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Hollywood has long had a large role to play in financial markets, with major film studios and distributors listed as part of blue chip companies or as standalone businesses.
2015 was a record-breaking year for cinema, and the arrival of Star Wars under new parent The Walt Disney Company could make it an historic one. But what impact is it having on shares trading?
In 2015, Universal Pictures achieved the remarkable feat of releasing three billion dollar blockbusters in Furious 7, Minions and Jurassic World. Walt Disney already had a one billion dollar film under its belt in Avengers: Age of Ultron, and achieved another in The Force Awakens, which has already broken records in the US and abroad.
But what do these films mean for the business’s bottom line, and how do they play out in share price movements?
Market Cap: $191.6 billion | Exchange: NYSE | Index: Dow Jones, S&P 500
The Walt Disney Company’s entertainment empire is worldwide and world famous, and movies form a major part of that success. As well as its own productions, Walt Disney has purchased three movie studios in recent years: Marvel Entertainment, Pixar and Lucasfilm.
Since its opening the Force Awakens has been a stunning success for Disney but this hasn't been replicated on the stock market. Chris Beauchamp, senior market analyst, has been examining why this is the case.
"Broader market turmoil has trumped the stunning success of Star Wars, with Disney’s shares knocked back along with the rest of the US stock market. In fact, we should not be surprised that the market has not rushed to mark up Disney shares, since the runaway popularity of Star Wars meant that it would have been more surprising had the film flopped [insert disparaging reference to ‘The Phantom Menace’ here].
Unsurprisingly, despite Star Wars’ popularity, the film hasn't picked up too many Oscar nominations. Investors in Disney should look on the franchise as a steady earner, and not a flash in the pan. With more to come from the franchise, it is fairly certain that this money stream will remain healthy."
Before the release of The Force Awakens, Chris took a look at the performance of the company behind the film.
“Long-term Disney shareholders have enjoyed one of the biggest rallies of the past few years, with the price increasing 226% since late 2010 versus a 75% gain for the S&P 500. Thus, the 1% bounce in the share price following the release of the latest trailer for Star Wars Episode VII will have been of little importance for those with a longer view. However, it underlines how important the new trilogy is expected to be for the firm.
It is not just Star Wars either. A series of successes with big titles such as Frozen and Captain America: The Winter Soldier helped to send revenues up 8% in FY 2014, while profits rose 21% to $13 billion.
Crucially, while the overall performance of the industry is expected to be strong this year – with box-office collections expected to move past $11 billion, benefiting Comcast, Lions Gate and others – it is Disney that combines strong business performance with a compelling valuation. While the overall earnings multiple for the industry sits at 38.8, Disney trades at just 22 times earnings, with growth currently running at 10.5%.
In the past six quarters, Disney has beaten expectations by around 10%. We can expect the addition of the Star Wars films, plus the merchandising and theme park rides that come with it, to help maintain this performance. The Force, it seems, is with them.”
IG analyst Alastair McCaig says: “The ultimate success of [The Force Awakens] will be down to toy sales. The Force Awakens has the backing of Disney, LEGO and Hasbro, which should ensure merchandising sales outweigh box office returns and, equally importantly, produce a steady flow of new fans growing up along with these new films.”
The Walt Disney Company is a component of the Dow Jones and the S&P 500. Learn more about indices trading.
Market Cap: $155.85 billion | Exchange: NASDAQ | Index: NASDAQ 100, S&P 500
Comcast is the US’s biggest internet service provider. It bought NBCUniversal in 2012 to take control of Universal Pictures. According to Forbes estimates, NBCUniversal contributes around a third of Comcast’s stock value.
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Market Cap: $59.82 billion | Exchange: NYSE | Index: S&P 500
Time Warner was formed out of a merger between Time Inc. and Warner Communications in 1990. As well as Warner Bros, it owns both HBO and New Line Cinema. The studio has been successful in recent years thanks to its fantasy franchises, Harry Potter and Lord of the Rings.
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Market Cap: $60.21 billion | Exchange: NASDAQ | Index: NASDAQ 100, S&P 500
Twenty-First Century Fox was formed out of a News Corporation stock split in 2013. It owns 20th Century Fox, as well as Fox’s television network. 20th Century Fox distributed the current highest-grossing film of all-time, Avatar.
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Market Cap: ¥4,321 billion | Exchange: Tokyo Stock Exchange | Index: Nikkei 225
Sony Pictures is the film-making arm of Sony Group, and currently has one billion-dollar film to its name: the most successful British film of all time, Skyfall. Sony Pictures is made up of several studios and distributors, including Screen Gems and Columbia Tristar.
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Market Cap: $38.21 billion | Exchange: NASDAQ | Index: NASDAQ 100, S&P 500
Viacom is the media company that owns Paramount Pictures, as well as a large TV network. Paramount Pictures is the global distributor of the Transformers franchise as well as Titanic, the second-highest grossing film of all time.
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Market Cap: $5.83 billion | Exchange: NYSE | Index: NYSE
Lions Gate is the newest, smallest studio covered here – and its owner Lions Gate is the smallest listed company. But despite sitting outside of the ‘big six’ movie studios, this mini-major has found great success with ‘young adult’ franchises including The Hunger Games.
Live Lions Gate prices
Our spread betting service enables you to speculate on the share price movement of all the companies listed above. Find out more about spread betting.
We’ve picked some of the biggest battles between blockbusters over recent years – and what they have meant for the companies behind them.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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