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Movie Business Eyes Record 2015 but Faces First-Quarter Challenges

The movie business may be headed for a record-breaking year, but studios and exhibitors will have to slog through a difficult few months before putting up big numbers.

Despite the presence of highly anticipated films such as “Fifty Shades of Grey” and “Cinderella,” the first quarter of 2015 is looking a little light. Analysts expect domestic theatrical revenues to be down a few percentage points when the final numbers are tallied.

“We’re relatively bullish on 2015, but the first quarter will in our mind absolutely be the weak part of the year,” said Chad Beynon, a media analyst with Macquarie Securities. “We’re looking for that potential surprising movie that can break out in the group, but it’s tough to find.”

Compounding the problem is that even though 2014 was a lackluster year for the industry, the first three months were uncharacteristically robust. It was a period that fielded five films that grossed more than $100 million — a group that included “Ride Along,” “The Lego Movie” and “Frozen.” Those hits helped the quarter close up 6% over the previous year.

After talking up 2015 through much of last year, exhibitors have privately been warning investors and analysts that the first quarter is going to be a rough one in the hopes of preventing any dip in their share prices. Despite the fact that the box office plunged 5.2% last year and attendance fell to its lowest levels in two decades, stocks for publicly traded theater companies have been resilient, primarily because there are several promising sequels to films such as “Star Wars” and “The Avengers” on the horizon.

Not everyone is convinced that the theater industry has a problem. Eric Handler, an analyst with MKM Partners, notes that the first quarter of 2014 was only the third-highest grossing January-March stretch in history, making the task of matching its numbers substantially easier. Plus, holiday hits such as “The Hobbit: The Battle of the Five Armies” are continuing to draw crowds and Oscar films such as “Selma” and “American Sniper” could produce strong box office results when they widen their theatrical footprint.

“It’s not insurmountable,” said Handler. “There’s always a couple of wild cards. The key for the first quarter is how do the carryover holiday films do, and right now they look pretty good.”

There are several films that have the potential to be the kind of wild card the box office needs to kick off the new year in force. “The Wedding Ringer,” a comedy with Kevin Hart could be another “Ride Along”; “Kingsman: The Secret Service” is an R-rated action comedy that should serve as a nice slice of counterprogramming when it debuts opposite “Fifty Shades of Grey”; and “Spongebob: Sponge Out of Water” should appeal to families. In terms of the calendar, “Cinderella” and “Insurgent,” a sequel to “Divergent,” look promising, but premiere in March, meaning much of their grosses won’t register until the second quarter.

Moreover, though Christmas releases such as “Unbroken” and “Into the Woods” have been popular with audiences, the fourth quarter did finish down 4.7%. There’s no “Frozen”-like juggernaut still packing in crowds.

The scope and strength of the film slate doesn’t really materialize until “Fast and Furious 7” debuts in early April, followed by a May that brings such heavy hitters as “The Avenders: Age of Ultron,” “Mad Max: Fury Road” and “Tomorrowland” with George Clooney. Those are the kind of films that give analysts the confidence to predict that 2015 will be the first to crack $11 billion at the domestic box office.

They are important not only because last year’s box office was moribund, but because they represent the kinds of brands that could lure younger audiences back to multiplexes. Studies by the Motion Picture Association of America and Nielsen have painted a troubling picture of the drop in ticket buyers between ages of 12 to 24.

“There are lots of great incoming franchises,” said Eric Wold, an analyst with B. Riley & Co. “There’s much better spacing on the calendar. I like the mix of new titles, and if you look beyond the sequels, there’s a nice selection of genres.”

It’s just that getting to those record-breaking months might take a little longer than expected.

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