What effect do large blockbuster films have on the stock prices of their parent companies?

Question

An example of this would be - Spiderman is produced, and I believe distributed by Sony pictures, so when the movie is released and makes 115million in 3 days, does that have a substantial effect on that companys stock, or would the effect be little to none?

Answer 1

Commonly there is an inverse relationship of rents and royalties, where the film maker gets a bigger piece of receipts in the first few weeks and a smaller piece afterwards. Then there is the issue of the underlying costs. George Lucas is reluctant today, despite his success with a few great-grossing flicks, to do the blockbusters because of the enormous risk. When a really good special effects film has hundreds of millions in costs, most of which have to be recouped in the first few weeks of release, it becomes more of a gamble. Still, there are films which don't cost so much but have enduring value and they become longer-term profit centers for the principals. While it is hard to see in the Disney or other such movie producers numbers because Disney, Sony, and TimeWarner have such a breadth of enterprise, consider the comparative profitability of Pixar to Dreamworks SKG. Some Dreamworks films have great initial cash, but Pixar a longer, often much longer, profit flow from a given film (though sometimes vice versa).

The affect on the stock prices is a slope of increase (or decrease) based upon the kind of profitability the film shows. A film in the top ten for months but never making number one will not garner as steep of an increase to the company stock as the film that starts with a bang at number one, then swiftly falls into oblivion. The steepness of the price chart for the latter will be in the stock price's fall. Yet there might be a persistence of increase.

I first considered this when I bought some Pixar after a movie release several years ago. I was amazed at the persistence of the price effect. Other big films sent competitor's price flashing up for a few days then dropping like a stone after the market had registered the effect of the earnings. I expected only to hold Pixar for a few days, but kept it instead for several weeks.

Answer 2

It depends on why the stock has fallen and by how much. In general, you're correct that it affects stockholders mostly. However, those corporate executives who never believe they've done anything wrong will be upset that their stock options are under water. That may lead to a number of corporate changes, some good and some bad, which very possibly could affect the actual business model.

Answer 3

Why don't you research the price of Sony back in Spider-Man 2 and Spider-Man?