What "Twilight: Eclipse" Can Teach About Movie Investing

The Twilight Saga: Eclipse is proving a few maxims about the film industry while ripping others to shreds.

The Stephenie Meyer adaptation is set for a monstrous opening. Eclipse opened today at a record-breaking 4,416 North American theaters and all 193 IMAX (Nasdaq: IMAX  ) locations, including more than 4,000 midnight shows. Expect this event to figure in big, bold letters the next time IMAX reports quarterly results.

Online ticket seller Fandango reports that the movie stands for 91% of the service's pre-ordering activity for the July 4 weekend. If last year's Twilight: New Moon is any indication, Eclipse should pull in at least $140 million in box office the first weekend alone; the 2009 installment in the series collected more than $700 million worldwide, not even counting a stellar haul of DVD sales.

Someone at Viacom (NYSE: VIA  ) studio Paramount Pictures must be pretty depressed over letting this cash cow get away when the company had the rights to the material, and it's a shame that we can't invest in privately held Twilight producer and distributor Summit Entertainment. Then again, that company has only one book left in the series and not much financial success elsewhere; buying in today would probably be an unwise choice.

So what can an entertainment-minded investor learn from this guaranteed blockbuster? Well, it's proof positive that even action movies don't really need to be shot in 3-D to succeed in 2010. That's a valuable lesson: Warner Brothers (NYSE: TWX  ) rushed the 3-D-ization of Clash of the Titans to capitalize on the house that Avatar built, but then barely covered the production costs in domestic ticket sales. 3-D was not a magic bullet for Warner, and is not needed for Eclipse.

The real trick to making money in movie theaters is to identify your target audience and then exploit that connection as much as possible. Walt Disney (NYSE: DIS  ) is the classic example of this, tapping into its core of kids and parents to produce one sure-fire hit after another. Eclipse rests on the Team Edward/Team Jacob dynamic, marketing the movie to females of all ages with smoldering vampires and shirtless werewolves at every turn. It doesn't really matter that half the movie consists of insufferable after-school-special dialogue when it's all done by sexy supernaturals. Summit has learned this lesson and is not shy about milking it to the last drop.

Eclipse shows you that the movie business is more about style than substance; more marketing than product quality; and you don't need fancy technology to make an action-movie hit. Find the best marketers and you'll find the big profits, too. Keep that in mind the next time you're drooling over a movie and wonder if it's an investable property.

Fool contributor Anders Bylund owns shares in Disney, but he holds no other position in any of the companies discussed here. Walt Disney is a Motley Fool Inside Value pick, IMAX is a Rule Breakers choice, and Walt Disney is a Stock Advisor selection. Try any of our Foolish newsletters today, free for 30 days.You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 01, 2010, at 2:00 PM, hansel101 wrote:

    You may not be able to invest in Summit as Twilight's US distributor - but you can invest in Entertainment One (ETO), which has the UK and Canadian distribution rights.

    ETO is just being promoted to the UK's main stock market from its AIM (Alternative Investment Market), and trades on a historic P/E of just 6.

    Take a look:

    http://www.investegate.co.uk/Article.aspx?id=201005250700114...

  • Report this Comment On July 01, 2010, at 6:52 PM, esxokm wrote:

    I believe a rigid, disciplined model of prudent capital allocation and deal-structuring is what the movie business currently requires.

    As the article essentially implies, you can make whatever movie you want whenever you want...so long as it isn't some pure piece of experimental cinema with the potential to attract only a limited audience, it will either be a hit or it won't be.

    Because of this existential reality, the best plan would be for to studios to focus on strong concepts and execute it with cheap talent. Try not to give profit participation, keep budgets low. Then, a studio will be able to make more bets. At some point, there will be hits. And as for the movies that didn't become hits, at least the risk profile on the investment was low.

    It's interesting that Disney was mentioned. That company has had so many hits, yet the stock doesn't move. True, it's a big company...but then, the conglomerate did spend many billions on the Pixar and Marvel acquisitions. Obviously CEO Bob Iger believes each and every movie has the potential to create shareholder value; yet, look at a long-term chart (better then five years) and the dividend history...not much action going on there.

  • Report this Comment On July 21, 2010, at 2:46 PM, jrminvestor wrote:

    That's why it's called the "MOVIE BUSINESS." But you can also diversify and invest in a portfolio instead of only one movie. Stratus Media Group(SMDI) is an example, owning and operating over 140 live entertainment events.check out their website....http://www.stratusmediagroup.com/.

    And Here's some info about the Perugia Film Festival, a great festival right near Tuscany!Stratus Media Group just bought the rights and will do a great job of drawing talent and making into a profitable and beautiful celebration of film!

    http://www.marketwatch.com/story/stratus-media-group-inc-ann...

  • Report this Comment On August 02, 2010, at 5:04 PM, gurumasterblaste wrote:

    Stratus Media Group - are you kidding me!

    Check out their Quarterly returns- What kind of event and media company has no revenue. They are claiming several million dollars in intangible assets in the form of events. Most of these events have not occurred for years and no one seems to remember them . Ever few months they put out a press release that they planning some new event

    a year in the future. Of course if you go to their website it is a complete mess and there are no real plans or dates for events. If anyone buys this stock if feel sorry for you. I heard their stock

    holders conference call, what a staged joke that was.

    The next big press release. STRATUS MEDIA GROUP ENTERS INTO BINDING LETTER OF INTENT TO ACQUIRE THE BROOKLYN BRIDGE.

    Financial statements tell the story NO REVENUES they just keep selling worthless stock to uneducated investors.

    If you have shares I guarantee they are impossible to sell. Let's hope the SEC figures out how these guys are managing to show that they have a trading volume. My guess is they have a few online accounts that the owner is trading back and forth between every day. If you are thinking of investing in this company save it. Investing

    in Beanie Babies would be a smarter move( you might only lose 95%) of your money but at least you will have some thing soft to hug as you

    cry yourself to sleep over your loses.

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