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Arundel Case Study

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Essay title: Arundel Case Study

This case report discussed the financial and business situation of an investment group, Arundel Partners. Arundel partners focused its investments on the sequel rights of that �associated with firms produced by one or more major U.S. movie studios’. As owner of the rights, Arundel could continue or reject the production of sequel.

Business

The proposal was innovative but at the same time, very risky. According to the case report, �Arundel would purchase the sequel rights before the first film were even made. Furthermore, the investor group would not make artistic judgments or attempt to select the rights for particular movies based on predictions of possible sequel’s successes’. On top of that, Arundel would also advance cash payments for the rights to finance the production of the initial film.

This proposal was risky because tastes and preferences of public will change dramatically as time goes. Thus to maintain and predicting the success of any one film or its sequel could be the biggest challenge of this business. At the same time, the amount of investment for each film was averaged at 2 million. This could also bring this project to a negative return easily if the net return falls below the initial cost.

Industry

In 1991, the industry produced 427 films in total. While major studios distributed 35% or 150 of all the films released, they accounted for 93% of all revenues received. One good example would be the top U.S. rental film of 1991, Tri-stars Terminator 2, represented approximately 5% of total U.S. industry rentals. Leader in market share in terms of rental amount changed year to year. This is due to the extreme volatility of public taste and preference. Table below presented the U.S. firm distributors data from 1980 – 1991.

According to the report, a typical movie went through three stages before it reaches the public. These three stages were production, distribution, and exhibition.

Production involved creating the film’s total cost and its cost incurred in three primary stages, pre-production, principal photography, and post-production. On average, the entire production cycle was about one year from the starting of the film until its finish. In 1991, the averaged film cost of production was approximately 20 million.

Distribution consisted of advertising, shipping prints to theaters, onto videocassettes, and licensing it to television program. Studios that produced or financed the movies usually were the distributor as well. Beside all the advertising responsibility, they also in charge of collecting proceed from theaters and ancillary revenue sources.

Exhibition consisted of showing films in theater and other viewing media, such as home video. U.S. film released its production first

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