STUDIO BRIEFING: April 23, 2008

STUDIO BRIEFING: April 23, 2008

NETFLIX REPORTS RECORD PROFITS; STOCK SINKS
Online movie renters Netflix reported spectacular results in its first quarter but quickly warned investors that they were not likely to last. The company reported profits of $13.4 million on revenue of $326 million, up a whopping 36 percent over the same quarter a year ago when it reported net income of $9.9 million on revenue of $305 million. Everything appeared to have gone right for the company. It was adding subscribers and spending less to acquire them. It ended the quarter with 8.2 million subscribers after adding 764,000 new ones. Nevertheless shares in the company plunged 13 percent as it forecast that its strong earnings performance would not likely last through the remainder of the year as it faced the prospect of consumer cutbacks in entertainment spending due to the recession and the costs it will incur preparing for online delivery of product while competing with the likes of Apple's iTunes Store and Microsoft's Xbox Live service. (In a related development Sony said that it was planning to launch a video service of its own that will allow users of its PlayStation 3 console to download movies and TV shows.) In a conference call with analysts Netflix CEO Reed Hastings also observed that the company will begin charging a "modest premium" for Blu-ray high-definition rentals "sometime this year."

NEW MOVIE CHANNEL A NEGOTIATING PLOY?
Some analysts were wondering aloud Monday whether Viacom is serious about launching a premium movie channel with MGM and Lionsgate or whether the announcement that it planned to do so was really a ploy to induce CBS's Showtime to pay more for the three companies' product. The Hollywood Reporter quoted one source as saying that if it was all just a negotiating tactic, it would be "hard to back off" if Showtime remained adamant. Nevertheless, it would appear that the three studios have not discussed their plan with major cable outlets, many of which are implementing their own plans to launch movies-on-demand services. The Wall Street Journal quoted a source close to Comcast, the country's leading cable-TV provider, as saying that it has "little interest" in carrying the new channel, even though it owns 20 percent of MGM. Moreover, Showtime doesn't have much of an incentive to sweeten its deal with the three studios, the WSJ observed, noting that of its top 20 telecasts in 2007, only two were theatrical movies. David Joyce, an analyst with Miller Tabak & Co., told Fortune magazine, "In the past six or seven years, movies on Showtime have seen as much as an 80 percent decline in viewers." Fortune also observed that CBS would be able to use the $300 million it currently pays for the three studios' movies each year to produce its own films -- not only for the channel but for theatrical release as well.

DISNEY TO REVIVE ANIMAL ADVENTURE SERIES
Hearkening back to the days of Disney's "True-Life Adventures" series that began in 1948 and continued until 1960, the studio announced Monday that it was launching a new film company called Disneynature to produce documentary films about, well, nature. The new division, it said, will be based outside of Paris and headed by Jean-François Camilleri, who helped Disney produce the French documentary March of the Penguins in 2005. The documentary, which cost about $3 million to make, earned $127 million at the box office, worldwide. The new studio's first release, the company said, will be Earth, due to launch on April 22 next year, Earth Day. Producers of the original "True-Life Adventures" series were sometimes criticized for taking dramatic license with their productions, particularly creating the myth that lemmings commit mass suicide. Its 1958 film Wild Wilderness showing lemmings plunging into the sea was actually filmed far from the sea in Alberta, Canada, where the filmmakers herded imported lemmings over a small cliff into a river.

KINGDOM KUNG-PAO HOT
A major-studio feature starring two Chinese actors -- something that in itself would have been unthinkable even a few years ago -- wound up at the top of the U.S. box office over the weekend. Not only did The Forbidden Kingdom bring together Jackie Chan and Jet Li, but it was also produced entirely in China mostly with Chinese crews, again something that would have been unheard of until recently. Finally the martial arts film was aimed at a family audience -- without the bloody violence of virtually all previous films of the genre. Nevertheless, it wound up with $21.4 million, at the high end of analysts' expectations, handily beating Universal's Forgetting Sarah Marshall, which many analysts had suggested was the film most likely to come out on top. Instead, the R-rated comedy settled for second place with $17.7 million. Together the top 12 films grossed $82.88 million, up 13.46 percent from last year's $73.05 million. This was only the second week out of the past ten that the box office has seen a rise.

The top ten films over the weekend, according to final figures compiled by Media by Numbers (figures in parentheses represent total gross to date):
1. The Forbidden Kingdom, Lionsgate, $21,401,121, (New); 2. Forgetting Sarah Marshall, Universal, $17,725,330, (New); 3. Prom Night, Sony, $8,670,364, 2 Wks. ($32,133,926); 4. 88 Minutes, Sony, $6,957,216, (New); 5. Nim's Island, 20th Century Fox, $5,687,072, 3 Wks. ($32,894,115); 6. 21, Sony, $5,520,362, 4 Wks. ($70,004,505); 7. Street Kings, Fox Searchlight, $4,179,505, 2 Wks. ($20,058,143); 8. Horton Hears a Who!, 20th Century Fox, $3,511,834, 5 Wks. ($144,418,495); 9. Leatherheads, Universal, $3,049,465, 3 Wks. ($26,605,235); 10. Expelled: No Intelligence Allowed, $2,970,848, (New).

AMNESTY INTERNATIONAL BUYS THEATER ADS
Amnesty International is taking its campaign against waterboarding to 50 British theaters, purchasing cinema advertisements in which a U.S. expert who trained American servicemen how to resist enemy torture techniques denounces the method. In the film Malcolm Nance says, "They seem to think it is worth throwing the honor of 220 years of American decency in war out of the window. Waterboarding is out-and-out torture, and I'm deeply ashamed President Bush has authorized its use and dragged the U.S.'s reputation into the mud." In the film Nance demonstrates the technique, commenting that the prisoner who is subjected to it will say anything to survive -- regardless of whether it's true.