Entertainment conglomerate Time Warner's
Skeptics will point out that this is the last in the Ring series. OK, they are right. But the previous two movies grossed a combined $1.8 billion worldwide. This series is the mother lode of movie gold -- and it has not even opened in Japan, Italy, or Australia.
Just as News Corp.
When Time Warner's New Line Cinema committed $450 million to make the three movies, folks focused on the risk, mentioning movies that didn't pan out -- like Little Nicky and Red Planet. But Time Warner's treasury was flush with Harry Potter, another gold mine, and it was willing to make a big investment to see if it could find another mother lode.
The previous two Ring movies churned blockbuster sales for weeks, and this one should have legs, too. Of the 172 movie reviews tracked at Rotten Tomatoes, 97% were favorable. Those gilded reviews will be followed by January's Academy Award nominations and, on March 23, the Best Picture award. All this could combine to make The Return of the King the second movie to achieve $1 billion in worldwide gross revenue.
For the record Fox and Warner Brothers each have four of the top 10 movies of all time. Sony
Many think that Time Warner is damaged goods -- although David Gardner recommended this stock n Motley Fool Stock Advisor in August 2002. Its $26 billion in long-term debt hardly makes for a 24-karat balance sheet. But the debt-to-equity ratio is a reasonable 0.47, and the company is making strong progress in selling weak assets to pare down debt.
What investors might be overlooking is the $6.3 billion in operating cash flow and free cash flow of $3.4 billion. All the bad news about write-downs, AOL, and board departures is hard to ignore. But this company has been making money and Rings is poised to add lots of gold to the treasury in coming months.
W.D. Crotty is a big movie fan who will soon be adding his money to the Return of the Kings results. He owns stock in Disney. You can e-mail W.D. at firstname.lastname@example.org.
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