... Inc. FROM: Yixin Liu SUBJECT: Arundel Partners: The Sequel Project 1. As you had assigned me the task of investigating a possibility of investing in the sequel rights in the US movie industry, I have made some analyses and recommendations as well. 2. The US film industry is on an upward growth after successful first films, thanks to creativity and growing thriftiness in the movie business. 3. Major studios finance film projects, which may or may not be successful in the US and the global market. However, experienced players always invest in independently financed films and the returns are good. 4. A lot of money is involved in production, distribution, and exhibition of films, which eventually...
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...purchasing the sequel rights associated with films produced by one or more major movie studios. Movie rights are to be purchased prior to films being made. Arundel wants to come up with a decision to either purchase all the sequel rights for a studio's entire production during a specified period of time or purchase a specified number of major films. Arundel's profitability is dependent upon the price it pays for a portfolio of sequel rights. Our analysis of Arundel's proposal includes a net present value calculation of each movie production company. In order to decide whether Arundel can make money buying movie sequel rights depends on whether the net present value of the production company's movies is higher than the estimated 2M per film required to purchase the rights. Problem Identification: How are the principals of Arundel Partners planning to make money by buying rights to sequels? They would be interested in purchasing the sequel rights for one or more studios¡¦ entire production over an extended period of not less than a year. If a particular film was a hit, and Arundel thought a sequel would be profitable, it would exercise its rights by producing the sequel. Alternatively, they can sell the rights to the highest bidder. Inevitably, the performance of the original films would not justify sequels, and for them the sequel rights would simply not be exercised. For most movies it becomes quite clear after their first few weeks in theaters whether a sequel would be economical...
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...interested in purchasing the rights to make sequels of all of the studios movies, rather than just some. Why do they believe this venture is profitable? 2. Suppose that you are a movie executive. You are considering a movie version of the life of President Garfield in the months leading up to his assassination by Charles Guiteau in a Washington DC railroad station in 1881. Your analysts have determined that the expected revenues are $94,556,250. They determine that revenues will be distributed binomially as shown in Exhibit 1 (40% annual volatility). Exhibit 1 shows the possible payoffs and the probability of each state occurring (note this information is provided in an Excel file). Assume that the one-year T-Bill rate is 5% (yield with semiannual compounding). If given the green light, the movie will have the following costs: a. $36MM – Negative Costs (assume it is incurred immediately) b. $25MM – Distribution Fees (assume these are paid in one year) c. $32MM – Distribution Expenses (assume these are paid in one year). Should you accept this project? Why? Suppose that Arundel Partners will give you a $2MM check for the rights to the sequel. Do you accept the project? 3. Suppose you come upon another project with exactly the same costs and possible payoffs. However, this film is a movie version of the popular 1960s television show Gilligan’s Island. Would you give the green light to this movie without having sold the sequel rights to Arundel Partners? Why? What is...
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...provide an immense box office result. It served well previously, the first film made over eighty million dollars, but the development cost for it was only three million. So, the sequel, Purge: Anarchy, was greenlit, with a budget of eleven million dollars. At the time of its release, the film received mediocre reception. A review from Rogerebert.com criticized the film, calling it "Just like its predecessor The Purge: Anarchy is so weak on a basic storytelling level that it makes you want to nitpick everything about it"; Notwithstanding the critical response, It grossed over one hundred million dollars at the box office. The film spawned...
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...FINANCE Corporate Finance and Banking Arundel Partners: The Sequel Project The East Wind Amol Marathe 140843 Linglan Tan 140838 Xiangyu Zhou 140912 Date: 20/11/2014 Arundel Partners: The Sequel Project The East Wind Executive Summary: Arundel group is looking into the project of purchasing the sequel rights associated with films produced by one or more major movie studios in United States. Arundel believes that they can calculate a value for the rights to produce these sequels and take a position by investing in a portfolio conformed of these rights. Arundel Partners plans to make money by negotiating an option price below its net present value calculation and obtaining its expected returns on the option. The proposal is appealing to studios because sales of sequel rights can help them finance initial production, If particular movie becomes a sequel then the value of the option will increase and Arundel will either exercise the right to make the sequel or sell the right either to the original studio or a third party willing to take on the project. The principals at Arundel Partners are inclined to buy a portfolio of all these sequel rights rather than individual films given that Arundel wants to avoid buying the rights of movies that are not expected to perform well. Movie rights are supposed to be purchased prior to films being made. Arundel wants to come up with a decision to either purchase all the sequel rights for a studio's entire production during a specific...
