Let The Bourse Be With You, George
Sydney Morning Herald
Wednesday May 19, 1999
Forget the lines outside movie theatres for The Phantom Menace. As the reels of the long-awaited Star Wars prequel roll today, corporate America is forming its own queue of galactic winners.
Global toy retailing giant Toys 'R Us yesterday became the first company to actually pin Phantom's undoubted success to its future earnings. The group posted better-than-expected profits for the quarter to May 1 but said it was expecting a solid boost in the current quarter from toys tied to the new film.
It might even be enough to help the once dominant global toy empire strike back after a year of diffident performance worsened by a fall in sales during the last holiday sales season.
Toys 'R Us chief executive officer Mr Robert Nakasone spoke glowingly about the current quarter. "We are experiencing strong second-quarter sales from the Star Wars merchandise and expect continued sales improvements in categories such as plush, action figures, computer software and video games," he said.
Despite a somewhat caustic response in the US media to the film's release, corporate America has no doubts about the potential boost to income (and investor sentiment) of the film.
Mr Rupert Murdoch's News Corp will be a major beneficiary. News is only the distributor (Mr George Lucas's Lucas Pictures owns the film) but Wall Street media analysts such as Merrill Lynch's Ms Jessica Reif Cohen now estimate that News's Fox subsidiary "could realise well over $US100 million [$148 million] in profit over the next two years from all windows".
Salomon Smith Barney analyst Ms Jill Krutick believes News will earn that amount even if the film "only" grosses $US1 billion worldwide - which she thinks is conservative.
Bookstore chains such as Barnes and Noble also expect windfall earnings from the books, magazines and derivative items that have been filling front-door displays for weeks - as do the book and magazine publishers and the movie's sponsors.
So does Pepsico, which has spent $US2.5 billion to sponsor Phantom and the next two films in the series and expects one of its most successful promotions ever with sales of millions of cans of its five soft drink brands featuring Phantom characters. On the day the deal was announced, the rise in Pepsico's share price lifted the company's market capitalisation by $US3 billion.
Tricon Global Restaurants, the film's fast-food sponsor, for the first time ever has linked its Taco Bell, Pizza Hut and Kentucky Fried Chicken chains with a single promotional theme and is expecting stronger sales throughout the summer as well as income from sales of toys and drink-cup lids.
Still, even though the film is forecast to gross more than $US2 billion at the box office and merchandise sales are also expected to top $US2 billion, the film so far has been heavily under-promoted. The pre-release publicity expenditure is believed to be much, much less than the $US20 million to $US30 million that might have been expected.
The National Research Group, used by studios to predict box-office results, is reported to put the public awareness level at an unheralded 96 per cent and some experts expect it to hit 100 per cent this week.
© 1999 Sydney Morning Herald
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