Reasons to Invest in Lionsgate Essay

Given our analysis of the motion picture industry, we recommend that Arundel carefully select the major film studios from which they intend to purchase sequel rights. The net present value of hypothetical sequels taken from the available previous years shows not only that the industry is highly volatile, but also that certain production studios are more volatile than others in terms of their recent performance. In addition, some studios are consistently less profitable than others. (See "NPV for Each Production Company" chart in appendix) Since the success of film studios are relatively stable in the short term (see "Rental Shares of Major Film Distributors" table and graph) Because of this stability, it is possible for Arundel to approach more profitable studios with their offer to purchase sequel rights. Out of all the major film studios, only MCA-Universal, Warner Bros., and The Walt Disney Company generate a positive net present value on a per-film basis. However, according to casual inquiries, it is unlikely that any movie studio would enter negotiations with Arundel on a per film price that is less than 1 million. Instead, the film studios seem to

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.

This year, the company’s revenue so far has been boosted by the release of How To Train Your Dragon 2, which recently passed the $600,000,000 benchmark at global box office, becoming the ninth highest grossing film of the year and one of the

The past decade has seen superhero movies rise to box office dominance. This is a new trend. Batman and Superman movies found success early, but the surprise blockbusters Spider-man and X-men at the turn of the millennium revealed that the market for comic based entertainment was not yet saturated (Fritz, 2014). Looking back a decade and a half later, consumer demand has clearly spoken: six of the last ten highest grossing movies were based on comic books: Guardians of the Galaxy, Iron Man 3, The Avengers, Transformers: The Revenge of the Fallen, The Dark Knight, and Spider-Man 3 (Lev-Ram, 2015). Today, studios have demonstrated confidence that this trend will continue. For example, movies set in the Marvel Cinematic Universe are scheduled out until at least 2019, with Inhumans set for release in June of that year (Marvel, 2015).

Driving Miss Daisy, Dead Poets Society and Batman were chosen to be the representative movie sequels with their varied sequel rights values that can be compared to $4.96M. They were chosen because they are all one of the most highly anticipated successful films that can generate sequels. In particular, the PV of these successful sequels will help us determine if we are underpaying or overpaying the current sequel rights for each individual movie.

Star Wars one of the best classics ever made was an unexpected success.George Lucas the creator of star wars had expected his films to be a failure ; a simple film , unspoken of and not well known.He couldn’t have been more wrong , his films had stucken the hearts of thousands of people.Instantly he had fans ; talked about all the time his famous creation had hit shelves in VHS’s and soon too be made into DVD’s.Now 38 years later he is working on another film comeing out this christmas ; soon to be added to the great trilligy known as starwars...

Jacobson now runs her own production company, Color Force. It is a small operation, but one with a mighty trick up its sleeve: she is the producer of The Hunger Games, the dystopian action movie series. The fourth and last, Mockingjay Part 2, is about to be released. Made with brisk efficiency – the first came out in 2012 – the films have been outlandishly successful. The total gross of the three to date is $2.3bn (£1.5bn). In Britain (the films are globally popular), the most recent, Mockingjay Part 1, accounted for two in every three cinema tickets sold on its opening weekend. But money is not the whole story. With vast audiences has come huge cultural impact. Mockingjay Part 2 was recently found to have higher levels of anticipation among cinema-goers

It can very difficult to make a good sequel to a recent blockbuster movie. How likely is it that lightning will strike twice, not very. Creating an all new epsiodic event for you already established characters can be daungting and redundant. These icons have proven themselves to be heoroes in the viewers eyes and writers have to raise the bar even further to coerce moviegoers to part with their entertainment bucks.

As popular as sequels and reboots have been in Hollywood of late, apparently all of those coming out this year are not the slam dunk for success that “Avengers: Age of Ultron” and “Jurassic World” have been. The release of “Terminator Genisys” over this fourth of July holiday weekend has shown that some sequels American moviegoers are apparently not interested in. Despite being its first box office weekend, it still finished third behind Pixar's “Inside Out” and “Jurassic World” continues its reign at number one at the domestic U.S. box office for a fourth weekend in a row.

After evaluation of the proposed acquisition of the movie sequel rights, we recommend to offer movie studios as a per-movie price to purchase the sequel rights for their entire portfolio of movies the studios are going to produce over the next year.

Based on our valuation of the investment, as outlined below in the Analysis portion of the report, we have determined a per-movie-value of $8.9 million when considering purchasing the rights to the entire portfolio of 99 movies analyzed in the sample data. Based on production of 10 sequels, the per-movie-value of the portfolio would be $52.25 million. Our calculations based on the hypothetical portfolio is that Arundel Partners should make this investment as long as the present value of the expected cash flows from the sequel revenues exceeds the cost of production plus the cost of the investment. Depending on what value a studio will accept as payment per sequel, there appears to be significant profitability in the investment.

The Harry Potter franchise as a whole is valued at an estimated $15 billion USD. In comparison, the much smaller Narnia worldwide box office profited at least $1.5 billion USD, significantly less than the entire Harry Potter franchise.

With a weekend in the cinema behind it, it made a mark at the box office, setting a record for biggest August debut with $135 million take. Similar to Batman v Superman, the film dropped sharply from Friday to Saturday, losing more than almost half its percent of its box-office momentum. That brings the film’s long-term earning potential into question, and the bad reviews don’t help. With one behind-the-scenes source claiming it needed to make at least $750 million just to break even, it faces a long struggle— especially since it’s likely to be shut out of release in asia, which is becoming a major financial factor for blockbuster

The debt is potentially crippling financially through increasing interest payments and the limitations that the loans restrictive covenants put on Lionsgate. The increasing interest payments are a large expense that limits net income as well as cash flows. Why would anybody invest in a company that is almost guaranteed to have a lower net income next year and possibly the year after? Also the limitation of cash flows can restrict certain business strategies such as acquisitions which is key to Lionsgate strategy as it is how Lionsgate brings new ideas into the organization, which is necessary to

In the first half of the decade, things were looking up for video game movies, as there were huge hits like Tomb Raider and Resident Evil.