MGM and Time Warner Need a Big 'Hobbit'
Bilbo Baggins is under a lot of pressure. Not only does he have to free a dwarf kingdom, but MGM is counting on him to pave the way for its IPO.
After filing a preliminary filing with the SEC this summer, MGM held off on plans to go public. The studio waited, hoping that strong performances from James Bond '007: Skyfall,' co-produced with Sony, and the first film in the Hobbit trilogy.
Entertainment industry economist Harold Vogel says he expects MGM to file for an IPO in March or April, between the flood of revenue from 'Skyfall' and 'The Hobbit.'
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Despite mediocre reviews, the 3-D "The Hobbit: An Unexpected Journey," is expected to set a record for the biggest opening ever, with $80 million at the U.S. box office.
Midnight showings at 3,100 theaters brought in $13 million, $1.6 million at Imax theaters. With no other major film opening this weekend 'Hobbit' will face little competition, and will benefit from the fact that it's in 3-D as those tickets cost as much as $3 more than a regular movie.
MGM is hoping that the three Hobbit films slated for Time Warner to release over the next two years will live up to the Lord of the Rings trilogy, which grossed some $3 billion worldwide. It has a lot riding on the franchise's potential: in July it paid Carl Icahn $590 million to buy out his 25 percent stake in the company. And back in February MGM obtained a $500 million credit facility to manage its debt and invest in growth, after it filed for bankruptcy in November 2010.
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Time Warner also has quite a bit riding on 'The Hobbit,' – its New Line Cinema co-produced the film, and Warner Brothers is distributing it worldwide. And since the eight-picture Harry Potter franchise ended last year, the studio's market share has dropped to third place, after dominating the number one spot in prior years.
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So how much did 'The Hobbit' cost?
The first two films in the franchise reportedly cost a combined $250 million, but it's possible the budget will be even higher, and marketing costs will certainly bring the numbers even higher. Still it is well believed that with a built-in fan base, both in the U.S. and around the globe, MGM and Time Warner's New Line, will have no problem earning back that investment.
—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin