Thus far, May have been the best month of 2011 for the cinema. Fast Five, the year's best opener has now grossed over $161 million domestically, and a whopping $441 million worldwide. Rio came close with w.w. take of $429 million. Thor, scored a second week at first place domestically and has now grossed over $120 million with a w.w. take of $318 million. The hit sleeper so far was Insidious, which has now grossed over $59 million, with a price tag of only slightly over $1 million to produce. One of my 2011 sleeper hit picks was Bridemaids, which came in second on its weekend debut at $24 million.
YTD the U.S. box office at $3.1 billion still lags behind last year by slightly over $500 million or 13% with 387 million admissions. The average ticket price: $7.86. The summer movie line up looks very strong and hopefully the 13% shortfall will be made up.
Moola Entertainment Stock Chart
Share Price
1/1/11 5/15/11 % Chg.
Ballantyne Strong (BTN) $ 7.77 $ 5.87 (24.5)
Carmike Cinemas (CKEC) 7.72 6.90 (10.6)
Cinedigm Digital (CIDM) 1.68 2.15 27.9
Cinemark (CNK) 17.20 20.71 20.1
Disney (DIS) 37.51 41.52 10.7
Dolby (DLB) 66.70 48.60 (27.1)
Dreamworks (DWA) 29.26 25.58 (12.6)
Entertainment Property Trust (EPR) 46.25 47.31 2.2
IMAX (IMAX) 28.07 36.66 30.1
Netflix (NFLX) 175.70 246.52 40.3
National Cinemedia (NCMI) 19.91 16.53 (17.0)
Rentrak (RENT) 30.16 21.26 (29.5)
Regal Entertainment (RGC) 11.74 13.68 16.6
Technicolor (TCH) 3.56 5.03 41.3
Time Warner (TWX) 32.17 35.99 11.9
Not much changed within the last month, Netflix (our stock of the month, see below) and Technicolor continue to be the stellar performers. Disney and Time Warner, the big guns in the chart, have performed fairly well given that both companies have stated that not all of their operations are doing as good as planned. Nonetheless, the market believes their growth prospects and dividend payouts look good. IMAX is another stock that has performed very well, due mainly to their premium admission pricing which the public seems to accept at least for the time being.
Moola Stock of the Month: Netflix (NFLX)
Netflix has been on a tear for the last two years. In 2003 it almost went bust as it tried to convince folks that getting DVDs via the U.S. Postal Service (for a flat monthly fee) was a good thing. It took some doing and time but Netflix stuck with its strategy and wound up amassing over 23 million devotees in the process and literally put the video store out of business. Its only competition of late being RedBox, the kiosk based movie rental company, which is owned by Coinstar and coincidental was started by a former Netflix executive.
But, Netflix knew that it would have to succumb to the inevitable pressure of the digital domain and had to change its distribution model from mailbox to internet - it is now in that process. RedBox must do the same if it is to have long-term survival. Media streaming is the name of the game and Netflix wants to be the means of distribution for movies, TV shows, and other web-driven content.
Netflix stock has risen from $3/share in '03 to today's price of $242 and I see no reason why it won't go higher. Its P/E is a nosebleed 70 but its growth prospects unchartable so long as it continues to ink deals with content providers and deliver that content at reasonable rates to an end user (viewer) - and Netflix is doing just that.
Currently, Netflix's streaming service (priced at $7.99/month to the subscriber) is available for TV, game consoles, BluRay players, and Apple iPads and iPhones. In a recent press release (May 12th) Netflix announced it would be streaming movies and TV shows on five superphones that use the Google Android operating system - 4 phones made by HTC and one from Samsung, others will follow. The Android additions further enhance Netflix's dominance in the media streaming space.
My thoughts on Netflex going forward:
The $7.99 flat fee will be eliminated and/or modified to take into consideration higher fees for newer released movies, as the cost of content becomes higher for Netflix.
The other point is that Netflix could be a takeover target for a larger firm that wants to enhance their position in the media streaming space - Amazon comes to mind. With Netflix's built-in subscriber base and Amazon's need to continue to expand its domestic and overseas operations (Netflix has no overseas operations and just recently started to operate in Canada and Mexico) the fit looks good.
With a share price north of $240 Netflix is valued at about $13 billion, so it won't come cheap, but Amazon with a share price of $197 is valued at $91 billion. Netflix would be expensive but not unattainable and given Amazon's high share price it may be the best time to acquire Netflix and if not than come to some collaboration. When it comes to Netflix its not price but its accelerated revenue growth potential that matters.
Best and Happy Movie Going
Jim Lavorato
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