Arundel Case Essay

Paramount took advantage of Ms. Marder when they purchased her story. They saw the story as a great investment, especially for the small amount they paid

After evaluating the Super Project for General Foods, the two main things that management needed to address were the relevant incremental and non-incremental cash flows discussed below and incorporate the NPV and the net cash flows (yearly) to make a decision on whether to accept or reject the project. The start-up costs were determined by splitting up the costs of $160,000 in 1967 and $40,000 in 1968. To calculate the yearly cash flows, I used year 1 through 10, and the gross profit was calculated by subtracting out relative cash flows and the before tax depreciation. The NPV of $169,530 is positive for the 10% discount rate, which is less than the IRR of 11.4%.

The maximum per-film price for the sequel rights that Arundel Partners should pay is $5.12M.

A group of investors (Arundel group) is looking into the idea of purchasing the sequel rights associated with films produced by one or more major movie studios. Movie rights are to be purchased prior to films being made. Arundel wants to come up with a decision to either purchase all the sequel rights for a studio's entire production during a specified period of time or purchase a specified number of major films. Arundel's profitability is dependent upon the price it pays for a portfolio of sequel rights. Our analysis of Arundel's proposal includes

With the purchase of sequel rights, what Arundel is achieving is to have a call option on the revenue that each movie brings. This helps to remove the uncertainty and risks associated with producing a movie, especially with regard to moviegoers’ taste. With the sequel right, Arundel will only exercise this option to produce a sequel if the first movie proved to be popular and the sequel is hence predicted to bring in profits. This provides downside protection, as huge losses (due to high production costs) associated with a failed movie will be avoided.

Commercial’s NPV is $.1516 million (see Table 3). This was determined by using the present values of the four year lease agreement between Prudent and Commercial. We concluded that Commercial’s discount rate will be 10% because of their opportunity cost. Commercial needs to have a residual value on the DAS of 6.8 million or greater, which will give them a positive net present value. Therefore, if their net present value shows negative, they would not want to lease to us. Assuming Commercial receives the same 5 year MACRS rate on the equipment purchase, then the system should be worth 7.01 million (book value) at the end of year 4 (see Table 4). This allows Commercial to have a positive NPV of $.1516 million (see Table 4). Therefore, they would be willing to lease the DAS to us.

Arundel can make money selling the rights to a higher bid. Another option to make money is by producing the sequel exercising its rights but this will depend on if the net present value of the production movies is higher than the amount of buying the rights. If the future positive cashflows are undervalued Arundel can seek an arbitrage

From Exhibit 4 the NPV is about $1.5 million. There initial investment is $400,000. Without included debt payments this appears attractive. However, the NPV should include the debt payments for a useful NPV. This reduces the NPV significantly. The investors double their money and the investment appears viable.

In this case, a movie industry analyst is asked to evaluate a proposed venture in which a group of partners would purchase the sequel rights to movies produced by the major studios. Your objective is to 1) discuss and evaluate the basic concept; 2) determine the value of the sequel rights on a per-movie basis; 3) evaluate the possible upside and potential drawbacks to the proposed plan. As you will see, the ideas here incorporate elements of capital budgeting coupled with a “real options” analysis.

Based on the previous module assessments, NBC Universal’s preliminary focus should be geared toward the film industry. The recent trade deal, between both the U.S. and Chinese Governments, lowered a 20-year-old quota on U.S. films and distribution fees in the Chinese film industry. This signifies productive progression within the film industry, even though small in nature, but nonetheless this could equate to significant profit gains for all the FMO’s within the market.

The studio’s executives were in shock after watch the movie that looked fantastic and it was an epic on a grand scale, but there is no way the studio could commercially release a film that was over five hours long. Frazier being forced to cut the film becomes two hours long. The movie was shortened, but now it made no sense. Characters appeared and disappeared randomly, the plot was impossible to follow, and the dialogue did not make sense at a several key points. The film was disaster. The reviews of the film were terrible, and audience stayed away in droves. On a total outlay of $90 million, the studio recouped less than $9 million. The studio releasing the five and a half hour version of the movie, but it made no difference to the overall financial results.

4. The bargaining power of buyers: The outlook for the target market isn’t favorable for the movie industry because it will not be growing as fast as the overall population. Buyer power is a strong force because of the target market and several other factors including: the undifferentiated product offered, switching to an alternative is simple and low cost, and customers can stay home and watch movies. The consumers are also complaining about concession and ticket costs, along with the advertisements before the film is shown.

TV movies and arrangement may have unique, yet debatable sovereignty shares.Include held rights in the assention. You should clarify the rights the creator saves in the alternative assention. These may incorporate distribution rights, the privilege to distribute continuations, prequels, or other standard works, or different rights. On the off chance that the writer has specific rights that he or she needs to hold for him or herself, make certain to incorporate them in the alternative agreement.Sign the choice understanding alongside the essayist and pay the concurred choice cost. You may require a legal advisor to help you in the consenting to in light of the fact that the arrangement will be composed utilizing specific legitimate verbiage.[8] After consenting to the arrangement, pay the essayist the alternative price.Search the enlistments and recorded rights exchanges for the work in the US copyright database. You need to ensure the copyright enrollment is under the writer's name and that there aren't as of now any choices, and so forth.

As a new business opportunity arises, so do some of the uncertainties that come along with it. Our company has been brought in to evaluate some of these uncertainties that come along when unchartered territory is explored. Arundel Partners has an idea that has great potential, but there are a few problems that must be addressed in order for the idea to become reality. First, we will look at potential limited partners. More than likely general partners will not have experience or specialized knowledge in the movie industry. They do not currently see the value in sequel rights, how they will be able to make money off of these investments in the rights, or understand why studios would

A distribution contract can be structured in many ways that result in very different returns for the producer, the key creative talent, and even the distributor. Elements that are negotiated include: