Dodo Essay

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The principals of Arundel Partners believed they could make money by buying movie sequel rights. This was an unusual business idea at the time, as producing and distributing motion pictures alone was a risky business, and predicting the success of one film is practically impossible. Despite of this, the idea was intended to capitalize on a few specific characteristics of the movie industry. (1) Exhibit 1 shows selected data from 1980-1991 for U.S. film distributors, and illustrates an undeniable trend in the movie industry: major movie studios dominate. As shown, major U.S. film distributors trump “North American Theatrical Film Rental Shares” at an average of 92%. Further, Major Distributors accounted for 44.2% of total U.S. and Canada aggregate Gross Box office earnings despite their significantly lower number of releases with an average of 2 Independent Releases for every 1 Major Release. Arundel Partners would be interested in purchasing the sequel rights for one or more studios’ entire production over and extended period not less than a year. If a particular film was a hit, and Arundel thought the sequel would be profitable, it would exercise its rights by producing the sequel itself or hiring professionals to do so. Alternatively, it could also sell the rights to the highest bidder (= all these outcomes are profitable). Inevitably, most first films would not justify sequels, and their sequel rights would simply not be exercised. (2) Whether Arundel could expect to make money depended heavily on how much it had to pay to purchase a portfolio of sequel rights. Arundel’s advance cash payments for the rights, at an agreed-upon price per film, would help finance production of the initial film. This in turn adds value to the initial movie, contributing to its success and perhaps increasing the likelihood of a sequel. From the studios’ perspective, Arundel

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