Metro-Goldwyn-Mayer Inc. reported Friday that it lost $61.3 million in the second quarter because of two major box-office flops.
MGM blamed the Martin Lawrence-Danny DeVito film, "What's the Worst That Could Happen?," and "Josie and the Pussycats," a co-production with Universal Studios, for the slide. On a per-share basis, the loss was 26 cents. MGM had a $6.3-million profit in the year-ago period.
MGM's quarterly revenue fell to $274.9 million from $294.5 million a year earlier, when sales were boosted by $67 million in video revenue from the James Bond film "The World Is Not Enough." Earnings before interest, taxes, depreciation and amortization--a key barometer used by analysts who follow media companies--was a loss of $35.9 million for the second quarter.
Wall Street took MGM's losses "pretty much in stride," said Jeffrey Logsdon, an entertainment analyst with Gerard Klauer Mattison. "Most people who understand the movie business realize that not every one of the little turtles is going to make it to the shore."
David Miller, a media analyst with Sutro & Co. in Los Angeles, added: "MGM faced a tough comparison. There were no James Bond films out this quarter."
MGM's stock ended trading Friday at $19.85 a share, up 50 cents, on the New York Stock Exchange.
Because movies remain MGM's dominant business, the Santa Monica studio's financial success is tied to its box-office results more so than for diversified media companies, where film duds can be offset by gains in other areas such as television.
"When the Warner Bros., Disneys and Viacoms have a movie that isn't successful, it can be buried 100 different ways," Logsdon said. "But when you have a pure production company, particularly in the early stages, your lack of success is going to be far more visible."
Company executives conceded that MGM's earnings are sensitive to the popularity of its pictures. But they said the studio's base is strengthened by revenue from its film library, DVD sales and an aggressive push into foreign cable markets with its MGM Networks.
Controlled by billionaire Kirk Kerkorian, MGM this year has a mixed track record. Although the Martin Lawrence and "Josie" films were disappointments, the company scored hits with "Hannibal," "Heartbreakers" and, most recently, the Reese Witherspoon comedy "Legally Blonde." Chief Executive Alex Yemenidjian said "Legally Blonde" will make the studio more money than it lost on the two stinker films.
"In fact, 'Legally Blonde' will probably become one of the 10 most profitable pictures in our company's history, including the James Bond pictures," Yemenidjian told analysts during a Friday morning conference call.
Chief Operating Officer Chris McGurk said MGM will try to stretch the success of "Legally Blonde" with a sequel and a television series. The film, which opened July 13, and cost about $20 million has reeled in more than $50 million. And the studio will claim much of that, McGurk said.
"We did not have any $20-million actors with high-gross participation in the movie," McGurk said.