Movies Studios and Market Action

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Did you happen to make it out to see a new 3D movie recently? You’re not alone.

Movies are making record revenues this year, and some studios such as Disney (DIS), Time Warner (TWX) and especially Paramount/Viacom (VIA) are outperforming the broad indexes year to date.

Click on this link to view a Comparison chart of Movie Studios and SPY for the first six months of 2010.


(To see a tutorial on how to create this chart yourself on NASDAQ.COM, click here)

To be certain, the companies shown in this graph do much of their business in areas outside the movie studio. The biggest example being General Electric (GE), which happens to own Universal Studios and several other media outlets but is itself a worldwide conglomerate whose media interests are a comparatively small part of its business. Meanwhile, even the biggest blockbuster of the decade, Avatar, didn’t keep News Corporation, the Fox studio’s parent company, from underperforming the entire group. Despite NWS being down, likely over concerns about a pending buyout of British Sky Broadcasting, this group as a whole is performing admirably considering recent market uncertainty.

Is this performance in spite of recent economic decline or because of it? The old stereotype of the forlorn individual escaping their depression-era troubles in theaters might be an explanation. Or could it be something else altogether? The premium ticket prices audiences are willing to pay to see 3D movies has created an interesting inflationary impact on revenues.

Consider that at $2.7 Billion in ticket revenue’s, Avatar’s take dwarfs all other movies achievements—but only if you don’t account for inflation.  If you factor in the price of the tickets themselves (and thus count the number of times an individual actually paid to see the movie), Gone with the Wind still holds the record even after 70 years of its release. Avatar is only fourteenth on that list. (http://www.boxofficemojo.com/alltime/adjusted.htm).

But that actually makes the revenue number all the more fascinating. 13 other movies had more viewers, but Avatar still collected at least 50% more money than the next closest entry (which by the way, was Titanic—apparently James Cameron and friends know a little something about extracting revenue from viewing audiences). How was it accomplished?  3D technology may be coming to a household TV eventually, but at least this year, the only place to experience this novelty is in the theater. Paying the extra 25% for each ticket to view a movie in 3D probably helps boost the numbers of some shows. Perhaps this technology is among the reasons why this group is often rated favorably by analysts in recent months.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks , Economy , Investing Ideas

Referenced Stocks: DIS , GE , NWS , SNE , SPY , TWX , VIA

Gordon Scott, CMT


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