----------------------------------- spootyhead Apr 17, 2007

Arundel Partners Case Analysis
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Arundel Partners Case Analysis

Executive Summary: A group of investors (Arundel group) is looking into the idea of purchasing the sequel rights associated with films produced by one or more major movie studios. Movie rights are to be purchased prior to films being made. Arundel wants to come up with a decision to either purchase all the sequel rights for a studio's entire production during a specified period of time or purchase a specified number of major films. Arundel's profitability is dependent upon the price it pays for a portfolio of sequel rights. Our analysis of Arundel's proposal includes
If Arundel were interested in purchasing rights from Warner Bros. Studios, it would need to negotiate a price of less than 2 million per film, and should not pay Warner Bros. more than $1.92 million per film. Despite the fact that these three studios appear profitable, it would be prudent for Arundel to consider the success rate of films produced by each studio. This is the percentage of profitable films produced by the studio. By far, MCA-Universal is the most successful in that regard, with a 71.4% success rate, followed by Walt Disney with 45% and Warner Bros, with only 21%.

Although this "success rate" may not be directly applied to the calculated per-film values, it does indicate the classic case of "risk vs. return" and should be considered by Arundel. Whether or not Arundel chooses to simply purchase the rights of all films to be produced by the studio, or some mixed combination, they should focus on MCA, Walt Disney and Warner Bros. If the $2 million estimated per-film price holds, then Warner Bros. should no longer be considered. Arundel should not, at any price purchase sequel rights from Sony Pictures, 20th Century Fox, or Paramount Pictures. Financial Analysis: 1. Why do principals of Arundel Partners think they can make money buying movie sequel rights? Who do partners want to buy portfolio of rights in