Can Murdoch make Chipmunks out of Na’vi?
Avatar’s $1 billion in ticket sales may garner all the headlines for News Corp’s Fox, which released the sci-fi spectacle. But the studio’s other holiday film, “Alvin and the Chipmunks: The Squeakquel”, may be more valuable to shareholders in Rupert Murdoch’s media group over the long run.
While Avatar packed them in, the latest offering from the world’s most popular singing rodent trio surpassed the quarter-billion dollar mark despite poor reviews and heavy competition. Indeed the Chipmunks demonstrate the importance of franchise value to the movie business.
Alvin, Simon and Theodore have been around since 1958, inspiring TV shows, hit songs and two feature films. The first film grossed $361 million at the worldwide box office while the second is already up to $255 million after just 12 days in wide release. Ancillary revenues like DVD and lunchbox sales could add millions more.
For investors, who prefer recurring profits and low risk to big bold bets on potential blockbusters, this is pay dirt. Like Spider-Man, Harry Potter or Batman, there is a long-term revenue stream attached to the Chipmunks. It’s partly why Disney – with its focus on princesses, pirates and now, with Marvel, superheroes – commands a higher multiple of earnings than many rivals.
Avatar doesn’t have to be a one-off. James Cameron says he’s thinking of making it a trilogy. But the 55-year old director took 15 years to make Avatar and hasn’t written a second script. And with the first film such a success, he may command an even larger ownership stake in any sequels.
As a one-timer, Avatar’s value to Fox may not be much beyond its contribution of $100 million (and counting) that JPMorgan estimates it will add to News Corp’s operating profits. But multiply by five the $40 million the Squeakquel will squirrel away, to reflect the likelihood the franchise will endure, and three 50-year old Chipmunks trump Mr. Cameron’s fictional Na’vi.