Free Annual Reports
Let Us Entertain You (DWA, DISCA, DIS)
No matter what age we are, we all grew up with television and movies and we all like to be entertained. It's just a matter of different strokes for different folks. Turn on and tune in for a discussion of Dreamworks Animation SKG (NYSE: DWA), Discovery Holding Company (Nasdaq: DISCA) and Walt Disney (NYSE: DIS).
An Animated Performance
Making movies is risky business and Dreamworks Animation has had its fair share of good ones and bad ones. Since going public in late 2004, it had a string of extremely volatile earnings in its brief history. Without a doubt, DWA's best product and most lucrative franchise is Shrek. The first movie garnered $470 million at the box office and the sequel took in a whopping $886 million. May 2007 will bring Shrek III and Shrek IV is currently scheduled to debut in 2010.
The difficult part of this is that Shrek accounts for about half of Dreamworks' revenue. A valuable asset to be sure, but the inherent lack of diversification is a problem. On the plus side, DWA has some of the top management talent in Hollywood are they are working to combat this over-reliance by making one sequel per year along with one original film per year.
Despite their talent, Dreamworks is going to be locking horns with the likes of Disney, Fox (NYSE: NWS) and Warner Brothers (NYSE: TWX). All of these firms are well run, but in the end depend on a fickle public to decide what is successful. As a final note, shares in Dreamworks trade at over 200 times earnings – and that really is risky business.
Non-Fiction
Discovery Holding Company owns a 50% stake in Discovery Communications which owns the Discovery Channel, TLC, Animal Planet, Travel Channel and Discovery Health Channel. This firm has an absolutely huge library of non-fiction content that they have been building since 1985. The firm markets that content in various forms to over a billion subscribers in 160 countries. This distribution capability has not gone unnoticed by advertisers.
Having just gone public in 2005, any financial history would be a brief glimpse at best. The risk they and any potential investor face is to what extent their subsidiary Ascent Media's capabilities can be produced in-house by movie studios and will the Federal Communications Commission allow "a la carte" programming that would negatively impact DISCA's distribution.
No Fairy Tale
For years, Walt Disney plodded along, apparently happy with the status quo. Then the board installed Bob Iger as CEO and has since become one of the most forward looking operations in the content business.
We all know who Disney's characters are, and there-in lies a problem and a part of the solution. Disney has come up with very few truly memorable characters ever since, they had bought Pixar. The big question is given what they had to pay for Pixar (12% of Disney), will it pay off for Disney? Disney has also ventured into ways that consumers can access their programming through new technologies and continues to look at others.
Disney has a huge content library and is striving very hard to add new characters and dimensions to their product suite. DIS is also cutting back the number of new films it makes to focus on what they consider movies to bigger at the box office.
Ahoy There Matey
One of the biggest problem areas for the industry as a whole is digital piracy. According to a study presented to the Motion Picture Association, over $6.1 billion was lost in 2005 alone due to piracy. While each firm is doing what they can to prevent it, big money is still being lost. Should you choose to invest in these firms, be mindful of anyone with a patch over an eye; they are very risky and do not come with a remote.
Looking to cook up a market-stomping stock portfolio? Check out our FREE report "7 Ingredients to Market Beating Stocks" and get started right now!
An Animated Performance
Making movies is risky business and Dreamworks Animation has had its fair share of good ones and bad ones. Since going public in late 2004, it had a string of extremely volatile earnings in its brief history. Without a doubt, DWA's best product and most lucrative franchise is Shrek. The first movie garnered $470 million at the box office and the sequel took in a whopping $886 million. May 2007 will bring Shrek III and Shrek IV is currently scheduled to debut in 2010.
The difficult part of this is that Shrek accounts for about half of Dreamworks' revenue. A valuable asset to be sure, but the inherent lack of diversification is a problem. On the plus side, DWA has some of the top management talent in Hollywood are they are working to combat this over-reliance by making one sequel per year along with one original film per year.
Despite their talent, Dreamworks is going to be locking horns with the likes of Disney, Fox (NYSE: NWS) and Warner Brothers (NYSE: TWX). All of these firms are well run, but in the end depend on a fickle public to decide what is successful. As a final note, shares in Dreamworks trade at over 200 times earnings – and that really is risky business.
Non-Fiction
Discovery Holding Company owns a 50% stake in Discovery Communications which owns the Discovery Channel, TLC, Animal Planet, Travel Channel and Discovery Health Channel. This firm has an absolutely huge library of non-fiction content that they have been building since 1985. The firm markets that content in various forms to over a billion subscribers in 160 countries. This distribution capability has not gone unnoticed by advertisers.
No Fairy Tale
For years, Walt Disney plodded along, apparently happy with the status quo. Then the board installed Bob Iger as CEO and has since become one of the most forward looking operations in the content business.
We all know who Disney's characters are, and there-in lies a problem and a part of the solution. Disney has come up with very few truly memorable characters ever since, they had bought Pixar. The big question is given what they had to pay for Pixar (12% of Disney), will it pay off for Disney? Disney has also ventured into ways that consumers can access their programming through new technologies and continues to look at others.
Disney has a huge content library and is striving very hard to add new characters and dimensions to their product suite. DIS is also cutting back the number of new films it makes to focus on what they consider movies to bigger at the box office.
Ahoy There Matey
One of the biggest problem areas for the industry as a whole is digital piracy. According to a study presented to the Motion Picture Association, over $6.1 billion was lost in 2005 alone due to piracy. While each firm is doing what they can to prevent it, big money is still being lost. Should you choose to invest in these firms, be mindful of anyone with a patch over an eye; they are very risky and do not come with a remote.
Looking to cook up a market-stomping stock portfolio? Check out our FREE report "7 Ingredients to Market Beating Stocks" and get started right now!
by
Dean Lundell
Dean Lundell is the former vice president of Merrill Lynch Capital Markets, a principal of a regional investment bank, an independent futures trader and a licensed commodity trading advisor. Lundell enjoys a contractual relationship with the consulting firm, Greenwich Associates, where he has written material on large corporate and investment banking, interest rate swaps, and foreign exchange and the fixed-ncome Markets. He has also written publications for McGraw-Hill, the Chicago Mercantile Exchange and several financial magazines. Prior to his career on Wall Street, he served with the 82nd Airborne Division in Vietnam.
Free Annual Reports
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=5b3548bf166951dc301980d27b3f8d8b
