capacity to manufacture spacecraft at scale, the company said.
Originally built in the 1940s as an aircraft facility, the complex has a history as part of aerospace and defense industries that have long shaped the South Bay and is near a host of major defense and space contractors. It is also close to Los Angeles Air Force Base, headquarters to the Space Systems Command.
Workers test AstroForge’s Odin asteroid probe, which was lost in space after launch this year.
(Varda Space Industries)
Varda is one of a new generation of aerospace startups that have flourished in Southern California and the South Bay over the last several years, particularly in El Segundo, often with ties to SpaceX.
Elon Musk’s company, founded in 2002 in El Segundo, has revolutionized the industry with reusable rockets that have radically lowered the cost of lifting payloads into space. Though it has moved its headquarters to Texas, SpaceX retains large-scale operations in Hawthorne.
Varda co-founder and Chief Executive Will Bruey is a former SpaceX avionics engineer, and the company’s spacecraft are launched on SpaceX’s workhorse Falcon 9 rockets from Vandenberg Space Force Base in Santa Barbara County.
Varda makes automated labs that look like cylindrical desktop speakers, which it sends into orbit in capsules and satellite platforms it also builds. There, in microgravity, the miniature labs grow molecular crystals that are purer than those produced in Earth’s gravity for use in pharmaceuticals.
It has contracts with drug companies and also the military, which tests technology at hypersonic speeds as the capsules return to Earth.
Its fifth capsule was launched in November and returned to Earth in late January; its next mission is set in the coming weeks. Varda has more than 10 missions scheduled on Falcon 9s through 2028.
For the last several decades, the Mariposa Avenue property served as the research and development center for Mattel Toys. El Segundo has also long been a center for the toy industry as companies like to set up shop in the shadow of Mattel.
The Mattel facility “has always been an exceptional property with a legacy tied to aerospace innovation, and leasing to Varda Space Industries feels like a natural continuation of that story,” said Michael Woods, a partner at GPI Cos., which owns the property.
“We are proud to support a company that is genuinely pushing the boundaries of what’s possible, and are excited to watch Varda grow and thrive here in El Segundo,” Woods said.
As one of the country’s most active hubs of aerospace and defense innovation, El Segundo has seen its industrial property vacancy fall to 3.4% on demand from space companies, government contractors and technology startups, real estate brokerage CBRE said.
Successful startups often have to leave the neighborhood when they want to expand, real estate broker Bob Haley of CBRE said. The 9-acre Mattel facility was big enough to keep Varda in the city.
Last year, Varda subleased about 55,000 square feet of lab space from alternative protein company Beyond Meat at 888 Douglas St. in El Segundo, which it started moving into in June.
Varda will get the keys to its new building in December and spend four to eight months building production and assembly facilities as it ramps up operations. By the end of next year, it expects to have constructed 10 more spacecraft.
In the future, Varda could consolidate offices there, given its size. Currently, though, the plan is to retain all properties, creating a campus of three buildings within a mile of one another that are served by the company’s transportation services, Chief Operating Officer Jonathan Barr said.
“We already have Varda-branded shuttles running up and down Aviation Boulevard,” he said.
Business
How Iran War Is Threatening Global Oil and Gas Supplies
Ships near the Strait of Hormuz before and after attacks began
Every day, around 80 oil and gas tankers typically pass through the Strait of Hormuz, the narrow waterway off Iran’s southern coast that carries a fifth of the world’s oil and a significant amount of natural gas.
On Monday, just two oil and gas tankers appear to have crossed the strait, according to a New York Times analysis of shipping activity from Kpler, an industry data firm. Since then, one tanker passed through.
“It’s a de facto closure,” said Dan Pickering, chief investment officer of Pickering Energy Partners, a Houston financial services firm. “You’ve got a significant number of vessels on either side of the strait but no one is willing to go through.”
Tankers have been staying away from Hormuz since the U.S.-Israeli attacks on Iran that began on Saturday. A prolonged conflict could ripple broadly across the global economy, threatening the energy supplies of countries halfway around the world and stoking inflation.
International oil prices have climbed 12 percent since the fighting began, trading Tuesday around $81 a barrel, and natural gas prices have surged in Europe and in Asia.
A senior Iranian military official threatened on Monday to “set on fire” any ships traveling through the Strait of Hormuz. Vessels in the region have already come under attack. Several oil and gas facilities have also been struck or affected by nearby shelling, though the damage did not initially appear to be catastrophic.
Where ships and energy facilities have been damaged
A fire broke out Tuesday at a major energy hub in Fujairah, United Arab Emirates, from the falling debris of a downed drone, the authorities said. On Monday, Qatar halted production of liquefied natural gas, or fuel that has been cooled so that it can be transported on ships, after attacks on its facilities.
The sharp reduction in tanker traffic is reducing the supply of oil and gas to world markets, pushing up prices for both commodities. And the longer that ships stay away from the Strait of Hormuz, the less oil and gas get out to the world, which could raise prices even more.
Shipping companies have paused their tankers to protect their crew and cargo, and because insurance companies are charging significantly more to cover vessels in the conflict area.
On Tuesday, President Trump said that “if necessary,” the U.S. Navy would begin escorting tankers through the strait. He also said a U.S. government agency would begin offering “political risk insurance” to shipping lines in the area.
In addition to tankers, other large vessels regularly go through the strait, including car carriers and container ships. In normal conditions, nearly 160 make the trip each day.
Some ships in the region turn off the devices that broadcast their positions, while others transmit false locations — making it hard to give a full picture of the traffic in the strait.