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...Partners: The Sequel Project 1. Why do the principals of Arundel Partners think they can make profits buying movie sequel rights? They would be interested in purchasing the sequel rights for one or more studios¡¦ entire production over an extended period of not less than a year. If a particular film was a hit, and Arundel thought a sequel would be profitable, it would exercise its rights by producing the sequel. Alternatively, they can sell the rights to the highest bidder. Inevitably, the performance of the original films would not justify sequels, and for them the sequel rights would simply not be exercised. For most movies it becomes quite clear after their first few weeks in theaters whether a sequel would be economical or not, based upon each film's box office performance. 2. Why do they want to buy a portfolio of rights in advance rather than negotiating film-by-film? It is of critical importance to Arundel that a number of films and a price per film is agreed upon before either Arundel or the studio knew which films would generate the option of a sequel. In addition, once production started, the studio would inevitably form an opinion about the movie and the likeliness that a sequel would be possible. This would put Arundel at a disadvantage, because they would then have to negotiate the price for sequel rights on each film produced, while knowing much less than the production studio about the film. 3. Estimate the per-film value of a portfolio of sequel rights using...
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...JRL CH 3 Extra Slide Info I. Conglomeration Consequences a. Oligopoly - a concentration of media industries into an ever smaller number of companies b. More safe choices: i. Copycat TV (ace of cakes, cake boss, cupcake wars) ii. Sequels to proven hits (rocky 1,2,3,4,5…) iii. Battleship: The Movie c. Availability: Wal-Mart only wants to carry top 2% of new releases. d. Are the Consequnces all Bad? iv. In 2009, Disney bought Marvel Comics v. As of fall 2012, Disney owns Star Wars – first sequel due for 2015 vi. Defenses: 1. Consolidation is realistic in a FRAGMENTED world 2. Economies of Scale: bigger operations have a lower relative cost vii. Criticisms: 3. Focus on the bottom line over quality 4. Conflicts of interest viii. News consequences: less coverage of congress, Washington, pentagon, world II. Media Behavior is Changing e. Day-and-date release: Many movies are released to multiple formats (theater, DVD, on-demand and download) on the same day f. Multiple platforms g. Theater attendance has fallen since 2002 h. Music sales are down by half since 1999 i. Newspapers are declining; DVD sales are flat III. Audience Fragmentation j. While media consolidates, its audiences are becoming more narrowly defined (fragmenting) k. Once, you ix. Read a newspaper ...
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...Arundel Partners – The Sequels Project 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. Arundel should make an offer to buy sequel rights as the average NPV (on a per film basis ) is $5.51 mn (this is the value calculated using real options method). Hence, we should pay a price below $5.51mn. As per informal inquiries made by us, the studios would be tempted to accept the price of $2mn or more and would not even consider a price below $1mn. We propose that we should negotiate for the price of $2mn. This would give us a profit of $3.51 mn per film. The movie studio might (or might not) be willing to sell these rights at this price because it helps the studios mitigate the risk associated with producing the sequel. Also, the fact that there is no liquid market for rights to produce sequels will also drive the price lower on account of lack of demand. Average value of Sequel rights per film using DCF Analysis Average value of sequel rights per film across all studios 1. There are 99 films in the portfolio. Arundel Partners will only produce films for which hypothetical NPV is greater than zero. Hence, we calculate NPV of each film at Year 0. Since the exhibits state that the values are already preset values, we have not rediscounted them. NPV (At year 0)...
