Walmart's New Health Food Push: Is It Too Hard to Swallow?
Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerGeneral Electric Company's (NYSE: GE) NBC Universal needs all the help it can get if it wants to remain part of the famous Dow component. After all, how many times have we heard in the last several years that the huge industrial conglomerate should get rid of the media asset? Well, maybe a little glitzy dose of DreamWorks will increase the perceived value of the movie/TV division in the eyes of a management in the midst of financial-crisis turmoil.
After wondering whether it would be Universal, The Walt Disney Company (NYSE: DIS), News Corp. (NYSE: NWS), or Time Warner, Inc. (NYSE: TWX), the new DreamWorks has decided to strike a distribution deal with Universal after it became a free agent following its split from Viacom (NYSE: VIA). This is according to The Hollywood Reporter. The transaction reportedly means that Universal will be releasing six films per year from DreamWorks starting sometime in '09.
Of course, we don't know all the details yet, but since DreamWorks is being funded by Indian media-investment entity Reliance Big Entertainment, Universal will probably only end up with a modest distribution fee. Still, any studio would have loved to have had bragging rights in terms of the famous director. It was never meant to be a fair competition, though, since the move to Universal was pretty much set in stone. Spielberg has had a special relationship with the company for a long time, and it was considered a given that DreamWorks would end up with a pact at the classic studio.
Like I say, we don't know the fine print to the deal just yet, but will working with Spielberg mean that NBC Universal will indeed look better to GE's management? Hey, no one's immune to the allure of Hollywood and its tinsel glory. And, as far as my opinion goes, I think GE should keep NBC Universal in its portfolio of businesses since I think the long-term prospects for well-managed media content represent a good thesis.
However, I've never believed that any media company should go out of their way to chase Spielberg. I respect the guy and am a fan of his work, but as a GE shareholder, I know that you can't mix the need for corporate shareholder value with his need to do whatever the heck he wants. Luckily, Spielberg's instincts tend toward big commercial projects. But I do believe that NBC Universal, along with the rest of its media colleagues, would find it more financially fulfilling if they looked for new talent that displayed Spielberg-like skills without the Spielberg-like premium. Even if NBC Universal doesn't end up financing a lot of DreamWorks' productions, the company will still pay a premium since it would be reasonable to expect that DreamWorks most likely will take the bulk of the profits.
No matter. Universal seems to have won the right to distribute DreamWorks' product. And I think it will up the image of NBC Universal to GE's management. But only by a little amount. Right now, everyone's concerned about falling book values on financial entities. And, remember, GE is one of them since it has a lot of exposure to financial businesses. Plus, here's an interesting news item I found as I was looking through some Spielberg stuff today. It was reported last month that Spielberg and Lord of the Rings director Peter Jackson were refused a $130 million budget for their Tintin animated project. I guess Spielberg can't command total subservience after all.
Disclosure: I own Disney and GE; positions can change at any time.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
Reader Comments (Page 1 of 1)
10-13-2008 @ 8:05PM
kunzsp said...
I think "SHE" would be an awesome movie
for Steven Spielberg, and perhaps
Harrison Ford for the lead. As for She
herself, I do not have a clue. I do not
remember which actress was in the original,
but she was blonde, gorgeous, and seductive
The movie was based on SHE by
H. Rider Haggard..
10-13-2008 @ 10:51PM
Kent said...
GE and the entertainment industry just are not compatible for consistent growth and margins. I am of the belief that GE is far too mesmorized with this industry for its own good.