The Shiva is a small oil tanker that has repeatedly faked its location, according to TankerTrackers.com, which tracks global oil shipments. It is suspected of carrying sanctioned Iranian oil, according to Kpler. The Shiva was one of the two tankers that crossed the strait on Monday.
The oil and gas that typically move through the strait come from big producing countries like Saudi Arabia, Iraq, Iran and United Arab Emirates, and are exported around the world.
Where tankers moving through the Strait have traveled
In 2024, more than 80 percent of the oil and gas transported through the Strait of Hormuz went to Asia. China, India, Japan and South Korea were the top importers, according to the U.S. Energy Information Administration.
Countries have energy stockpiles that could last them into the coming months, but a continued shutdown of the strait could damage their economies.
Several big disruptions have roiled supply chains in recent years, but the tanker standstill in the Strait of Hormuz could have an outsize impact.
Business
Paramount credit downgraded to ‘junk’ status over debt worries
Paramount Skydance’s jubilation over its come-from-behind victory to claim Warner Bros. Discovery has entered a new phase:
Call it the deal-debt hangover.
Two major ratings agencies have raised concerns about Paramount’s credit because of the enormous debt the David Ellison-led company will have to shoulder — at least $79 billion — once it absorbs the larger Warner Bros. Discovery, bringing CNN, HBO, TBS and Cartoon Network into the Paramount fold.
Fitch Ratings said Monday that it placed Paramount on its “negative” ratings watch, and downgraded its credit to BB+ from BBB-, which puts the company’s credit into “junk” territory. Fitch said it took action due to “uncertainty” surrounding Paramount’s $110-billion deal for Warner Bros. Discovery, which the boards of both companies approved on Friday.
S&P Global Ratings took similar action.
To finance the Warner takeover, Ellison’s billionaire father, Larry Ellison, has agreed to guarantee the $45.7 billion in equity needed. Bank of America, Citibank and Apollo Global have agreed to provide Paramount with more than $54 billion in debt financing.
“Potential credit risks include the prospective debt-funded structure, Fitch’s expectation of materially elevated leverage and limited visibility on post-transaction financial policy and capital structure,” Fitch said.
Late last week, Paramount sent $2.8 billion to Netflix as a “termination fee” to officially end the streaming giant’s pursuit of Warner Bros. That payment paved the way for Warner and Paramount’s board to enter into the new merger agreement.
Paramount hopes the merger will be wrapped up by the end of September. It needs the approval of Warner Bros. Discovery shareholders and regulators, including the European Union.
Paramount executives acknowledged this week the new company would emerge with $79 billion in debt — a considerably higher total than what Warner Bros. Discovery had following its spinoff from AT&T. That 2022 transaction left Warner Bros. Discovery with nearly $55 billion of debt, a burden that led to endless waves of cost-cutting, including thousands of layoffs and dozens of canceled projects.
Warner still has $33.5 billion in debt, a lingering legacy that will be passed on to Paramount.
Paramount plans to restructure about $15 billion in Warner Bros. Discovery’s existing debt.
Paramount CEO David Ellison at a 2024 movie premiere for a Netflix show.
(Evan Agostini / Invision / AP)
Paramount told Wall Street it would find more than $6 billion in cost cuts or “synergies” within three years — a number that has weighed heavily on entertainment industry workers, particularly in Los Angeles.
Hollywood already is reeling from previous mergers in addition to a sharp pullback in film and television production locally as filmmakers chase tax credits offered overseas and in other states, including New York and New Jersey.
Some entertainment executives, including Netflix Co-Chief Executive Ted Sarandos, have speculated that Paramount will need to find more than $10 billion in cost cuts to make the math work. More recently, Sarandos went higher, telling Bloomberg News that Paramount may need $16 billion in cuts.
Cognizant of widespread fears about additional layoffs, Paramount Chief Operating Officer Andrew Gordon took steps this week to try to tamp down such concerns.
Gordon is a former Goldman Sachs banker and a former executive with RedBird Capital Partners, an investor in Paramount and the proposed Warner Bros. deal. He joined Paramount last August as part of the Ellison takeover.
During a conference call Monday with analysts, Gordon said Paramount would look beyond the workforce for cuts because the company wants to maintain its film and TV production levels.
Paramount plans to look for cost savings by consolidating the “technology stacks and cloud providers” for its streaming services, including Paramount+ and HBO Max, Gordon said. The company also would search for reductions in corporate overhead, marketing expenses, procurement, business services and “optimizing the combined real estate footprint.”
It’s unclear whether Paramount would sell the historic Melrose Avenue lot or simply centralize the sprawling operations onto the Warner Bros. and Paramount lots in Burbank and Hollywood.
Workers are scattered throughout the region.
HBO, owned by Warner Bros. Discovery, maintains its West Coast headquarters in Culver City; CBS television stations operate from CBS’ former lot off Radford Avenue in Studio City; and CBS Entertainment and Paramount cable channels executive teams are located in a high-rise off Gower Street and Sunset Boulevard, blocks from the Paramount movie studio lot.
“The combination of PSKY and WBD could create a materially stronger business than either individual entity,” Standard & Poor’s said in its note to investors. “However, this transaction presents unique challenges because it would involve the combination of three companies, with the smallest, Skydance, being the controlling entity.”
David Ellison’s production firm, Skydance Media, was the entity that bought Paramount, creating Paramount Skydance.
Ellison has not announced what the combined company will be called.
Paramount shares closed down more than 6% Tuesday to $12.45.
Warner Bros. Discovery fell 1% to $28.20. Netflix added less than 1% to close at $97.70.
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