The MOOLA REPORT - August 2011

Summertime and the living is easy ........ Really?
What happened to the good old dog days when a body could get away and frolic on the beach or picnic without a care ?  Are these bygone days gone forever ?  Witnessing (and weeping for those unfortunates that have equity investments) at what has been playing out economically and politically the good old days may just be that - old, tired, and ready to pack it in.
The cinema however, isn't doing that bad (relatively speaking). The summer box office has held its own (maybe the folks need to escape and the local cinema is one of the few places to hide - well for a few hours anyway) and the fall film roster has potential.

Doing the Hula for Hulu
With over $76 billion in cash, Apple can buy almost anything it fancies, so picking up Hulu (the online video streamer) for $2 billion isn't a stretch financially.  Hulu is for sale and if managed properly could become a real competitor to Netflix.  Hulu's owners (Disney, News Corp. and Comcast) are offering would be bidders a 5 year extension of Hulu's programming rights (2 years with exclusive access).
Part of Apple's future includes focusing on the video streaming arena. Currently, in addition to music, iTunes offers TV shows and movies for rental or purchase, acquiring Hulu would be a major complement to Apple's streaming strategy.
Unlike Hulu's other suitors : Amazon, Google, and Yahoo (Microsoft has reportedly bowed out) Apple has strong ties to big media with its stake in Pixar and iTunes; additionally, Steve Jobs, Apple's honcho, is Disney's largest shareholder and sits on it Board of Directors.
Cinema exhibitors should be transitioning to a true retail business model as only in this way will they be able to complete against the movie streaming players.
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                       Cinema Consulting Services 
Restructuring & Refocusing Cinemas to Address the Impact of Internet Content Streaming entequip@aol.com
 
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MOOLA Cinema Stock Chart
                                                     ____Share Price_____    ____I/(D)______
                                                        1/1/11       8/16/11                 %
Amazon (AMZN)                         $ 180.00     $ 197.09               9.5
Ballantyne (BTN)                                7.77            3.78            (51.4)
Carmike Cinemas (CKSC)                  7.72            6.92            (10.4)
Cinedigm (CIDM)                               1.68            1.55            (  7.7)
Cinemark Holdings (CNK)                17.20          19.32             12.3
Comcast (CMCSA)                            21.97          21.13            ( 3.8)
Disney (DIS)                                      37.51          33.27            (11.3)
Dolby Labs (DLB)                             66.70          32.98            (50.6)
DreamWorks (DWA)                         29.26          20.02            (31.6)
Enter. Properties Trust (EPR)            46.25          41.00            (11.4)
IMAX Corp. (IMAX)                        28.07          17.06             (39.2)
Lions Gate Enter. (LGF)                     6.51            7.08                 8.8
Natl' Cine Media (NCMI)                  19.91         14.30              (28.2)
Netflix (NFLX)                                175.70       239.18               36.0
Rentrak (RENT)                                 30.16         13.33              (55.8)
Regal Enter. (RGC)                            11.74         12.89                 9.8
RealD (RLD)                                      25.92         12.99              (49.9)
Technicolor (TCLRY)                          3.56           4.49               25.1
Time Warner (TWX)                          32.17         30.27                 5.9
Viacom (VIA)                                     39.61         45.06                13.8

Because of the precipitous nature of the current stock market it would be unfair to highlight any of the stocks in the Chart this month.  The U.S. stock markets and markets around the world are in a free-fall and will continue their up/down (mostly down) trends until the U.S. and European governments get their acts together.



Largest Cinema Landlord Looks for Growth Elsewhere

Entertainment Properties Trust (EPR) is the largest cinema landlord in the U.S.  Its tenents include Regal Cinemas, AMC Theatres, Cinemark,
Rave Theatres, to name several.  EPR is also a stock we follow on the Moola Stock Chart and was the featured stock in the March Moola Report.
At that time I stated, " my guess is that EPR will, going forward, place more emphasis on non-cinema properties and holdings, particularly the charter school arena, and less on cinemas".  Last week EPR issued a statement saying just that.  It was de-emphasising cinema investments and moving heavily into the charter school industry.

EPR currently owns 112 cinemas (representing over 2000 screens) which makes up 60% of its property portfolio.  It intends to lessen its reliance on cinemas and move into the education business.  U.S. cinemas have some hard thinking to do.  With web content streaming on the horizon cinemas need to refocus their business models and move toward a much broader retail type operation.

Best and Happy Movie Going !
Jim Lavorato