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...Arundel Partners: The Sequel Project Question 1: Arundel Partners thinks they can make money by buying the rights to sequels because of the possible arbitrage opportunity between the price they would pay for an option to sequels and the sequels’ real value. Therefore, valuing the option correctly takes great importance. The partners want to buy a portfolio of rights in advance rather than negotiating film-by-film to buy them because it is of critical importance to Arundel that a number of films and a price per film are agreed upon before either Arundel or the studio knows which films would generate the option of a sequel. If not, once production starts the studio would inevitably have more information on the likeliness that a sequel would be possible. This would put Arundel at a disadvantage, because they would then have to negotiate the price for sequel rights on each film produced while knowing much less than the production studio about the film. For example, if the studio knew that obtaining the rights for the literary work the first movie is based upon took a lot of haggling and work, and that the script has gone through fifteen revisions with six different writers, then the studio may be keen to get rid of the sequel rights. While a film’s profitability is always a gamble, there are often early signs such as these that a movie is going to be a jumbled mess that cost the studio way too much money to produce in the first place. These films tend to do...
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...one reason for them to buy the rights to create sequels would be to exploit a possible arbitrage in between the price they would pay for an option to sequels and its real value. Therefore valuing the said option correctly is of the most importance. 1.2 We believe that portfolio negotiation rather than on a film-by-film basis will level the playing field. Since the partners do not have experience in the movie making industry and those on the other side of the negotiating table do, it would be easier for the movie industry executive to figure out which movie would be a hit and which would be a miss and try to sell Arundel the rights to only those movies that will not be followed by a successful sequel. 2.1 NPV calculation. According to the Exhibit 4, based on 14 pairs of first films and their first sequels, average sequel negative cost as a percentage of first film negative cost was 120%. Also according to the same exhibit based on 61 pairs of first films and their first sequels average sequel rental revenue as a percentage of first film rental revenue was 70%. If we assume that Exhibit 7 represents “the universe” of films available for analysis then data from Exhibit 8 can be used to calculate what percentage of movies has been followed by a profitable sequel. According to the said exhibit 26 sequels achieved one-year return of 0.2 or higher. Therefore we can assume that the same number of movies was followed by a profitable sequel, i.e. 26. Since Arundel will have an option to...
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... a) Why do the principals of Arundel Partners think they can make money buying movie sequel rights? The principle point is that they want to buy the rights of movies that can become, if successful sequels. When successful they can choose to produce the movie by themselves or to sell to the highest bidder (other production companies). When the first movie is successful the initial investment for the right is easily covered by the potential benefit of the (potential) sequels. As explained in the case, Arundel will notice the success or failure of a movie investment after the first few weeks of exhibition. b) Why do the partners want to buy a portfolio of rights in advance rather than negotiating film-by-film to buy them? Arundel want to buy a portfolio of right in advance rather than negotiating film-by-film because before production nobody has enough information about the potential of the movie. When the production has started, the movie studios have more information than Arundel. Then, they (movie studios) can already see the potential of a sequel or not. This is an example of asymmetry of information that could have implication on the bargaining power of Arundel. In addition, by buying a broad portfolio of sequel rights Arundel diversifies its risks (more than 30 investments could eliminate the specific risk). Moreover by buying purchasing a broad portfolio of sequel rights, Arundel is increasing its probability of having a highly successful investment and...
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...Assignment and Rationale: For this project, you are required to find three legitimate, same-genre movie posters from the last decade and write a report revealing your genre awareness findings and conclusions about both the stability and flexibility of the movie genre represented in these three posters. You may choose the movie genre, and you may find that you’re working with a multi-hyphenated genre (e.g., thriller-crime-drama). This is fine, as long as you can find three movie posters that represent this particular genre. However, I advise you to not go too obscure in your choices, as this might limit or make difficult your selection, and I also request you stay away from choosing posters for movies already clearly linked (e.g., sequels, trilogies). Also, I encourage you to consider the country of origin for the movies and posters, as this will alter/change the content of the poster. For the sake of uniformity, use the U.S./English version of a movie poster, if possible. The movie poster functions as a shorthand version of all that the movie is trying to represent or present. As such, the posters...
