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Vid biz heats up popcorn

'Matrix,' 'Hulk,' 'Nemo,' 'T3' lineup could draw big auds

NEW YORK — A lackluster summer box office could yet translate into a gangbuster fall for video retailers.

While the season’s actioners and popcorn pics may not have grabbed critical kudos or massive grosses, the high-powered marketing behind the films should help drive DVD and video consumption into the critical fourth quarter. And, ironically, the box office also-rans could turn out to be video champions.

With a fall lineup of DVD releases like “The Matrix Reloaded” (Oct. 14), “The Hulk” (Oct. 28) “Finding Nemo” (Nov. 4) and “Terminator 3: Rise of the Machines” (Nov. 11), investors are hoping that auds who passed on the pics in the theater will be curious enough to rent the video or DVDs.

Viacom-owned Blockbuster, for one, is expected to see a big turnaround from its less-than-stellar fourth quarter performance in 2002.

Smith Barney analyst Jill Krutick on Monday raised her price target for Blockbuster from $18 to a bullish $22 per share, based on the firm’s belief that this summer’s box office hits — and even some of the misses — pack video and DVD potential.

According to Blockbuster, last year’s lineup was more skewed toward kids and other “collectible” sell-through titles like “Lilo & Stitch,” “Ice Age” and “Star Wars: Episode II — Attack of the Clones,” while this fall and winter will feature a large stable of action titles that typically perform well in rental, Blockbuster’s strong suit.

Optimistic vidtailers can even paint a silver lining on some of the flops.

Even “When you have a title like ‘Gigli,’ there may be a little more consumer interest thanks to the star power and all the talk surrounding it,” said Blockbuster spokesman Randy Hargrove. ” ‘The Hulk’ did make over $100 million, but it should be a title with real rental interest to an audience curious about the comic.”

All the marketing power behind the summer releases may not have translated into huge cinema admissions, but the residual effect will still resonate into the fall video rental window, where the lower price point comes into play. Simply put, the quality bar can be lower in video, especially for a family of four or five, which would find it easier to lay out $4 for a vid rental compared with tyring to justify the $50 or more a theatrical outing would cost.

Blockbuster’s shares have already jumped 65% since December, when its failure to be fully responsive to the market shift toward sell-through and potent new rivals like Wal-Mart hit its fourth quarter. Since then revenues have improved substantially with increased margins.

The summer box office season accounts for some 40% of the year’s total theatrical grosses, but more importantly, its titles drive the all-important holiday video sell-through and rental season.

Year-on-year B.O. up

In fact, some observers feel that so-so performers at the summer theatrical box office have better potential than the blockbusters when it comes to vid rentals. That’s because auds want to buy the blockbusters, but are content to rent the so-sos.

And while this summer can hardly be called a huge success, the box office did generate year-on-year increases, with box office revenues up 2.8% over the same period in 2002. Much of that gain no doubt comes from ticket price hikes of around 8% this year, since attendance has been down by 5% over last summer.

In its last earnings call, Blockbuster management predicted high-single-digit growth targets for the full year 2003.

The company has regularly won a stay of execution thanks to continued delays and limitations in video-on-demand rivals.