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Wednesday, December 14, 2005

Variety on CG animation and the stock market

Great article in Variety, about how Wall Street views CG animation powerhouses Pixar and DreamWorks. David S. Cohen writes:

    CGI toons have been the most consistent moneymakers in the movie biz, and that's turned Pixar and DreamWorks Animation into Wall Street darlings.

    Wall Street's preoccupation with CGI toon makers has to do not just with their profitability but their stock volatility. Both Pixar and DreamWorks have proven exquisitely sensitive to any news about CG animation, moving not just on the results of their own titles but also on those from other companies.

    Pixar stock, for example, jumped when Disney's "Chicken Little" opened strong, fueled by speculation that Disney would buy Pixar outright.

    These stocks behave like no others, says Keith Goodman, media analyst for Glenhill Capital. "There's about $10 billion of market capitalization that's affected by the performance of only two or three films a year," he says.

    The small number of releases from these companies, Goodman explains, gives each new "data point" enormous significance to investors. "Any company's equity is based on its ability to generate and sustain cash flow. The number of events that can tell you whether a company can generate or sustain cash flow, for these CG animation companies, may be one film every two years."

    Only videogame and music publishers come anywhere close to the stock sensitivity of publicly traded CGI shops, Goodman adds, "but they're nowhere near as dependent on a limited number of events as a CG-animated film company."