Hollywood’s BO momentum fueled by sequels


MUMBAI: The bright lights of Hollywood may be shining the way to promising returns for the movie industry. According to a study by Standard & Poor’s Equity Research Services, the industry might be just warming up, with the release of more potential blockbuster films scheduled over the coming weeks and this year’s $3.1 billion gross receipts through mid-May 2007 at the US box office likely on a pace to eclipse last year’s total domestic gross receipts of $9.2 billion.


In the view of Standard & Poor’s Equity Research, several of the industry’s biggest names could have banner years.


Among those companies on which Standard & Poor’s Equity Research Services has a “Strong Buy” (5-Stars out of 5) recommendation, and that the company believes could benefit from strong performance at the box office are General Electric Co. and The Walt Disney Co. Also, DreamWorks Animation, News Corp., Sony Corporation, Time Warner and Viacom could see positive impacts from success at movie turnstiles.


“The record-breaking debut of Spider-Man 3 has set the stage for what we believe could be an unprecedented spring movie season that may carry straight into summer. This is great news for the movie industry, which has been trying to control production costs while balancing the challenge of direct-to-consumer online distribution with DVD sales in the face of the continued evolution of consumer behavior. While we believe there is reason to be optimistic in the short term, it becomes a question of whether this momentum can be sustained throughout the holiday season. In our view, there is still the inherent risk associated with the fickle nature of consumers that tempers our positive outlook with a hint of caution for the long-term,” said Standard & Poor’s Equity Research Services senior media and entertainment analyst Tuna N. Amobi.


According to Standard & Poor’s Equity Research, a multitude of offerings should be able to continue the pace set by the release of Sony’s Spider-Man 3. These include several three-quels, such as DreamWorks’ Shrek the Third, Disney’s Pirates of the Caribbean: At World’s End, Time Warner’s Ocean’s 13 and Rush Hour 3, and News Corp.’s Live Free or Die Hard. Those releases may find stiff competition for ticket sales from GE’s NBC Universal unit’s sequels The Bourne Ultimatum and Evan Almighty, News Corp.’s Fantastic Four: Rise of the Silver Surfer, as well as Time Warner’s fifth Harry Potter installment, Harry Potter and the Order of the Phoenix, Disney’s newest animated feature, Ratatouille and Viacom’s Transformers.


“We believe there’s a lot to like about the list of upcoming releases. You have some films that offer what we see as proven ‘brand-name franchises’ and a successful box-office track record, as well as appeal across multiple audience segments. When you factor in the ‘star power’ of the films’ casts, live or voiceover, we believe there is a strong case to be made for the industry building on its early box-office success, which could lead to nice returns and ultimately stock performance,” Amobi added.