The 1 Number That Explains How Batman v Superman Is Failing Time Warner

"Batman v Superman" is a winner, even if the film hasn't met expectations. Image source: Warner Bros./DC Entertainment.

In many ways, Batman v Superman: Dawn of Justice is anything but a failure for Time Warner and its shareholders.

Just look at the at the data: At $833.9 million worldwide, BvS ranks third on the list of highest-grossing DC Comics films, while its $312.8 million domestic haul is 12th best all-time among comic book adaptations, according to Box Office Mojo.

And while Rotten Tomatoes says only 28% of critics gave the film a positive review, 68% of the fans who saw Batman v Superman -- over 200,000 as of this writing -- said they liked it. The divergence helps to explain why BvS has done as well as it has at the box office.

Knowing all of this, how can I (or anyone, really) call this film a failure for Time Warner? Momentum is the issue. According to data compiled by Box Office Mojo,BvS was screening in 3,505 theaters earning $228 per theater after day 26 in cinemas. Avengers: Age of Ultron-- a similarly big-budget superhero film from Marvel Studios --was yielding $523 per theater at 3,727 locations during the same point in its run last year.

To put a fine point on it:Batman v Superman: Dawn of Justiceis not only playing in fewer theaters today, but it's also earning 56% less per theater than its closest peer did.

The troubling villainy of meager enthusiasmMaybe you think this doesn't matter. Some films are huge hits; others aren't, right? While that's true, it's important to remember how cinema operators make their profits.

Let's takeAMC Entertainment as an example. One ofthe largest U.S. chains, the company reported a whopping $498.7 million in admissions revenue in the fourth quarter offset by $388.6 million in film exhibition costs and rent. Add in half of the remaining operating expenses ($103.8 million), and you're just about at break-even for AMC's filmed entertainment business -- in a quarter that saw record crowds for Star Wars: Episode VII: The Force Awakens.

Why is this? Like every other cineplex operator, AMC pays a percentage of ticket sales after agreed-upon house expenses (the "nut") for every new film shown on its screens. Splits vary, but big studios usually get 95% of the take after accounting for the nut in weeks 1 and 2, 90% in week 3, and 85% in week 4. Films that have appeal after the initial four-to-six week engagement period are more profitable for AMC and its peers because the rental terms for longer runs are more favorable to cineplexes.

Marvel's merc with a mouth has been a big winner at the box office. Image source: 20th Century Fox.

This is why they loveDeadpool. This R-rated superhero comedy is still playing in 791 theaters (and earning $128 per theater) 68 days into its run. Cineplexes showing the film are doing so to milk the last few drops of profit before21st Century Fox pulls it to prepare fans for Blu-ray and streaming sales.

DC movies won't always need the staying power ofDeadpool. They just need to be good enough for Warner to extract the same rental terms for say, Cyborg, as they do for theJustice Leaguemovies.

Cinematic kryptoniteNor can Warner allow the DC Entertainment brand to become associated with bad movies when intensifying competition will make it easy for fans to find alternatives. Here's what each of the planned DCU films faces over the next several years:

Source: Box Office Mojo.

While some films are likely to have a clear path to profit, others could get squeezed. Look atThe Flash andShazam!, whichhave potentially tough rivals at both bookends, whileJustice League-Part Two is going to have to live up to the finale in Marvel'sInfinity War two-parter before facing off againstInhumans.

Then again, maybe this is what we need. Maybe DC and Warner need tough competition in order to raise the level of filmmaking. It's happened before;Batman Begins set the stage forThe Dark Knight, which was both an economic powerhouse and an Oscar winner.

Critical and audience ratings tell usBatman v Superman: Dawn of Justice isn't in the same league as either of those two movies. Yet it's even worse than that: A faster-than-expected exit from theaters goes further and tells us it's a failure for Warner investors -- even at over $800 million in worldwide grosses.

The article The 1 Number That Explains How Batman v Superman Is Failing Time Warner originally appeared on Fool.com.

Tim Beyers owns shares of Time Warner. The Motley Fool owns shares of and recommends Time Warner. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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