Arundel Partners: The Sequel Project
Investment Analysis and Opportunity Review
EXECUTIVE SUMMARY
Background
The proposed business venture, Arundel Partners, is an investment group which would purchase the sequels rights associated with all films produced by 1 or more selected U.S. movie production studios for a specified period of time, or a specified number of films. As your investment analysts, our goal is to assess the value of the sequel rights to allow a determination of the value of the overall investment as well as a reasonable price-per-film for the sequel rights.
Arundel Partners plans to pay to obtain a guarantee to the ownership of sequel rights for a set of films prior to production. It is assumed that only a small percentage of the films produced by a studio will be sequel candidates, based on the profitability of the initial film release. It is also recognized that the profitability of a sequel is typically lower than the initial release. This estimated profit will determine the proposed contract offer by Arundel Partners to the selected studio.
Sequence of Events
**Note: The diagram in Figure 1.1 outlines the timeline as it applies to the Arundel investment described.
Prior to proposal, Arundel will need to determine which studio they feel offers the best potential success, and propose the contract prior to knowledge of films to be produced during the contract period. Arundel will then own the sequels rights as defined in the contract. History suggests that a studio would entertain an offer around $2 million per film for the rights to the sequels of each move it produces that year.
FIGURE 1: SUMMARY OF EVENTS BY YEAR
Arundel's ownership rights begin on day 1 (year 0) of the cont ...