After Harry Potter, Warner Seeks a New Hero

Warner Bros., whose Harry Potter and the Deathly Hallows—Part 1 hauled in $125 million in the U.S. and Canada on its first weekend to record the sixth-biggest box office debut in movie history, faces a task even a wizard would find daunting: replacing a series that is expected to hit $7.5 billion in ticket sales by the time it ends next summer. J.K. Rowling's tale of the young sorcerer, concluding with an eighth film in July, is the highest-grossing film franchise ever.

Time Warner's (TWX) film studio will turn to DC Comics superheroes such as Batman, Sherlock Holmes sequels, and two prequels to the The Lord of the Rings trilogy. "We have been developing [other] properties that are starting to look like franchises," says Alan Horn, Warner's president and chief operating officer. "Is Sherlock [which sold $523 million in tickets worldwide last year] a franchise? I would argue yes. Is The Hangover series [the first film took in $467 million] a franchise? You could argue it is."

The Potter films, along with lucrative series such as The Lord of the Rings and The Matrix, have made Warner the top-grossing studio in seven of the past 10 years. The impact of a single installment can be outsized: In 2009, Harry Potter and the Half-Blood Prince accounted for 14 percent of Warner's $2.11 billion in domestic ticket sales, according to Box Office Mojo, an industry website.

Replacing Harry and his pals at Hogwarts School of Witchcraft and Wizardry won't be easy. "I don't think there's one obvious successor," says David Bank, an analyst with RBC Capital Markets. "If I were looking for it somewhere, it's the DC catalog."

DC Comics Projects

Time Warner, which has owned DC Comics since 1969, made the unit part of its film division last year in a move that highlighted the importance of the characters for future films. "We're doing our best to get the DC properties lined up like airplanes taking off from the runway," Horn says. Several projects based on DC Comics ­superheroes are under way. In June 2011, Warner will release its Green Lantern movie, which stars Ryan Reynolds as a test pilot with superpowers. The studio is also developing a Superman film, more Batman installments, and movies based on vintage action heroes Wonder Woman, the Flash, Green Arrow, and Aquaman, Horn says. Not every DC entry has been a hit. Jonah Hex, starring Josh Brolin as a bounty hunter in the Old West, took in just $10.9 million worldwide last summer. It cost $47 million to make, says Box Office Mojo.

The Potter movies, which have already raked in $1 billion more than Twentieth Century Fox's (NWS) six Star Wars films, have provided the studio with stability in an unpredictable industry, says Bank. The strongest opening of any Potter film was Deathly Hallows—Part 1. It may take in as much as $900 million, says Porter Bibb, a managing partner of ­Mediatech Capital Partners. The film cost about $250 million to make, according to Internet Movie Database. The series so far has produced a profit of about $1 billion if income from home-video, games, and other products is also tallied, according to Warner.

The studio's performance is increasingly important to parent Time Warner. Since the media giant completed the spin-off of its cable TV operations in March 2009, the studio's share of total revenue has doubled, to almost 42 percent. Filmed entertainment contributed 14 percent of profit last quarter.

Including Deathly Hallows—Part 2, which opens on July 15 in 3D, the Potter series is expected to produce $7.5 billion in theaters, Warner Chief Executive Officer Barry M. Meyer said in September. Warner and partner Metro-Goldwyn-Mayer will try to duplicate that success with two films based on The Hobbit, the J.R.R. Tolkien book featuring characters who appeared in the Rings series. The studios aren't taking any chances: They've signed Peter Jackson, director of The Lord of the Rings films, to also helm the The Hobbit movies.

The bottom line: Warner Bros.' Harry Potter films have been the industry's biggest. With the saga ending in 2011, the studio needs a new growth engine.

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