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...Avatar is a 2009 American[8][9] epic science fiction action film directed, written, co-produced, and co-edited by James Cameron, and starring Sam Worthington, Zoe Saldana, Stephen Lang, Michelle Rodriguez, Joel David Moore, Giovanni Ribisi, and Sigourney Weaver. The film is set in the mid-22nd century, when humans are mining a precious mineral called unobtanium on Pandora, a lush habitable moon of a gas giant in the Alpha Centauristar system.[10][11][12] The expansion of the mining colony threatens the continued existence of a local tribe of Na'vi – a humanoid species indigenous to Pandora. The film's title refers to a genetically engineered Na'vi body with the mind of a remotely located human, and is used to interact with the natives of Pandora.[13] Development of Avatar began in 1994, when Cameron wrote an 80-page treatment for the film.[14][15] Filming was supposed to take place after the completion of Cameron's 1997 film Titanic, for a planned release in 1999,[16] but according to Cameron, the necessary technology was not yet available to achieve his vision of the film.[17] Work on the language of the film's extraterrestrial beings began in summer 2005, and Cameron began developing the screenplay and fictional universe in early 2006.[18][19] Avatar was officially budgeted at $237 million.[5] Other estimates put the cost between $280 million and $310 million for production and at $150 million for promotion.[20][21][22] The film made extensive use of cutting edge motion capture filming...
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...Outsiders Sequel Use the Instructions on the Essay Guide in Google Classroom and the Plot PPT to organize your sequel. You need to ensure you have all of the requirements from the instruction sheet and you have each element of plot represented in your story. Exposition -pony writes his book and his teacher publishes it but the police start an investigation on the book. : after Pony wrote his essay for the project the teacher asks to talk to him after school. His teacher said,” Ponyboy… this is amazing! Is it ok with you if i publish it?” Pony excitedly replied,” Sure, I don't mind.¨ Mr. Syme ecstatically replied,¨ Yes! If any profits come in i will give it to you!¨ Pony replied,¨ Ok cool, but I gotta go so I will talk to you later.¨ Mr. Syme said,” Ok, bye ponyboy.¨ Rising Action: the police decide that based on the book they decide that their place is unfit for living in and they take pony to a boys home. : his teacher publishes the book and weeks go by and it is the new york times most popular book. Pony at home when someone knocks on the door. ¨ Who is it?¨ asks pony. On the other side of the door he hears,¨ The police, open up!¨ pony says,¨”Ok hold on a second.¨ He goes and opens the door and they ask to speak to the head of the household. I yell for Darry...
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...In Jonathan Lethem's personal narrative essay "13,1977,21, " Lethem reflects on when he was 13 years old, in the year 1977 where he watched the film Star Wars 21 times. However, the essay is not actually talking about the Star Wars film. It is about how Lethem used going to the movies to remove himself or hide from the real life such as his mother's illness and the recent divorce of his parents. The essay is very informal. Lethem uses sarcasm, curses, witty comments and references to pop culture in his text. The witty tone and cleverness are good, but it probably wouldn't appeal to a more formal and professional reader. The tone could be described as witty but also nostalgic. With reflecting on his trips to the movie theater along, Lethem reflects on his awkward preteen years, which it was speculated by his parents whom he was a boy. As I think, Lethem numbered each paragraph to go alone with the significant of numbers in his essay. For example, the title of essay "13,1977,21" begins to make sense once he introduces the events of 1977, where he watched a film 21 times at the age of 13. These numbers are very meaningful. Lethem's 21 trips to the movie theater to see Star Wars was not entirely his fascination with or like the movie. He used plaza as a hiding place from the gradual loss of his mother to the brain tumor and already absent father. Watching the film many times in the summer of 1977 can help him to copy with his teenage struggles....
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