Paul LaMonica Commentary:
Media Biz by Paul R. La Monica Column archive
Time Warner needs a 'Super' hit
After a disastrous opening for "Poseidon," Time Warner (and its investors) should be rooting for a big comeback from the Man of Steel.
By Paul R. La Monica, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- Say what you want about Time Warner. The company has not had a problem making hit movies over the past few years. But this year, Time Warner needs Clark Kent to really make a "super" return.

While many Wall Street analysts and investors have criticized the media giant for continued sales and profit declines at its AOL Internet unit, sluggish growth in magazine publishing and ratings challenges at the company's CNN cable network, nobody can dispute the company's magic at the box office... until now.

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He's back to save Metropolis! "Superman Returns," the first movie about Krypton's finest since 1987, is due in theaters on June 28.
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Time Warner (Charts), which also owns CNNMoney.com, is off to a rough start so far in 2006. According to figures from movie industry research firm Box Office Mojo, the company's two big studios, Warner Bros. and New Line, account for just 10.5 percent of the domestic box office.

By way of comparison, the two studios combined for more than 20 percent market share last year and also topped the 20 percent mark from 2001 through 2003. During the past few years, four Harry Potter movies from Warner Bros. and the "Lord of the Rings" trilogy from New Line have helped boost Time Warner's box office results.

This year has been problematic for Time Warner as two high profile films, "V for Vendetta" and "Poseidon," did not live up to expectations. And there's no Potter film later this year that Time Warner can bank on as a surefire smash.

Holding out for a hero

With that in mind, there is going to be a lot of pressure on The Man of Steel to generate big ticket sales in theaters. "Superman Returns" will be released on June 28.

"Time Warner is hoping 'Superman' will turn things around for them. That's the big event picture of the summer," said Joe Bonner, a media analyst with Argus Research.

"Superman Returns" has a lot of buzz since it has been nearly 20 years since moviegoers have seen someone don the blue and red tights on the silver screen. It also comes with high hopes since Bryan Singer, the widely respected director of the first two "X-Men" movies, abandoned the third installment of that series in order to take over "Superman." Plus, Kevin Spacey as the follicly challenged villain Lex Luthor is a bit of brilliant casting.

Time Warner also has already proven that it can create new hits by resurrecting comic book characters. "Batman Begins," the first "Batman" film since 1997, grossed $205.3 million in the U.S. last year.

A representative for Warner Bros. would not comment about the studio's expectations for "Superman Returns". But speaking at a media conference sponsored by Deutsche Bank on Tuesday, Time Warner chief financial officer Wayne Pace said the company was "excited about this year's film slate."

Still, it's reasonable to wonder if the company can generate more hits outside of "Superman." In July, Warner Bros. is releasing "Lady in the Water," the latest film from director M. Night Shyamalan.

That has to be considered a risk since Shyamalan's last movie, "The Village," was not a big hit with critics and the movie did not do nearly as well at the box office as his earlier films "The Sixth Sense" or "Signs" did.

Then there's "The Ant Bully," Warner Bros.' foray into animated films featuring computer-generated images. That comes out in August.

Sure, kids appear to have an insatiable appetite for cartoons but this film may be a tough sell considering how many animated CGI movies have already been released this year. In addition, two more CGI films, "Monster House" from Sony (Charts) and "Barnyard" from Viacom's (Charts) Paramount, hit theaters in late July.

Plus, "The Ant Bully" is not a sequel (like this year's hit "Ice Age: The Meltdown") or from a studio with an already established track record in CGI films (a la DreamWorks Animation's (Charts) "Over the Hedge" and Disney's (Charts) and Pixar's "Cars"). Time Warner has another CGI film, "Happy Feet" coming out this fall.

That pretty much leaves Time Warner with "Snakes on a Plane," the New Line film that has generated a huge amount of attention on blogs. But it remains to be seen if the film, starring Samuel Jackson as an air marshal fighting the titular snakes, can actually be a big box office hit.

Mild-mannered box office could hurt TWX stock

Nonetheless, analysts dismissed concerns about the Time Warner studios' box office market share decline.

"Near-term swings in box office do not have a significant economic effect. Our view is that current box office is irrelevant to the long-term value of a media company," said Laura Martin, an analyst with Soleil -- Media Metrics, an independent research firm.

Bonner adds that after several years where Time Warner's studios were at the top of the market share race, it's only natural to stumble.

"The film business is hit and miss. So even if they miss on a couple this year, I don't think anything is broken," said Joe Bonner, an analyst with Argus Research.

However, the box office results shouldn't be dismissed so casually. After all, the filmed entertainment business is extremely important for Time Warner, accounting for 26 percent of the company's total sales in the first quarter and 20 percent of operating profits.

And it stands to reason that if a movie doesn't fare well at the box office, that also lessens the likelihood that it will generate strong DVD sales.

Martin concedes that blockbusters and bombs do play a role in what happens with media stocks. "Box office results have a far greater psychological impact on media stocks than an economic impact," she said.

As such, it's worth noting that Disney's stock took a hit earlier this month after "Cars" debuted with a slightly lower than anticipated $60 million take at the box office. And shares of News Corp (Charts)., which owns Fox, are up nearly 20 percent this year. Fox has released the two biggest hits so far this year, "X-Men: The Last Stand" and the "Ice Age" sequel.

Time Warner's stock is down 1 percent so far this year. So for the sake of its investors, the company can ill-afford a "Superman" flop this summer.

Related: Big media: Adapt or die

Related: X marks the spot at box office

Related: Cartoon wars

Analysts quoted in this story do not own shares of Time Warner and their firms have no investment banking relationships with the company.

The reporter of this story owns shares of Time Warner through his company's 401(k) plan.

This is an update of a story that originally appeared on June 14. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.