Rule Breaker Portfolio

<THE RULE BREAKER PORTFOLIO>
What Happened to Fool Port?

You've Got Mail!
Rule Breaker Propaganda!

By Yi-Hsin Chang (TMFPuck@aol.com)

Alexandria, VA (Dec. 30, 1998) -- There's no question that one recently released movie has the potential to boost the returns on the Rule Breaker Portfolio. Of course, I'm talking about none other than the latest Tom Hanks-Meg Ryan-Nora Ephron collaboration, You've Got Mail. I know Rick (TMF Edible) said in last night's report that it wasn't that good, but hear me out here.

Any user of America Online (NYSE: AOL) recognizes that distinctive male voice log-on greeting that tells subscribers that there's email in their mailbox. The "You've got mail" moniker is to AOL as that sonorous four-note tagline is to Intel (Nasdaq: INTC) -- except not as well known and generally more annoying, but that's beside the point.

AOL has been promoting You've Got Mail on its main page and elsewhere within its network and on its website, but as far as I can tell from its press release archive, AOL had no hand in the making of the movie. The only thing I could find was a December 10 announcement saying that AOL's Entertainment Asylum would sponsor a live chat with the stars of the romantic comedy at the movie's premiere. Whether AOL paid for the publicity or not, the online service gets primo promos in this movie centered around an online romance based on email exchange via -- you've got it -- America Online.

Even if you haven't seen the movie (I haven't), you've probably seen the commercials on TV that are intended to promote the movie but, in fact, do a better job of hyping AOL. You hear that "You've got mail" greeting and see the colorful click-on icons. Even if you're not inspired to see the movie (I wasn't), you're bombarded with this ad for AOL.

And if you go see the movie, you spend two hours being brainwashed on the romantic possibilities available on AOL. As one Washington Post critic recounted, "As I staggered zombie-like out of a screening of You've Got Mail an insistent voice kept sounding in my head: Must... enroll... in America Online... now..." Even though the reviewer more or less panned the movie for lacking originality, this is great news for AOL! This could mean a flood of new members, especially women, who are still underrepresented on the Internet -- after all, this is a chick flick (before you wig out, I can say this because I'm a chick).

The Washington Post critic also wrote that he had a "strange craving for a tall, non-fat, decaf mochaccino." This is hardly surprising considering that the main characters in the movie shop at the same trendy gourmet grocery store on Manhattan's Upper West Side, Zabar's, and -- here's the important part -- they actually buy coffee from the same Starbucks (Nasdaq: SBUX).

Ya see, You've Got Mail is one movie-length ad for America Online and Starbucks. People say that violence on TV encourages kids to be violent. By that "logic," seeing two movie stars -- Tom Hanks and Meg Ryan no less -- logging on to AOL and drinking Starbucks coffee should encourage viewers to download AOL 4.0 and head for the nearest neighborhood Starbucks. (If they live in America, this should be a very short hike.)

This is great exposure for both Rule Breaker companies, and it also targets potential customers previously unfamiliar with the Internet and with designer coffee. This past weekend, You've Got Mail grossed $19.1 million and landed the No. 3 spot, just a tad behind No. 2 Stepmom (another chick flick) starring Julia Roberts. So far, it has made $48.6 million in just two weeks. Think of the possibilities when the movie goes to video and to theaters all around the world! This is the type of movie and these are the type of consumer brands that won't get lost in translation.

But, wait, there's more. In the movie, Tom Hanks plays Joe Fox, the "evil" owner of Manhattan's largest and rapidly expanding bookstore chain. Meanwhile, Meg Ryan co-stars as Kathleen Kelly, who runs a small, independent children's bookstore a few blocks from the newest Foxbooks superstore. With its discounts, wide selection of titles, and espresso bar (more references to coffee), Foxbooks appears certain to crush the quaint children's bookstore that's been in the neighborhood for more than 40 years.

What's all this got to do with the Rule Breaker Portfolio? Stay with me here. See, moviegoers might associate the mega bookstore chain with the nation's biggest brick and mortar bookstore chain Barnes & Noble (NYSE: BKS), and the independent bookstore with Amazon.com (Nasdaq: AMZN). Never mind that Amazon is the leading online bookstore and has a market capitalization that's 3 1/2 times higher than the combined market caps of rivals Barnes & Noble and Borders (NYSE: BGP) -- you're not supposed to think that much. Anyway, moviegoers might subconsciously exit the theaters with a preference for Amazon over chains like Borders and Barnes & Noble as they identify with the plight of the Meg Ryan character, who's about to lose the shop passed down to her by her mother.

