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Why Warner Bros.’ misfire ‘Our Brand Is Crisis’ is so troubling for the once-dominant studio

Ann Dowd, Sandra Bullock, Reynaldo Pacheco

Ann Dowd, left, as Nell, Sandra Bullock as Jane and Reynaldo Pacheco as Eddie in Warner Bros. Pictures and Participant Media’s satirical comedy “Our Brand Is Crisis,” a Warner Bros. Pictures release.

(Patti Perret / AP)

Warner Bros. executives may be having second thoughts about the choice of title for their latest movie, “Our Brand Is Crisis.”

The studio, one of Hollywood’s largest, is not in crisis, but its vaunted brand has been bruised by a rash of misfires this year.

“Our Brand Is Crisis,” in which Sandra Bullock stars as a political strategist helping a struggling Bolivian presidential candidate, took in just $3.4 million in ticket sales this weekend, about half of what had been projected.

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It was the latest box office flop for a studio that, uncharacteristically, has had plenty of them this year, in marked contrast to the studio’s successful television and video games businesses.

Warner Bros. is still reeling from the recently released “Pan,” a $150-million movie that tanked with audiences despite a heavy marketing push by the studio. Some analysts predict Warner Bros. will have to take a writedown of more than $100 million on the film.

“Pan,” in turn, followed other high-profile 2015 duds, including “Jupiter Ascending,” the costly science fiction movie from the Wachowski siblings, as well as “Hot Pursuit,” “Entourage,” “The Man from U.N.C.L.E.,” and the Zac Efron movie “We Are Your Friends.”

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Warner did have notable successes earlier in the year with Clint Eastwood’s surprise hit “American Sniper,” “San Andreas” starring Dwayne Johnson and the critically acclaimed “Mad Max,” which did well commercially but wasn’t the blockbuster the studio was hoping for.

As any studio executive knows, the movie business is cyclical and every studio has its ups and downs. But the dearth of hits is a humbling turn of events for Warner Bros., which for many years led the box office with its “Harry Potter,” “Lord of the Rings” and “Batman” movies.

“No studio made it look easier to make hits than Warner Bros.,” said Laura Martin, an analyst with Needham & Co. “They’ve had the magic touch for a decade ... so this is a surprise coming out of Warner Bros., but not a surprise given the industry they compete in.”

It’s the second consecutive year that Warner Bros. has placed third in the share of box office revenue, putting more pressure on studio chief Kevin Tsujihara and his executive team to turn things around next year. The former head of Warner’s home entertainment unit took over the studio in March 2013 after a protracted and destabilizing contest to succeed Barry Meyer.

Warner’s struggles have been magnified by the successes of the top two studios, Universal and Disney, who are helping the industry set new records this year with such movies as “Jurassic World,” “Furious 7,” “Inside Out” and “Avengers: Age of Ultron.”

Unlike those studios, Warner did not have any bankable franchise movies to drive ticket sales. Tsujihara has long telegraphed to investors that 2015 would be a transition year to 2016, when the studio releases “Batman v. Superman” (which was pushed back from this summer), as well “Suicide Squad” and “Fantastic Beasts and Where to Find Them,” the spinoff of the Harry Potter franchise.

But the transition has been rougher than people inside and outside the Burbank studio predicted, underscoring the challenges of competing in a hit-driven business where consumers with more entertainment options in the home are more discriminating about what they choose to see in the multiplex.

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“It hasn’t been a great year for them,” said Doug Creutz, an analyst with Cowen and Co. “They had several things that looked good on paper that just didn’t come together.”

Creutz recently lowered his 2015 earnings estimates for Warner Bros. parent Time Warner Inc. based on the poor performance of “Pan,” which he predicts will make less than $40 million domestically, qualifying the poorly reviewed film as a “major bomb,” he wrote.

Michael Nathanson, a media analyst with Moffett Nathanson Research, also has been surprised by the uneven box office results for Warner Bros.

In a recent research note he said that “Warner Bros. has missed on many of its movies this year” even as the industry set records.

“We knew going into it, this was going to be a tough year, but it has been worse than we thought,” he said.

Nathanson and other analysts are more optimistic about Warner’s outlook for next year, which they view as the real test of Tsujihara’s strategy. He predicts film revenue will climb 7% in 2016, compared to an estimated 8% drop this year. “It’s going to get much better from here,” said Nathanson, who upgraded his rating on Time Warner stock to a “buy” this summer. 

Greg Silverman, president of creative development and worldwide production for Warner Bros. Pictures, said the studio won’t change its approach of taking chances with top artists and filmmakers.

“When you take risks and they miss, it hurts, but when they hit there are reverberations for years around the company,”  Silverman said. “We’re betting long on really talented filmmakers and great screenplays. You have to know that and look forward.”

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Time Warner shares, which closed Friday at $75.34, have fallen 14% in the last three months, the steepest among the six major media companies. Other media companies have also seen their shares drop amid broader concerns about consumers cutting their cable services, but the declines have been far less. Shares in Disney dropped 5% during the same three month period, while those of Comcast, owner of NBCUniversal, remained virtually flat.

Nonetheless, the weak box office results aren’t expected to have a significant effect on Time Warner’s overall third-quarter earnings, which will be released on Wednesday. Time Warner also owns HBO, Turner and CNN.

The good news for Warner Bros. is that its financial exposure from film is limited by gains in other segments, notably video games and television.

Warner produces hit shows like “The Big Bang Theory” and the new CBS series “Supergirl.” And surging video game sales from new releases “Batman: Arkham Knight” and “Mortal Kombat X” should help the studio deliver record profitability this year. The studio generated $1.3 billion in profits last year.

On the film side, studio executives remain hopeful that business will slowly build for “Our Brand Is Crisis,” much as it did for “The Intern” and “Black Mass,” both of which were successful.

“Our Brand Is Crisis” was a passion project for George Clooney, his producing partner Grant Heslov and Bullock, who along with Clooney starred in the Oscar-winning Warner Bros. film “Gravity.”

“We’re proud of that movie,” said Jeff Goldstein, Warner Bros.  executive vice president of distribution, referring to ‘Our Brand Is Crisis.’ “But I had higher expectations, and we’re obviously disappointed.”

Adult-oriented dramas have been struggling this year, including Universal’s recent “Steve Jobs” biopic and Sony’s “The Walk.”

“Our Brand Is Crisis” got a cool reception from audiences and critics alike. The film got a C+ grade on CinemaScore, and only one-third of critics polled by Rotten Tomatoes gave it a positive review.

Warner, however, has limited financial exposure from the film, which cost $28 million. The studio reduced the risk to its bottom line with co-financing from Participant Media and RatPac-Dune Entertainment.

The studio could end the year on a high note with two anticipated releases: “Creed,” the spinoff of the hit Rocky movies due out Nov. 25, and Ron Howard’s “In the Heart of the Sea."  The film, set for release on Dec. 11, is based on the story that inspired Herman Melville’s literary classic, Moby Dick.

Times staff writer Tre’vell Anderson contributed to this report.

Follow me on Twitter @rverrier

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