Investment Tips from Oscar?


With the countdown to the Mar. 24 Academy Awards nearly over, movie fans are furiously IM'ing each other with their predictions for which movies and actors will take home an Oscar. If you truly believe, for example, that Nicole Kidman is a shoo-in for Best Actress for her turn as an ill-fated courtesan in Moulin Rouge, how about putting your money where your mouth is?

No, I'm not talking about shelling out 10 bucks in the office Oscar pool. Instead, you might grab some shares of Fox Entertainment Group (FOX), which includes the film division that made the nominated musical. The annual media orgy could bring some benefit to companies whose films win major awards, right? After all, the studios play up any nominations they garner in their advertisements, and the winners' names are plastered in newspapers worldwide the morning after the award show.

Well, it's a theory. But don't reshuffle what's left of your dwindled equity portfolio into AOL Time Warner (AOL) just because its New Line Cinema unit is behind The Lord of the Rings: The Fellowship of the Ring, which leads the Oscar race with 13 nominations. While film awards and nominations generate plenty of welcome buzz for Hollywood studios, their impact on revenues, earnings, and stock prices are nominal, media analysts say.

"MEANINGLESS" MONEY. True, one of the most tangible benefits of awards and nominations is higher ticket sales. David Miller, an entertainment analyst for Sanders Morris Harris in Los Angeles, notes that an Oscar nomination for Best Actor or Best Picture can add anywhere from 5% to 10% in additional box-office receipts for a studio. However, that figure depends heavily on how much money a studio wants to spend on keeping a film in theaters, months after its debut, to take advantage of any awards buzz. Two nominees taking that route are Moulin Rouge, released in spring, 2001, and still playing in New York City, and the animated feature Shrek, released in May, 2001, and still in Los Angeles theaters. "Certainly [the extra box-office receipts are] material, but it's not so much that it's going to move stock prices," Miller says.

Besides, even if New Line's Lord of the Rings raked in, say, an extra $100 million in ticket sales on the heels of its Oscar nominations or any wins, that figure barely registers at parent AOL Time Warner, which records annual revenues of $38 billion. "It's meaningless to the bottom line," says Jeffrey Kleintop, chief investment strategist at PNC Financial Services Group. "Instead, a lot of the nominations are about generating some hype around the studio, a release, a certain production team to market the next film they might come out with."

Just look at the stock prices. AOL Time Warner is hardly on a tear. At $26 a share, AOL remains 55% off its yearly high of $58, reached in May, 2001. How about Universal Pictures, which made A Beautiful Mind, another nominated film? Universal is part of Vivendi Universal (V), and its shares are trading at $38, 44% lower than their 52-week high of $69 in April, 2001. Fox Entertainment Group -- which includes 20th Century Fox, maker of Moulin Rouge -- sits at $24 a share, down 17% from its yearly high of $29 reached in June, 2001.

POPULARITY CONTESTS. Movie fans who are dying to make a bet on Oscar predictions, have other options. Web sites exist that let users bet funny money on actors and movies. At Hollywood Stock Exchange (www.hsx.com) and NewsFutures (www.newsfutures.com), users register for free online games in which they use imaginary cash to place bets on a variety of people and events -- including the 74th annual Academy Awards. Top winners qualify for prizes. While no one walks away with real money, the Web sites have become an unofficial barometer of the popularity of actors and movies and are fun for the star-struck investor.

According to Hollywood Stock Exchange, A Beautiful Mind was trading at $14.50 imaginary dollars, compared to $10.50 for The Lord of the Rings. And at NewsFutures, where users trade futures on the likelihood of outcomes, the chances Moulin Rouge will get the Oscar nod for Best Picture or Best Director award were nearly flat.

Sure, it's all just a fantasy. But the prices do give an idea of what diehard movie fans, if not members of the Academy or active investors, are thinking. And aren't Hollywood and the movies about make-believe anyhow? By Heesun Wee in New York


Silicon Valley State of Mind
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