Harry Potter Adds Magic To Aol-time Warner Shares
Sydney Morning Herald
Wednesday November 21, 2001
Wall Street is falling under the Harry Potter spell and revising its outlook for AOL-Time Warner's future as rapidly as the queues are lengthening outside movie theatres.
Even as the first financial rave notices arrived last Friday, AOL's share price was falling 1.7 per cent, with analysts generally agreeing that the market already had priced in the world's largest media group's potential take from its Warner Brothers studio subsidiary's film adaptation of the best-selling children's books.
It was a different story yesterday after the movie's first three days broke all box-office records with estimated receipts of $US93.5 million ($179 million) topping long-time champion The Lost World: Jurassic Park, which took in $US90.2 million for Universal back in 1997.
Harry Potter and the Sorcerer's Stone is showing on more screens a record 8,200 in 3672 US theatres but the dinosaur movie's receipts were for a four-day Memorial Day holiday as were the respective $US75.2 million and $US70.8 million box office takes for the openings of previous second and third placegetters Pearl Harbor and Mission: Impossible 2. Previous best three-day, non-holiday weekend opening was $US68.5 million from Fox's Planet of the Apes earlier this year.
All this and confirmation that Harry Potter was in line to become the fastest movie ever to reach the $US100 million level passing it yesterday a day ahead of the most recent Star Wars epic, Phantom Menace left Wall Street analysts scrambling to rethink the implications of the phenomenon for AOL-Time Warner.
The media giant's share price rose 2.3 per cent as suddenly entranced analysts, with their eyes on the six more Potter movies in the pipeline, focused on the potential creation of a ``franchise" that could outdo Star Wars.
AOL-Time Warner owns movie rights for the first four J.K. Rowling books with an option over the rights for books five, six and seven, and the Warner studio's production and marketing costs for the first film were already covered by licensing, merchandising and promotion rights even before the movie made its debut.
Salomon Smith Barney analyst Jill Krutick expects the first movie alone to add US US10c to US15c to AOL-Time Warner's earnings per share over the next few years as the film moves through the theatre into video and TV.
First Albany analyst Youssef Squali predicted that the movie will generate about $US1.2 billion in revenue and $US350 million in earnings before interest, taxes, depreciation and amortisation for AOL-Time Warner, with most of the money coming next year.
But Merrill Lynch's Jessica Reif-Cohen, who already had projected a two-year EBITDA contribution of $US250 million from a domestic box office gross of $US250 million, calculated that AOL-TW's EBITDA from theatres, pay TV, home video, merchandise and broadcasting would be $US500 million on a domestic box office gross of $US350 million (more than $US800 million worldwide).
A gross of $US400 million or more is now seen as likely by JP Morgan analyst Paul Noglows after the movie opening ``easily topped our conservative assumptions" and he believes the movie will boost the revenues at AOL-Time Warner's Filmed Entertainment business by 4 per cent to 5 per cent in the current quarter.
The huge opening for Harry Potter prompted DB Alex Brown analyst Doug Mitchelson to raise his EBITDA estimate for AOL-Time Warner's film business by $US1.6 billion for the period 2001-06 and his price target on AOL shares by $US1.
© 2001 Sydney Morning Herald
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