One hitch here is that some people might come away not liking the movie. Some might think it's a poor remake of the 1940 film The Shop Around the Corner starring Margaret Sullavan and the charismatic and widely admired James Stewart. Some, like the movie critic from The New York Observer, might see it as closer to being Sleepless in Cyberspace (a reference to Sleepless in Seattle, also starring Tom Hanks and Meg Ryan). Frankly, I don't think it matters.

Whether people like the movie or not, they would've already been subjected to two hours of hype for America Online, Starbucks, and, to a lesser extent, Amazon.com. And that's all that matters. From a Rule Breaker perspective, I give You've Got Mail two thumbs up -- but don't expect to run into me at the theater.

# # #

On a more serious note, tomorrow is the last day of The Motley Fool's second annual charity fund drive for an organization called Share Our Strength (SOS), which is dedicated to fighting poverty and hunger. The Rule Breaker Portfolio has been especially fortunate this year, which is all the more reason for all of us to give a little to those less fortunate. More than 1,200 Fools have already joined in this effort. Please take five minutes of your time to make a donation to a very Foolish cause simply by clicking here.

Thanks, and Happy Fool Year!


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Bookmark Live Rule Breaker Port Quotes

12/30/98 Close
Stock  Change    Bid 
 ---------------- 
AMZN  -11 1/16321.25
AMGN  -1 1/2  103.38
AOL   -5 7/8  148.00
T     -2       76.81
ATHM  -7       71.50
DJT     ---     3.81
DD    -1 1/8   55.44
XON   -1 1/16  74.63
IP    -  13/16 43.75
IOM   -  1/4    7.44
LU    -3 7/16 108.63
SBUX  +1 7/8   54.63
TDFX  -  9/16  11.19
 
                   Day   Month    Year  History  Annualized 
      R-BREAKER  -3.24%  41.37% 192.68%  882.22%   68.03%
        S&P:     -0.79%   5.87%  26.95%  168.75%   25.18%
        NASDAQ:  -0.68%  11.15%  37.99%  200.89%   28.43%


    Rec'd    #  Security     In At       Now      Change
   8/5/94  1100 AmOnline       1.82    148.00    8042.16%
   9/9/97   440 Amazon.com    19.74    321.25    1527.59%
  5/17/95  1960 Iomega Cor     1.28      7.44     480.87%
  10/1/96    84 LucentTech    23.81    108.63     356.25%
  8/12/96   130 AT&T          39.58     76.81      94.08%
  4/30/97 -1170*Trump*         8.47      3.81      54.98%
  12/4/98   450@Home Corp.    56.08     71.50      27.50%
 12/16/98   290 Amgen         85.75    103.38      20.55%
  2/20/98   200 Exxon         64.09     74.63      16.44%
   7/2/98   235 Starbucks     55.91     54.63      -2.30%
  2/20/98   215 DuPont        59.83     55.44      -7.35%
  2/20/98   270 Int'l Pape    47.69     43.75      -8.26%
   1/8/98   425 3Dfx          25.67     11.19     -56.41%

    Rec'd    #  Security     In At     Value      Change
   9/9/97   440 Amazon.com  8684.60 141350.00  $132665.40
   8/5/94  1100 AmOnline    1999.47 162800.00  $160800.53
  5/17/95  1960 Iomega Cor  2509.60  14577.50   $12067.90
  10/1/96    84 LucentTech  1999.88   9124.50    $7124.62
  12/4/98   450@Home Corp. 25236.13  32175.00    $6938.87
  4/30/97 -1170*Trump*     -9908.50  -4460.63    $5447.88
 12/16/98   290 Amgen      24867.50  29978.75    $5111.25
  8/12/96   130 AT&T        5145.11   9985.63    $4840.52
  2/20/98   200 Exxon      12818.00  14925.00    $2107.00
   7/2/98   235 Starbucks  13138.63  12836.88    -$301.75
  2/20/98   215 DuPont     12864.25  11919.06    -$945.19
  2/20/98   270 Int'l Pape 12876.75  11812.50   -$1064.25
   1/8/98   425 3Dfx       10908.63   4754.69   -$6153.94

                              CASH  $39332.55
                             TOTAL $491111.43

</THE RULE BREAKER PORTFOLIO>

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