The Time Warner Split: What’s in Store?

Tim Beyers sits down with Rick Engdahl to talk comics, TV, movies, tech, and related geekery. Beyers is a member of the Motley Fool Rule Breakers stock-picking team, as well as the real-money Motley Fool Supernova growth portfolio.

In this video segment, Beyers discusses the implications of a split between Time Warner's (NYSE: TWX  ) magazine business and its entertainment side, and how DC Entertainment -- currently a small piece of the pie -- may figure into the mix.

A full transcript follows the video.

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Tim Beyers: If you're an investor, it's very early in the Warner Bros. stock story. If we know that Time Warner is going to split between its magazine business and its studio and entertainment business, it might be a very interesting time to be a Time Warner stock owner.

Richard Engdahl: You mentioned the possibility of the split between the two. Do you want to wait until that's cleared, and then maybe consider being an investor there?

Beyers: Well, I'm already an owner of Time Warner shares, so I would say no, but I think this is one of those stock stories that is still playing out. There's a lot of long-term potential there, and we just don't know how valuable the properties can be.

Also, the risk is in the proof of concept. For example, we all know that -- at least, those of us who are comic book fans -- that there could be a really great movie starring the character called The Flash, the guy who runs faster than sound.

It could be really cool, but until we actually see it, we don't know how cool it would be. There was a TV show in the '90s that only lasted a season, so yes, it could be interesting to wait and see what happens after the spinoff [from Arrow]. But, on the other hand, Time Warner has a lot of properties.

It is a big media conglomerate, so you could do worse than buying now, reinvesting the dividends, and then using that as an opportunity to study the business and how the characters blossom.

Engdahl: In the scheme of Time Warner, how big is the DC slice of that pie?

Beyers: It's pretty small.

Engdahl: Pretty small?

Beyers: It is pretty small.

Engdahl: What's the potential?

Beyers: The potential is multi-billion. I mean, if you look at... Let's put this in context by comparing it to what Marvel is to Walt Disney  (NYSE: DIS  ) right now.

It is, by far, the biggest film franchise that is owned by Walt Disney Studios. If you look at the Phase 1 of Marvel movies -- and that starts with Iron Man and ends with The Avengers -- it's a little over $3 billion. What it looks like is, with Iron Man 3, that was the kick-off for Phase 2. That's already $1.2 billion, roughly, so it's not a stretch to say that Phase 2 is going to be $5 billion.

The potential is billions of dollars if DC can figure out how to market its characters appropriately. But again, we just don't have the evidence to say, "Yes, absolutely, that's what we're going to see."


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