Warner Loses at Box Office, Videogames Score Big

Dow Jones Newswires

It is a story as unlikely as a boy who can fly: Hollywood's biggest studio is in the midst of a prolonged slump at the box office at the same time it is racking up a high score in videogames.

The fairy tale reboot "Pan" bombed with a $15.5 million opening this weekend, likely landing it where most of Warner Bros.' big-budget movies this year have: in the red. With a production budget of at least $150 million, "Pan" joins other high-profile Warner flops, including "Jupiter Ascending" and "The Man From U.N.C.L.E.," along with smaller duds such as "Entourage" and the action film "Run All Night."

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Two exceptions were January's surprise blockbuster "American Sniper" and the solidly performing disaster flick "San Andreas."

Despite releasing more movies than the other five major Hollywood studios, Warner is ranked No. 3 in global box office with $3.2 billion so far in 2015, and may fall to No. 4 before the year is out. The Time Warner-owned studio has long spent more making and marketing its movies than competitors, in search of the highest results, and hasn't finished a year lower than No. 2 in box-office rankings since 2006.

While the 92-year-old Warner is losing at the box office, however, its 11-year-old videogame division is beating established publishers like Electronic Arts and Activision Blizzard at their own game. The studio's Warner Bros. Interactive Entertainment is ranked No. 1 in videogame sales, with a domestic market share of just over 20% through August, according to data from research firm NPD Group.

Other Hollywood studios have taken a stab at the videogame business, but none have stuck with it like Warner. After ranking No. 6 or 7 the past few years, the studio has shot to the top, thanks to major hits including "Batman: Arkham Knight" and fighting game "Mortal Kombat X," which have each sold more than 5 million units globally. "Lego Jurassic World," based on the movie from competitor Universal Pictures, has sold about 4 million copies.

Warner Interactive has in several key ways aped the strategy of the studio's motion-picture business by making large investments in hopes of creating market-dominating franchises.

It spent hundreds of millions of dollars to buy the development studios behind "Arkham Knight," the third game in a successful Batman franchise; "Mortal Kombat"; and the Lego game series, which turns popular movies like "Harry Potter," "The Avengers" and "Star Wars" into kid-friendly interactive worlds.

"We really do feel this year is a culmination of a lot of the investments we have been doing for about a decade," said David Haddad, who runs Warner's videogame business.

Though it may not keep its No. 1 ranking all year, Warner Interactive is on track for a record $1.5 billion in revenue in 2015, said Mr. Haddad--likely more than 10% of the studio's annual total.

Two weeks ago it made its biggest bet ever with the launch of "Lego Dimensions," a "toys-to-life" game similar to Activision's "Skylanders" that lets players build special, separately sold Lego sets that can appear in the game. Such toys-to-life games typically cost more than $100 million to develop, manufacture and launch.

Warner's entry into the videogame business was led by former home-entertainment chief Kevin Tsujihara, who is now CEO of the studio. Since ascending to that role in 2013, Mr. Tsujihara has been more involved in the movie business than his predecessor, Barry Meyer, who largely delegated that job to the motion-picture group president. Mr. Tsujihara hasn't filled that job.

Instead, he has worked closely with the heads of movie production, marketing and distribution to steer a slate that is rebuilding following the recent conclusions of the hugely successful "Dark Knight," "Harry Potter" and "Hobbit" series.

This year's attempts to start new franchises--some of which were under way before Mr. Tsujihara was named CEO--have fallen flat. "Pan," which has grossed an additional $25.1 million internationally, is just the latest example.

With Warner Bros.' large television business--which produces the new NBC hit "Blindspot," among many other series--still performing well, the studio is on track for record revenue this year despite its movie woes.

"Our business is intentionally diverse, so in a year where we've faced challenges at the box office, our games and TV businesses have been off the charts," said a spokeswoman.

Mr. Tsujihara, who declined to be interviewed, is said to essentially have this year's movie slate in his rearview mirror and is focused on March's ambitious and expensive "Batman v Superman: Dawn of Justice," which kicks off 10 DC superhero movies over the next five years. Next November brings the Harry Potter spinoff "Fantastic Beasts and Where to Find Them," while 2017 will see two follow-ups to last year's "The Lego Movie"--a surprise hit that arose from the studio's videogame partnership with the brand.

Warner Bros. wasn't the only studio with bad box-office news for the weekend. Sony Pictures Entertainment's "The Walk," a $35 million true-life story about the daredevil who crossed the Twin Towers on a tightrope, expanded nationwide this weekend and grossed a dismal $3.65 million.

"The Martian," the Ridley Scott-directed science-fiction thriller from 21st Century Fox's Twentieth Century Fox, was No. 1 for the second weekend in a row, grossing $37 million. It has collected a robust $228 million world-wide.

Write to Ben Fritz at ben.fritz@wsj.com