BACKGROUND & PROPOSAL
In April of 1992, a movie industry analyst name Mr. David Davis of Paul Kegan Associates, Inc. was approached with an interesting and fresh business idea. The proposal was to create a new investment group, Arundel Partners, that would exist solely for the purpose of purchasing sequel rights to motion pictures produced by major U.S. movie studios. The proposal was unusual in that studios rarely sold rights to sequels prior to 1992, and interesting in the sense that it did not target specific movies or negotiate prices based on performance of the first movie. Instead, Arundel wanted to create a portfolio of options to produce all sequels at a studio for a given time period. The incentive to the studios is that Arundel would give them cash during production or up front, which would help finance the original movies.
Increasing quantities of sequels were being created in recent years as the industry realized that they are lower risk investments as opposed to new, unproven motion pictures with no sure signal of how it will do at the box office. The risk in buying rights to sequels appears in the form of guessing which originals will be successful, and Arundel hopes to mitigate this by creating a portfolio of all possible sequels and pricing it accordingly as a whole. Therefore, they will not have to deal with analysis of individual movie proposals or interfere artistically with the production of pictures in an attempt to boost perceived expected box office sales. They want to minimize their risk and direct involvement in matters they would have difficulty fully immersing themselves in and comprehending.
The specifics of the proposal were as follows: Arundel would agree with one or more studios separately on a period of time over whic ...