Wall Street can relate to Hollywood underdog tale
By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The dystopian kill-or-be-killed world of âThe Hunger Gamesâ isnât the filmâs only apt metaphor for Wall Street. This weekendâs smash box-office debut of the teen lit sensation makes Lions Gate the studio equivalent of a boutique investment bank landing the yearâs biggest deal. And Walt Disneyâs coinciding flop âJohn Carterâ raises questions about Hollywoodâs bulge bracket. Independents from both industries are fighting to stay in the spotlight.
Lions Gate is deservedly the talk of the town. In the first few days of its release, âThe Hunger Gamesâ delivered $155 million of U.S. and Canadian ticket sales. That makes it the biggest non-sequel opener ever, and leaves it third behind only later chapters in the âHarry Potterâ and âBatmanâ series. Itâs a coup for a relative tiddler, especially when a goliath rival announces a $200 million loss on an epic fail even by Tinseltownâs larger-than-life standards, as Disney just did for its own fantastical book adaptation.
Whatâs more, in a bankerâs terms, âThe Hunger Gamesâ is like having an acquisition-hungry client with an abundance of capital available. Lions Gate plans to release three sequels based on the Suzanne Collins trilogy of bestsellers, so itâs a gift that should keep on giving.
But competing against rivals owned by deep-pocketed conglomerates is as hard on the West Coast as it is on the East. Even with the lucre raked in so far from âThe Hunger Games,â Lions Gate wonât crack the top five in the studio league tables, according to Box Office Mojo figures. Legendary moguls Harvey and Bob Weinstein have struggled similarly, producing a steady slate of critical successes via their eponymous indie house – including this yearâs Oscar winner âThe Artistâ – that often fail to achieve blockbuster status financially.
Smaller shops on Wall Street have capitalized on the misfortunes of their larger peers. Greenhill, for example, is valued at over 16 times expected 2013 earnings, according to Thomson Reuters data. And despite losing money over the last few years, Lions Gate trades at a forward multiple of 15.
After spurning the advances of activist Carl Icahn last year at about half the current share price, Lions Gate spent over $400 million to buy âTwilightâ producer Summit. That gives it the ability to release more films, on a par with the likes of Paramount. Thatâs important in a business that feeds on big hits. Just as banking supermarkets can no longer ignore the boutiques nipping at their heels, âThe Hunger Gamesâ means Hollywood must pay heed to the Lions Gate mouse that roared.