Summertime is a great time to see movies. The kids are out of school, the days are longer, and with the heat and humidity, who wouldn't want to soak up a few hours of air conditioning? Many of us look forward to the summer movie releases that tend to be action-packed, fun and simply entertaining - think "Pirates of the Caribbean" or "Transformers". Just like lying on the beach listening to the waves, summertime movies provide an escape, even if only for a few hours.

With the summer blockbuster season quickly approaching, the big studios are anxiously awaiting theater turnout and the subsequent ticket sales. The major motion picture studios invest huge amounts of money on these summer releases, hoping to recover their investments - and achieve a summer blockbuster.

In Pictures: 6 Ways To Save Money This Summer

A Big Gamble
According to the Motion Picture Association of America, major motion picture studios invest an average o $96.2 million to make and market a movie. This includes $3.8 million for film copies (to distribute to theaters) and $32.36 million for advertising in print and on TV and internet spots. However, we are so inundated with the ticket sales statistics in the news that it may come as a surprise that six out of 10 movies never recoup their initial investment. With studios forking out close to $100 million on a movie, you can bet that they are hoping theirs will be among the summer blockbusters that "everyone" goes out to see.

Number Crunching
Movie-goers definitely take in more films during the summer months; particularly May, June and July. By August, sales drop off, perhaps because kids are heading back to school, or we've simply seen our share of summertime movies. Figure 1 shows annual movie ticket sales for 2008 and 2009. The month of May enjoys a dramatic uptick in ticket sales - more than twice the March ticket sales - that carries through to June and July. Indeed, ticket sales for May, June and July accounted for 39% of the $9,066,472,148 in annual sales during 2008, and 35% of the $9,971,755,182 in sales for 2009. These statistics are important because more than one-third of annual sales occur during one quarter of the year.

Figure 1: Comparison of annual ticket sales for 2008 and 2009. (Monthly data compiled from www.the-numbers.com)

Ticket sales for May, June, July and August accounted for 46% of annual sales during 2008, and 43% of sales for 2009. Not bad considering the four-month period represents only one-third of the entire year.

It is interesting to note that, while the summer is absolutely the busiest time at movie theaters, November is a close second. Ticket sales for November rival those of the summer blockbuster months, perhaps because Thanksgiving break provides the first real vacation since summer. If we include November in the tally, ticket sales for May, June, July, August and November of 2008 equated to 57% of annual sales; ticket sales for the same months in 2009 comprised 55% of total sales. (For insight on investing in the entertainment industry, see Analyzing Show Biz Stocks.)

What the Numbers Mean
Motion picture studios hope to earn a significant portion of total annual ticket sales during the summer blockbuster months. In 2009, Warner Brothers (NYSE:TWX) gained the top spot for movie ticket sales market shares, topping 20% of total ticket sales; it was followed by 20th Century Fox (Nasdaq:NWS) (13.73%) and Paramount Pictures (NYSE:VIA) (13.72%). Warner Brothers' summer movie release ticket sales equaled an impressive 42% of annual ticket sales - that's almost half of sales earned in one-third of the year (May, June, July and August).

Another consideration that is on the radar screen of picture makers is the advent and popularity of 3D movies. Movies like Avatar (20th Century Fox) in RealD Cinema 3D and IMAX 3D make movie-going a whole new experience - and one that people would like to repeat. The special effects with this new breed of 3D digitization are so seamless and realistic that one may wonder why all movies aren't in 3D now. In fact, television makers are jumping on board and marketing 3D sets for home use. RealD is working with top consumer electronics manufacturers to make new 3D technologies a reality in public spaces, business environments and the home. (For related reading, see 3D Television Reality Check and Will Avatar Ruin Sports TV?)

The Bottom Line
Summer blockbuster movies are fun for us - the movie goers - and a big gamble for the major motion picture makers. Enormous amounts of cash are invested in the movies, increasing the pressures and expectations associated with bringing home the bacon. Summer seems a likely time to try to recoup those investments and hit pay dirt. Unfortunately, box office bombs are all too common, and striking a winning chord with audiences is easier said than done.

Related Articles
  1. Stock Analysis

    How Movie Theater Companies Are Combatting Netflix (NFLX)

    Understand why Netflix is a threat to major movie theater companies, and learn how movie theaters are fighting back against the digital media giant.
  2. Economics

    The Oscars and Golden Globes: Worth Their Weight In Gold!

    The Oscars and Golden Globes set off a wave of spending that creates new flows of funds in the economy and has major financial impact.
  3. Stock Analysis

    The Top 4 Companies Owned By Sony (SNE, ERIC)

    Learn how Sony Corporation became a leader entertainment. Music acts such as Beyoncé and movies such as "Spider-Man" are part of Sony's success story.
  4. Stock Analysis

    Analyzing Dish Network's Return on Equity (ROE) (DISH, TWC)

    Analyze Dish Network's return on equity (ROE), understand why it has vacillated so greatly in recent years and learn what factors are influencing it.
  5. Stock Analysis

    Tribune Media: An Activist Investment Analysis (TRCO)

    Learn more about the breakup of Tribune Company, once a powerful newspaper and broadcasting giant, and the role of activist investor Cliff Robbins.
  6. Fundamental Analysis

    The World's Top 10 Entertainment Companies (CMCSA, CBS)

    Take a look at the world's top 10 entertainment companies, spanning the movie, television, cable television, gaming and streaming video sectors.
  7. Stock Analysis

    The Biggest Risks of Investing in Dish Network Stock (DISH)

    Get insight about the potential risks of investing in Dish Network stock, such as its lack of cross-selling ability as an independent pay-TV provider.
  8. Stock Analysis

    Comcast Stock: A Dividend Analysis (CMCSA)

    Discover a detailed analysis of Comcast's dividend policy, and learn about its dividend coverage and payout ratios, which indicate future dividend growth.
  9. Investing Basics

    This is What Donald Trump's Portfolio Looks Like

    Find out what Donald Trump's portfolio looks like and gain some interesting insights into the way the billionaire's investment mind works.
  10. Personal Finance

    4 Famous People Whose Finances Were Under Conservatorship

    Understand what conservatorship is and how it comes about during the legal process. Learn about four celebrities who were placed under conservatorship.
RELATED FAQS
  1. How are Rupert Murdoch's holdings distributed?

    Rupert Murdoch owns a controlling share of News Corporation and over 750 different businesses. Some of the major brands he ... Read Full Answer >>
  2. How did Rupert Murdoch become a media mogul?

    Rupert Murdoch's father was a journalist and newspaper owner in Australia. Upon his death in 1952, Rupert inherited the News ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center