Sony (NYSE: SNE) is not the first investment idea one thinks of when contemplating the movie business. But maybe Stephen King – as well as Spider-Man – will turn out to be a catalyst.

Before we get to King, let me first mention the Spider-Man film coming out: Disney (NYSE: DIS) and Sony combined their powers of creativity to produce Spider-Man: Homecoming. This one will be in theaters the first week of July (unless the date changes), and I’m going to assume it stands a better than excellent chance of capturing large weekend grosses. Disney and Sony came together on this as a way of reviving the franchise. Why would arch corporate enemies do this? Simple reason: it benefits both. Sony will probably see the film gross more than it would have otherwise, and Disney then gets to use the character in its Marvel cinematic universe (and presumably, will benefit from a merchandise angle). Best of luck to both on this team-up.

Spider-Man is obvious. Stephen King may not be so obvious. He’s a big brand name in books, and he has been adapted to silver/small screens over the years, but could he be the source of a franchise, a cinematic universe?

Let’s first consider Sony’s content business. From the company’s latest Form 20-F, we see that the division, called Pictures, is important to the overall profit model for Sony. The company’s financial division is a big contributor to consolidated operating income, and there are other moving parts, but Pictures is still significant.

On page 47 of the linked 20-F, we see that, for the years 2014, 2015 and 2016, the operating income for Pictures was $51.6 billion yen, $58.5 billion yen and $38.5 billion yen, respectively. Consolidated operating income (after corporate and elimination costs) was $26.5 billion yen, $68.5 billion yen and $294.2 billion yen for the same respective years. Obviously, some segments, like games and mobile, experienced big fluctuations; the studio business can be seen as a component that can help smooth things out when running properly and robustly (i.e., with franchise successes).

The studio business could use some help from Spider-Man and King. More recent data would also indicate this. For fiscal year 2016, the Q3 earnings release (pages 5 and 6) stated that the Pictures division was hit by lower sales for motion pictures (the television business did better). There was a 5% decrease on a dollar basis for the top line. The quarter suffered an operating loss, and it was also stated that tough comparisons were observed because of a stronger slate in the comparable period (the projects Spectre and Hotel Transylvania helped out during that time frame).

In my opinion, Sony has a decent chance here of starting up a franchise with the upcoming The Dark Tower movie, scheduled for release in early August. King’s brand equity is becoming more valuable as it evolves through this golden age of content production. Compare the quality of a King miniseries today – like Hulu’s 11/22/63 – to The Stand miniseries from 1994. The former was constructed under the influence of a higher standard, and such quality programming is being used by Hulu for purposes of competing with Netflix (NASDAQ: NFLX).

King’s concepts can now be turned into actual entertaining media vehicles. Netflix has a certain standard for quality, if you exclude the Adam Sandler features (hey, I like the guy and his personal business model with Happy Madison, but Sandy Wexler could have been better), and it will be in business with King later this year when it releases a movie version of Gerald’s Game. Furthermore, Time Warner (NYSE: TWX) will surely make everyone forget the It miniseries from way back when it releases a new version to multiplexes in September. Going back to Hulu, a new show with 11/22/63 producer J.J. Abrams will see King bring his Castle Rock mythologies to the streaming service in a series of the same name. Viacom’s (VIA, VIAB) Spike channel will air The Mist during the summer. King has been around for a long time, but it has never been better for him and his trademark(s); the post-streaming world has been very kind to him. Social media helps his projects gain buzz and mindshare; the trailer for It, as an example, was a sensation when it hit the web, as this Deadline article indicates.

As the Tower release date approaches, I anticipate a lot of King hype; in particular, the heat from It is only going to increase. In fact, one of the young actors from Stranger Things is in the creepy clown epic, and many are comparing the film to Things not only because of that connection, but because it has a youthful cast of kids in it that are likewise on their own harried adventure.

Let’s shift to the stock. Sony shares have meandered a bit over the last three years, but that meandering has led to an upward trend.

There have been problems with Sony studios. Last year, Ghostbusters didn’t do well, unfortunately. When Sony launches a franchise, it isn’t like Disney launching a franchise. There is more risk.

But the company as a whole is in an interesting spot. Besides the Spider-Man and Tower films, there is the video game console business to consider. The company’s PlayStation 4 is a device that is popular in a competitive industry, and it is a multimedia hub that can be used to promote Sony’s cinematic products. Here is an article by Dam Pathmalal on the positive sales prospects for the PS4. Here is a recent news item about the company’s preliminary earnings release; operating profit was a little under 20% better than what the company was expecting. Guidance also went up. The headline of that item includes the words “big” and “turnaround.” Yes, there’s a question mark at the end of the headline, but the point is both the company and the stock seem to have some momentum behind them.

That leads us back to the summer of Spider-Man and King. One thing I don’t like about Tower is that it is being released in August and not at an earlier point in summer. I think a July release would have been optimal – I have always thought that studios think too much about release dates and should be more aggressive about going up against competitors, which I concede would be a controversial thought in Hollywood, given the utter fear of tentpoles cannibalizing each other’s financial potential – and that the film should begin on a Wednesday as opposed to a Friday (especially given the late summer frame) – but Sony and its data experts probably know better than I do. For now, Sony will simply hope that social media will give these two summer projects the attention they hopefully deserve.

Disclosure: I am/we are long DIS, NFLX, TWX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.



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