March 5, 2010: Brooklyn's Finest and something from Tim Burton

Two movies are opening this weekend, Oscar weekend, one a generic cop movie with a solid cast, and the other another visual-effects spectacular from the usually delightfully twisted mind of Tim Burton.

First up, let's look at the cops, Brooklyn's Finest (BRKLN). I have this funny feeling that the title is sarcastic, but I'm not entirely sure. These Finest include Richard Gere, Don Cheadle, Wesley Snipes, and Ethan Hawke. And Ellen Barkin. Good actors all, but none have really opened a movie on their own in at least a few years. Opening on Oscar weekend, it's not being targeted at the arthouse crowd, that's for sure. Stock is at H$31, and has been dropping from a high of about H$40, although my guess is that it has bottomed out. Strike price is H$15, which is rather on the optimistic side, since the stock price predicts an opening weekend around $12 million. The call (BRKLCA) reflects that unfortunate strike price, as it is around H$1. The put (BRKLPU), absolutely unsurprisingly, is above H$3. The CX derivative on HSX is around H$32, after nosediving steeply. It's also at $32 on Cantor. It's going out on 1,900 screens, a decent release, but not great. Reviews are not terrible, but not good - it's at 31% on rottentomatoes.com. I think these prices are all about right, or maybe on the high side. I'm looking for right around $10 million.

Stock: Short

Call: Short

Put: Long

CX on HSX: Short

Cantor: Short

Then there's the big movie of the weekend and the month, Tim Burton's Alice in Wonderland (ALCNW). Lots of anticipation for this one. Price on HSX is just shy of H$200. Strike price is H$70, with the call (ALCNCA) above H$6. Haven't seen that in a while. The put, of course, is underwater, at H$1 and change. The CX derivative on HSX is at H$226, so much higher than the stock. On Cantor, it's even higher, at $235. So the predictions range from about $75 million to $87 million. It's going out on a very wide number of screens. But the critics' reviews range from merely decent to downright savage. It's at 57% on RT, but it's a very weak 57%. I have a couple of problems with it. First, there are a couple of famous faces (Johnny Depp, Helena Bonham Carter, Anne Hathaway), but they are hidden beneath lots of makeup and CGI. That takes away a certain part of their appeal, notably that they are very good looking. It's in 3D, which of course raises the box office potential, but it wasn't shot in 3D; those effects were added in post. Tim Burton definitely has a very active imagination, the kind that creates worlds suitable for 3D, but I'm not sure he has the technical chops that, say, James Cameron does. The story is apparently quite different from Lewis Carroll's original. In some sense, that doesn't matter, because most people are only vaguely familiar with the story in the first place. But the replacement story sounds very generic-Hollywood. It's supposed to be a kids' movie, but I'm not sure I see this appealing to many kids. I think it will have a huge opening weekend, but then drop quickly.

Stock: Long

Call: Long

Put: Short

CX on HSX: Short

Cantor: Short

Update Monday night: Boy do I feel stupid. Hopefully this will go down as one of the worst mistakes of my movie stock investing career, because I hope I never make another doozie like this one. Shorting a huge blockbuster - what was I thinking? And less than a month after I got burned the same way on Valentine's Day. This is certainly a humbling business. I should have asked the classic question: is there more potential on the upside, or the downside? There was virtually no potential on the downside - this movie was pretty much a lock to make at least $70 million. You had four great brands working here - Disney, Tim Burton, Johnny Depp, and Alice in Wonderland. Certainly was a learning experience. It adjusted from H$205 to H$314. Brooklyn's Finest also adjusted up, although that was not really as surprising.

The big question is - how will ALCNW do over the course of its run? Movies with openings like this tend to drop over time. I'm staying with my short, in the hopes of somehow salvaging some kind of money from this. Also, there are some seriously strong negative reactions on Yahoo!, so I have the feeling the word of mouth will not be that great.

Update from last week: I was wondering how 2COPS and CRAZI would hold out long term. My bet was that CRAZI would benefit from a higher PSA, because fewer movie theaters would pull it. Looks like I completely misread that - 2COPS didn't lose any theaters, and CRAZI only added 3, a miniscule change. Another lesson learned.