Warner Bros. Discovery And Comcast: The Inconvenient Truth For Investors Behind The ‘Barbenheimer’ Success

Summary:

• While the “Barbie” and “Oppenheimer” twin-bill (aka “Barbenheimer”) over-performed, it is not all good news for the entertainment industry and its investors.
• The pair’s ability to over-index and draw massive crowds may be a short-term boost for Hollywood as duplicating this type of draw is going to be easier said than done.
• These movies appealed to very specific audiences that don’t always show up, but both studios made them feel like they “had” to see them in theaters.
• We already have seen a reduction in theatrical movies due to COVID-related changes and now with the strikes, the number could shrink even more.
• Whether its projects being shelved as “reserves” for their various studios or unable to even start production, last weekend could easily prove to be the exception rather than the norm.

With over $500 million combined in worldwide grosses and wall-to-wall (positive) placements in the media you’d think the past weekend’s success of Warner Bros. Discovery’s (NASDAQ:WBD) Barbie and Universal’s (NASDAQ:CMCSA) Oppenheimer would be nothing but a success story.

And in many ways it is… but in other ways it also may be a stark warning that could fall on deaf ears.

First as always, some background.

Let’s be clear the Barbie/Oppenheimer (aka Barbenheimer) twin-bill over-performed. The movies defied all expectations and broke multiple records including:

• Largest Domestic Opening of 2023 year to date (Barbie)
• Largest Warner Bros. Advance Sales ever at $49.5M (Barbie)
• Largest Opening for a female-directed film in US (Barbie)
• The biggest global day and date opening weekend ever for a biopic (Oppenheimer)
• Christopher Nolan’s highest grossing opening weekend ever, both global and domestic for a non-Batman movie. (Oppenheimer)
• The biggest global opening for a drama since 2019’s Creed (Oppenheimer)

And that’s just a handful.

So with all of that success and strong earnings, what’s the problem?

Simple – can Hollywood do it again?

Nobody is quite sure and few are optimistic.

It’s been a roller-coaster summer at the box office, compounded by the writers/actors strikes, but the end result is a lot more movies under-performed than over-indexed. Even Mr. “I’ll Do Anything… And I Mean Anything” Tom Cruise had a harder-time drumming up support for his latest Mission Impossible film.

And that’s saying something.

Cruise has a reputation for going out of his way to promote his film, his cast and his crew and lately even rival movies because he knows the value. However while Dead Reckoning: Part One is by no means a flop, it did take a post-premiere slip.

The problem is largely that the industry is changing. The issues he and his fellow actors and writers are striking over are important, but they also are only part of the problem. While the WGA/SAG members deserve what they are asking for, they may be advocating for it at their own peril.

The truth is that we already have seen a reduction in movies due to COVID-related changes and now with the strikes, the number could shrink even more. In order to reverse that the other studios need to take a page out of the Comcast/WBD playbook because this weekend they both found lightning in a bottle… but it may be easier said than done to duplicate.

For example, Warner Bros. has been marketing Barbie for seemingly the past year and during that time set the narrative perfectly. This is a Barbie world and we aren’t going to ruin that by making Ken or any other character the focal-point.

It sounds silly to say, but when you look at what Disney is going through with the “culture wars,” you can see why WBD could have given the “girl-power” push some pause. Instead, the studio leaned into the brand and showed off this version of Barbie wasn’t just made of plastic, but of actual emotions.

And in any case the movie wasn’t even the featured attraction – no, that honor went to the brand.

You could argue the bigger winner here was Barbie’s parent company Mattel.

If anything, Barbie was a giant integration sponsored by WBD.

Not that audiences cared – nor should they.

WBD ran a brilliant campaign that mixed classic nostalgia with new age creativity. Of course, you could also say that if your company gave you $100 million to play with, you could meet or exceed these results as well.

But still Barbie came, saw and conquered.

And somehow despite all of that Comcast/Universal also came out a winner as Christopher Nolan’s Oppenheimer also dominated the weekend. It wasn’t just counter-programming, it was counter-everything.

The Barbie pink was replaced by darker hues mixed with black and white. This was a three-hour character study that also held a mirror up to society. It’s not the type of movie you ask “did you enjoy?” it’s the type of movie where after you ask, “are you okay?”

There is a reason it was suggested you see Oppenheimer first AND then Barbie.

Again though, that’s the point.

It’s that tough, gritty nature that made you pay attention to it. That’s also Christopher Nolan’s trademark style and why movies like Dunkirk, The Dark Knight and Inception worked so well.

What Comcast did so well here was sell through the shocking true nature of this story but more-over how you HAD to see it on the big screen. This not only led more people to theaters but more people to IMAX theaters – and their pricy upcharges.

While Barbie and even Mission Impossible would have loved the extra IMAX real estate, because Nolan films with IMAX in mind and with their equipment, his movies tend to get a leg up. It’s a built-in boost that only adds to his value.

With Barbie you had to see it so as not to be left out and with Oppenheimer you just had to see it as intended.

Both messages worked, but for a while there was genuine concern they’d just destroy each other in the process.

It is also worth noting we only have this match-up in the first place because Nolan left Warner Bros. after the COVID hybrid movie debacle. Annoyed by what he felt was a slap in the face to the traditional model, he signed with Universal which promised they’d give the film a true theatrical run and hold it from streaming for as long as possible.

And the concern over Barbie running the table got so big it was reported that insiders called WB to ask them if they’d consider moving Barbie so both films could thrive. That was the longshot of longshots, but ultimately (and surprisingly) a non-issue.

But back to the main question… can Hollywood do it again?

Yes, they probably can, but it will be a while and analysts and investors have shown they have a low tolerance when it comes to waiting.

I’m keeping the “hold” designation for now because all signs point to a second strong weekend for both movies and the short-term afterglow from their success will help power both studios through year’s end. That’s also not to mention that it gave Comcast a shiny stat to play with during this week’s earnings.

The worry comes as we get into 2024 and especially if these strikes don’t subside. Studios were ready for the beginning of a strike, but there’s a limit and it may come faster than expected given the level of vitriol that has come with the work stoppage.

We’ve already seen multiple movies pushed to 2025 and beyond and the longer this drags out, the more movies that will likely join them. Yes, the success of Barbie/Oppenheimer is a big win for the industry, but studios should savor the flavor, but it may be some time before we see this type of box office twin-killing again.

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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