Paramount set to grab global box office crown

This is the second in TheWrap's series of Studio Report Cards.

PARAMOUNT:

Grade: A-

Paramount has dominated the domestic box office and is poised to capture the worldwide crown from Warner Brothers, but the studio has had more success distributing films via expiring partnerships with Marvel and DreamWorks Animation than it has had building its own in-house franchises.

From Transformers: Dark of the Moon to Paranormal Activity 3, Paramount has had a monster year at the worldwide box office.

In 2011, Paramount has fielded nine films that have crossed the $100 million barrier in domestic ticket sales, including 2010's True Grit, which logged the bulk of its $250 million worldwide gross in this calendar year.

With $1.73 billion at the domestic box office thus far and two tentpoles slated for the end of the year, Mission: Impossible -- Ghost Protocol and Steven Spielberg's The Adventures of Tintin, Paramount will certainly end Warner Brothers' three-year reign atop the domestic box office.

And with $2.84 billion in foreign revenue and $4.6 billion in global receipts to date, Paramount will also end Warner's international and worldwide No. 1 streaks.

Going into the summer, we certainly felt like we had a number of big tentpole movies, and on balance, they all delivered, said Don Harris, Paramount's president of domestic theatrical distribution. They all opened at high numbers.

But there's something scarier on the horizon than the flesh-eating alien in J.J. Abrams' summer hit Super 8: the imminent departure of partners Marvel and DreamWorks Animation, the team behind such recent winners as Thor, Captain America: The First Avenger, Kung Fu Panda 2 and Puss in Boots.

Together, those films comprised four of Paramount's top five grossing movies this year.

Paramount gets distribution fees from DreamWorks Animation and Marvel, but it doesn't own the rights to the superhero and family films.

Their big hits have been with third-party content, Marla Backer, an analyst at Hudson Square Research, told TheWrap. I don't think it's clear they can maintain their position based on the in-house content that they produce.

Paramount's deal to distribute Marvel films is over, and its pact with DreamWorks Animation expires in 2012. Though Paramount received an 8 percent distribution fee for its efforts with the two studios, the departure of Marvel and DreamWorks Animation will take a big chunk out of the studio's market share.

Emboldened by the moderate success of Rango ($245 million), Paramount recently launched its own animation division with an eye toward owning the family films it distributes outright. It expects to release its first film through the unit in 2014.

The DreamWorks deal was low-risk, easy money, and as Warner Brothers and other places have discovered, it's not so easy to launch an animation division, Backer said.

However, Paramount senses that after a number of years of serving as a distribution house for other companies, it has developed enough of its own intellectual property to move forward without the comic book company and the animation studio.

To that end, it has high hopes that Pixar maestro Brad Bird (The Incredibles) can reinvigorate its Mission: Impossible franchise after 2006's disappointing third installment, and it already successfully rebooted the wilting Star Trek franchise. A sequel to its hit 2009 Trek film is due out in two years.

Although Transformers star Shia LaBeouf has hinted he's done riding shotgun to Optimus Prime, there's still gas left in the robot franchise. After a critically derided second film, Dark of the Moon grossed $1.1 billion worldwide and was more enthusiastically received than its predecessor.

No. 3 was the best of the three, and I think that was the biggest secret for its success, was that it was a better movie than the sequel and the original, Harris said.

Outside of the line of tentpoles that Paramount planted across the summer and Christmas landscape, the studio had a nice string of lower budget successes.

Made for a cost of just $13 million, the studio's Justin Bieber concert film Never Say Never, took in nearly $100 million worldwide. Likewise, Paranormal Activity 3 continued the ultra-low budget series' penchant for capacious profit margins. Produced for a mere $5 million, the haunted house flick racked up $201.9 million worldwide.

There were mercifully few bombs. Yes, with a budget of $170 million, the $33 million grossing Hugo can safely be certified a flop. However, Paramount merely distributed the film, meaning that producer Graham King has been left holding the bag on the Martin Scorsese family picture.

Likewise, an attempt to give the '80s dance film Footloose a 21st century facelift failed to enchant audiences. The $24 million film danced its way to a $62 million worldwide gross, meaning don't hold your breath for those fleet-footed denizens of small town America to hoof it through a sequel.

Looking ahead, Paramount seems unlikely to duplicate its record shattering success next year at the box office. The studio has high hopes for its zombie film World War Z with Brad Pitt and G.I. Joe: Retaliation, but without men in tights or other comic book films, it looks like a less overpowering slate.

From a longtime strategic vantage point, it's incredibly important to Paramount that 'Mission Impossible' work, Matthew Harrigan, an analyst with Wunderlich Securities, told TheWrap. If the cupboard was that well stocked at Paramount, I wonder if there'd be another 'G.I. Joe' movie.

Yet, the studio owns more of the films it is releasing, meaning that it stands to bank the bulk of the profits.

Of course, all that reward comes with a lot of risk.