Taken 2, a movie under the banner of News Corp's (
) Twentieth Century Fox, did well on its opening weekend, grabbing
$50 million as the top grossing film. How well does this bode for
the financial health of the company? As we have maintained in the
past, the success of a single movie hardly holds any significance
for media companies in the long run for two reasons.
First, the movie business margins are so low that its cash
profits pale in comparison to what media companies earn from cable
and broadcasting networks. In case of News Corp, while cable and
broadcasting networks together constitute 65% of the company's
value, movie and TV show production and distribution business
constitutes just 20%. If we look at movies alone, this value
contribution comes down further significantly.
Second, the movie business is quite unpredictable. One of the
good ways to judge the annual success is to look at the successful
franchises that the media companies own and whether their sequels
are scheduled for release. Disney (
) with its Marvel franchise and Time Warner (
) with its Batman franchise have done well. News Corp does have
some successful franchises such as Rio, How To Train Your Dragon,
Kung Fu Panda, etc., but their sequels do not release until 2014
and beyond. In any case, compared to Disney and Time Warner, News
Corp's franchises pale in terms of success and box office
See our complete analysis for News Corp
News Corp trailed other major studios in terms of box office
revenues in 2011 and the trend is continuing in 2012 as well,
. Given the relative weakness of its franchises and no major
sequels scheduled for late 2012 or 2013, we expect News Corp to
perform below other major studios in the short-to-medium term.
Our price estimate for News Corp stands at
, implying a premium of about 5% to the market price.
How a Company's Products Impact its Stock Price at