?
Wall Street overnight started chiming in on the late Monday distribution deal announced by DreamWorks Animation with News Corp.'s Fox, with analysts assessing the financial winners and losers.
Stifel, Nicolaus analyst Benjamin Mogil?in a first investor note discussed the financial benefits for DWA. "While the deal is slightly better than the current one, and Fox is a strong partner, it does not change our view that the company will continue to see gross margin pressure amid home entertainment revenues given the continued production and [advertising] cost levels," he said in maintaining his "hold" rating on DWA's stock.
For DWA, the new Fox deal comes at the same 8 percent fee as its expiring deal with Viacom's Paramount, but "allows for the domestic television rights (pay TV, Netflix, cable, free) to be carved out from the deal," while digital distribution revenue comes at a 6 percent fee "reflecting the lower costs associated with these revenues," Mogil explained.
Most of those terms were as he had forecast, but "the lower digital fee is positive compared to our expectations," Mogil said.
But Lazard Capital Markets analyst Barton Crockett said the deal isn't quite as good as he had expected for DWA. "The terms, while improved, are not quite the step up we had assumed," he said. Combining the effects of the 6 percent and 8 percent fees, he said "the total effective fee" is about 7 percent, compared with his expectation for a 6.5 percent fee, which the analyst said slightly trims his earnings expectations going forward.
Fox will be a strong distribution partner for DWA in today's more global box office game, he also highlighted. "With the international markets, particularly the emerging ones, the key driver in global box office, the choice of Fox is strategically sound," said Mogil.
Combining the effects of the 6 percent and 8 percent fees, he said "the total effective fee" is about 7 percent, compared with his expectation for a 6.5 percent fee, which the analyst said slightly trims his earnings expectations going forward.
While DWA is paying only a 6 percent fee for emerging digital distribution opportunities, such as electronic sell-through, VOD and online rental, "DWA home video sales, aimed at kids, are mainly DVD, so the impact of the new tech exclusion is limited initially," Crockett predicted.
Meanwhile, analysts said the new distribution relationship will be positive for Fox, but could put additional pressure on Paramount to add new content to its pipeline.
"The deal, we estimate, will drive close to $75 million per year in high margin new fees for News Corp., worth about a 2 cents to 3 cents after tax lift to earnings per share," Crockett estimated.
And Mogil's Stifel, Nicolaus colleague Drew Crum?said that "Paramount loses a high margin distributor's fee (8 percent of gross revenue) and may need to pursue additional cost cutting initiatives in order to maintain profitability."
But he also highlighted that Paramount is only a small contributor to Viacom's overall financials. "To put it into perspective, Paramount represents only 7 percent of Viacom's estimated fiscal year 2012 adjusted profit," he said.
Source: http://www.hollywoodreporter.com/news/analysts-weigh-dreamworks-animations-fox-364257
robert kardashian chicago weather forecast narcolepsy narcolepsy weather st louis faceoff kings island
No comments:
Post a Comment