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Friday, April 07, 2006

S&P Equity Research Cautious on Movie Industry in 2006

S&P Equity Research Cautious on Movie Industry in 2006

Industry Facing Continued Declining Attendance, Potential DVD Saturation

NEW YORK, April 7 /PRNewswire-FirstCall/ -- Standard & Poor's Equity Research Services cautions investors about the numerous issues facing movie studios in its new semi-annual survey on the entertainment industry. These and other findings are available in the report, Movie and Entertainment Industry Survey, published twice yearly by Standard & Poor's, a leading provider of independent investment research.

According to Standard & Poor's Equity Research, movie studios face multiple potential business challenges in 2006, after a disappointing 6% decline in the 2005 box office. These include the possibility of further declines in attendance, with only moderate growth in average ticket prices; saturation of the home video market, resulting in declining DVD sales and contribution margins; and increased competition for consumers attention from emerging media platforms.

"The movie business is in the midst of a transition. We believe declining theater attendance could be a secular trend. Additionally, flattening DVD sales, rapid technological advancements and evolving consumer habits are forcing movie studios to reinvent traditional business models," says Tuna N. Amobi, Senior Media and Entertainment Analyst with Standard & Poor's Equity Research Services. "With rising film production and marketing costs increasingly weighing on the bottom line, we deem caution is warranted on the implications of these business trends for the industry."

"That said," Amobi continues, "we see easier comparisons in 2006, and a strong slate that could drive the summer box office, including Disney/Pixar's "Cars," Disney's "Pirates of the Caribbean 2," Paramount's "Mission Impossible III," Time Warner's "Superman Returns" and "Poseidon," DreamWorks Animation's "Over the Hedge," Sony's "The Da Vinci Code," and 20th Century Fox's "X-Men 3."

Standard & Poor's Equity Research Services has a "Buy" (4-STARS out of 5) recommendation on Disney (NYSE:DIS)(NYSE:$28) due to the benefits of its acquisition of Pixar and a strong slate of films. In addition, Standard & Poor's Equity Research Services has a "Strong Sell" (1-STARS) recommendation on DreamWorks Animation (NYSE:DWA)(NYSE:$27) because the stock lacks any major catalysts in 2006 and management's comments after a disappointing fourth quarter.

To view a video clip of Standard & Poor's equity analyst Tuna Amobi, CFA, CPA, discussing the sector, go to: mms://wmd31sea.activate.net/sandp/windows/sptv-survey-24.wmv

Standard & Poor's Industry Surveys provide a broad and fundamental overview of each industry's structure, its recent performance, and an analysis of trends that are expected to influence it in the future. Each Survey is organized into the following sections: Current Environment, Industry Profile/Industry Trends, How the Industry Operates, Key Industry Ratios and Statistics, How to Analyze a Company, Industry References, Comparative Company Analysis, and a Glossary of terms used in that industry. Both text and data are provided, as are references to additional sources of industry information. Two surveys on each industry are published each year.

Readers can purchase Standard & Poor's Industry Surveys three ways:

Online for immediate download at http://sandp.ecnext.com/ , by telephone at 212-438-4052, or via e-mail order sent to bill_kelleher@standardandpoors.com. Members of the media can request a copy from the communications contact listed at the end of this release.

The analyst quoted above is a Standard & Poor's equity analyst. He has no affiliation with any company he covers, nor any ownership interest in any company he covers.

About Standard & Poor's Equity Research Services

As the world's largest producer of independent equity research, over 1,000 institutions license Standard & Poor's research for their investors and advisors, including 19 of the top 20 securities firms, 13 of the top 20 banks, and 11 of the top 20 life insurance companies. Standard & Poor's team of 100 experienced U.S., European and Asian equity analysts use a fundamental, bottom-up approach to assess a global universe of approximately 2,000 equities across more than 120 industries worldwide. Follow Standard & Poor's equity analysts' U.S. market commentary each day at http://www.equityresearch.standardandpoors.com/ .

The equity research reports and recommendations provided by Standard & Poor's Equity Research Services are performed separately from any other analytic activity of Standard & Poor's. Standard & Poor's Equity Research Services has no access to non- public information received by other units of Standard & Poor's. Standard & Poor's does not trade on its own account. The analytical and ethical conduct of Standard & Poor's equity analysts is governed by the firm's Research Objectivity Policy, a copy of which may also be found at http://www.standardandpoors.com/ .

About Standard & Poor's

Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research, data and valuations. With approximately 6,300 employees located in 21 countries and markets, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com/ .

Source: Standard & Poor's

CONTACT: Ed Sweeney of Standard & Poor's, Communications,
+1-212-438-6634, Edward_Sweeney@standardandpoors.com

Web site: http://www.standardandpoors.com/
http://www.equityresearch.standardandpoors.com/
http://sandp.ecnext.com/

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