Warner Brothers, Time Warner's (
) movie entertainment arm, is going to launch part 2 of Harry
Potter and the Deathly Hollows in 3D during 2011. We take this
opportunity to estimate the value of such movies from Time Warner's
perspective. Time Warner competes with Viacom (
), News Corp (
), CBS (
) and Disney (
) in the media and entertainment business.
Our price estimate for Time Warner's stock stands at
, in line with market price.
Success of Part 1…
Harry Potter and the Deathly Hollows Part 1
earned global box office revenues of close to $950 million, with
31% coming from the U.S. box office and the remaining 69% coming
from the international box office. This suggests that this movie
alone accounted for a good portion of Time Warner's annual box
office revenues. We should note that, since the movie launched in
late 2010 and remained in theaters into 2011, the revenues cited
above are spread across both years.
… And Looking Ahead to Part 2
With the expected launch of part 2 in 2011, the year is shaping
up nicely for Time Warner's movie arm. Since 3D movies often have
ticket prices about $3 higher than regular movies, the company get
an added boost to revenues.
With a successful theater run for part 2, Time Warner can gain
both domestic and global box office market share. We estimate that
Warner Brothers is the most important division for Time Warner,
representing about 35% of the company's stock
. We include the company's box office business within this arm, and
estimate that box office operations single-handedly generate 12% of
Time Warner's stock value.
While a slight uptick in box office market share for 2011 alone
is immaterial, the company's stock value could see real upside if
these market share gains can be sustained over the long-term. You
can drag the trend line in the interactive charts above to see how
changes to Time Warner's box office market share outlook can affect
the company's stock value.
See our full analysis for Time Warner here