Arundel Partners Case Analysis

1495 Words3 Pages

Arundel Partners Case Analysis Executive Summary: A group of investors (Arundel group) is looking into the idea of purchasing the sequel rights associated with films produced by one or more major movie studios. Movie rights are to be purchased prior to films being made. Arundel wants to come up with a decision to either purchase all the sequel rights for a studio's entire production during a specified period of time or purchase a specified number of major films. Arundel's profitability is dependent upon the price it pays for a portfolio of sequel rights. Our analysis of Arundel's proposal includes a net present value calculation of each movie production company. In order to decide whether Arundel can make money buying movie sequel rights depends on whether the net present value of the production company's movies is higher than the estimated 2M per film required to purchase the rights. Problem Identification: How are the principals of Arundel Partners planning to make money by buying rights to sequels? They would be interested in purchasing the sequel rights for one or more studios¡¦ entire production over an extended period of not less than a year. If a particular film was a hit, and Arundel thought a sequel would be profitable, it would exercise its rights by producing the sequel. Alternatively, they can sell the rights to the highest bidder. Inevitably, the performance of the original films would not justify sequels, and for them the sequel rights would simply not be exercised. For most movies it becomes quite clear after their first few weeks in theaters whether a sequel would be economical or not, based upon each film's box office performance. Why do the partners want to buy a portfolio of right... ... middle of paper ... ...oposed to buy. As can be seen in exhibit to solution 2, we have estimated the per-film value of each production company. MCA Universal, Warner Brothers and Walt Disney Co are the only production companies that provide a positive per film value, with values of 9.89, 1.92, 12.56 million respectively. This value is calculated by dividing the net present value of all the movies by the total number of movies. We also calculated the average value of each production company based upon their share of the total number of movies produced. The companies with positive values were MCA Universal, Warner Brothers and Walt Disney Co is also the only production companies that provide a positive per film value, with values of 1.40, 0.37, 1.40 million respectively. These values are based on the average value per film multiplied by the company's average share of the industry.

Open Document