Wall St eyes 'Monsters' opening

By Robert Marich
   March 26, 2009 – Wall Street is watching closely how Monsters vs. Aliens does at the box office this weekend, because the stock price of its maker – DreamWorks Animation SKG – will likely move based on the animated film’s performance. The roughly $165 million production – which is betting heavily on 3-D theater projection – premieres tomorrow on about 7,000 domestic screens, of which 2,000 are 3-D.
   “We estimate a domestic box office opening of $60 million+ is necessary to reach our total $200 million domestic box office estimate,” says a report from investment house Bank of America/Merrill Lynch. That report notes that other stock analysts have a slightly lower forecast of Monsters’ ultimate domestic box office of $180-190 million.
   It’s rare that a single theatrical release will visibly impact the stock price of the parent of a major studio because all the majors are parts of larger media conglomerates. In the case of Monsters, Paramount Pictures is the theatrical distributor and it is part of Viacom – which has a stock market capitalization of $11 billion that is too big to be nudged by a single film.
   But DreamWorks Animation, which is not a major studio, has a stock market capitalization of just $1.9 billion, so one of its films that hits or drops big-time will influence trading. Further, DWA – which is the company’s stock market ticker symbol – releases just a few theatrical films a years, which is far less than the 12-25 of a major studio. Monsters may – or may not – emerge as a source of dependable sequels, like DreamWorks’ Shrek franchise (a fourth installment Shrek Goes Fourth) is in the works.
   The second edition of Marketing to Moviegoers: A Handbook notes that the total marketing costs of major studio releases routinely top $100 million worldwide, though this is lost on most observers. That’s because most pundits only focus on the domestic ad spending -- $20-50 million – but forget to add the more-expensive international release.
  Merrill Lynch estimates that DreamWorks will spend a whopping $185 million for global marketing costs—which is a high end number. It’s not a surprise because DreamWorks has a reputation for pulling out all the stops in marketing. For example, DreamWorks spent an estimated $8 million for a 90-second Super Bowl ad for Monsters, plus lined up tie-in partners to hand out 3-D glasses to viewers so they could watch at home in 3-D as part of a special promotion.
   The only other significant film company whose stock price can fluctuate based on the opening of a single film is Lionsgate, which is the biggest indie distributor. Liongsate has a stock market capitalization of $640 million (corporate raider Carl Icahn is a big and active shareholder). Hollywood’s industrial sector is characterized by a few major studios at the top and lots of little companies at the bottom—most of them privately held and not listed on any stock market. DreamWorks and Lionsgate are in the sparsely-populated middle.
   In a stock market boom 20 years ago, Wall Street capitalized a slew of medium and small film companies, such as now-defunct Carolco Pictures, which made Terminator 2: Judgment Day. In that era, stock analysts advised investors to place their bets that a single film would lift a stock one or two weeks before the actual theatrical opening, and then sell the stock two days before the premiere. They said that the actual box office results would seldom propel a company stock higher, so there was no reason to hang on and, in the event of a disappointment, the only big movie would be down.
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