EMI helps Hulu take on YouTube

EMI Music became the first major music company to agree to distribute its music videos and concert footage on Hulu, the popular online video site.

Starting with today's announcement, EMI will make content available from its various music labels, including Virgin, Capitol and Blue Note. It launches with exclusive footage of Norah Jones performing music from her new album, "The Fall," in a concert at Le Poisson Rouge in New York City.

--Dawn C. Chmielewski

Read the full post here from the Company Town blog

Photo: The cover of Norah Jones' latest release, "The Fall." Credit: EMI Blue Note / Associated Press

 

Video game Call of Duty: Modern Warfare 2 gets Hollywood-scale launch

Modern Warfare 2 generated a record-setting $550 million in sales through Saturday, besting not only the previous mark for a video game but also for movies at the box office, entertainment reporter Ben Fritz writes today. That represents about 8 million units sold, according to estimates by publisher Activision Blizzard Inc. of Santa Monica.

"This provided the entire industry with a shot in the arm," said Colin Sebastian, an analyst at Lazard Capital Markets, who predicted Modern Warfare 2 would ultimately sell 15 million to 20 million units, exceeding $1 billion in revenue.

Call of Duty cost $40 million to $50 million to produce, people close to the project said, about as much as a mid-size film. Including marketing expenses and the cost of producing and distributing discs, the launch budget was $200 million, on par with a summer popcorn movie -- and extremely high for a video game.

Unleashing a Hollywood-scale opening for Modern Warfare 2 has been a priority for Activision Blizzard. The marketing and publicity campaign has featured all of the trappings of a modern movie effort, including ads and trailers designed by top advertising shops, a Twitter feed on which news was strategically disclosed, and a controversial scene involving airport terrorism that leaked onto YouTube and generated much media attention.

"My goal was to create a launch that would compare very favorably to the biggest box offices of all time," Activision Blizzard Chief Executive Bobby Kotick said.

Read the full story by clicking here

Photo: Alejandro Medina, 20, of Culver City, dons a jungle sniper ghillie suit as he takes in the festivities surrounding the release of the video game Call of Duty, Modern Warfare 2 at Best Buy. Robert Gauthier / Los Angeles Times

 

Michael Moore declares all-out war on capitalism

Director Michael Moore now wants nothing less than the complete overthrow of the modern capitalist system.

From Reuters in Venice today:

Capitalism is evil. That is the conclusion U.S. documentary maker Michael Moore comes to in his latest movie "Capitalism: A Love Story," which premieres at the Venice Film Festival Sunday.

Blending his trademark humor with tragic individual stories, archive footage and publicity stunts, the 55-year-old launches an all-out attack on the capitalist system, arguing that it benefits the rich and condemns millions to poverty.

"Capitalism is an evil, and you cannot regulate evil," the two-hour movie concludes. "You have to eliminate it and replace it with something that is good for all people and that something is democracy."

Moore’s long-awaited film, which will open in L.A. and New York on Sept. 23 and nationwide on Oct. 2, is in part his post-mortem on the global financial system crash that began a year ago this month with the collapse of brokerage Lehman Bros.

But the film takes on much more than the usual cast of blood-sucking bankers to make the case against capitalism, delving into unrewarded worker productivity, vultures who make their living off foreclosed homes and horror stories from a privately owned juvenile correctional facility in Pennsylvania.

Time magazine’s Mary Corliss writes from Venice:

"Capitalism: A Love Story" does not quite measure up to Moore's "Sicko" in its cumulative power, and it is unlikely to equal "Fahrenheit 9/11" in political impact. In many ways, though, this is Moore's magnum opus: the grandest statement of his career-long belief that big business is screwing the hard-working little guy while government connives in the atrocity.

As he loudly tried to confront General Motors CEO Roger Smith in "Roger & Me" in 1989, and pleaded through a bull horn to get officials at Guantanamo to give medical treatment to surviving victims of "9/11," so in "Capitalism" he attempts to make a citizen's arrest of AIG executives, and puts tape around the New York Stock Exchange building, declaring it a crime scene.

But Corliss also questions whether Moore’s call for a grass-roots revolution can make it past the theater exit door:

At the end Moore says, "I refuse to live in a country like this -- and I'm not leaving." But this call to arms demands more than a ringleader; it requires a ring, an engaged citizenry who are mad enough not to take it any more. That's unlikely to happen. Moore's films are among the top-grossing documentaries in history because they are pertinent populist entertainments. The question remains: Will "Capitalism: A Love Story" rouse the rabble to revolt? Or will audiences sit appreciatively through the movie, then go home and play the cat-in-the-toilet [YouTube] video?

More reviews of the film from Venice screenings are here.

-- Tom Petruno

Disney's premium for Marvel: Not enough, or too much?

Some Marvel Entertainment Inc. shareholders may wonder if they’re getting a high enough premium for the company in Walt Disney Co.’s $4-billion takeover offer today.

Wall Street may be wondering just the opposite: whether Disney is overpaying.

The cash-and-stock deal -- each Marvel share will fetch $30 cash plus 0.745 of a Disney share -- valued Marvel at exactly $50 a share based on Disney’s closing stock price on Friday.

That was a 29.4% premium to Marvel’s closing price of $38.65 on Friday.

As premiums go, that’s less than the 36.8% average offered this year in other U.S. merger deals worth $1 billion or more, according to data firm Dealogic Inc.

Still, Marvel shares already were up 26% year to date through Friday, nearly double the advance of the Standard & Poor’s 500 index.

And based on the price it’s paying, Disney estimated that Marvel won’t begin to add to the Burbank giant’s earnings until fiscal 2012.

Disney executives’ tone on a conference call with analysts today suggested that they know they’re going to take some heat for paying up relative to where Marvel shares were trading.

Disney Chief Financial Officer Thomas Staggs said Marvel was in a "strong financial position. This is not a deal that they had to do. ... So we are acquiring a premium company, a premium set of assets, and for that I think you have to pay a full and fair price."

Disney shares were down 73 cents, or 2.7%, to $26.11 at about 12:30 p.m. PST, trimming their year-to-date gain to 15%.

Marvel shares were up $9.74, or 25%, to $48.39, just slightly below the $49.45-a-share value of the deal given the slide in Disney’s stock today.

If Wall Street believed that some Marvel shareholders might pressure Disney for a higher bid, the stock would be trading above the deal’s value today.

Also note that Marvel CEO Ike Perlmutter owns about 37% of the stock, which helps to lock up the deal as agreed.

-- Tom Petruno

Image: Iron Man. Credit: Marvel Entertainment

DreamWorks shares fly on profit report and Goldman 'buy'

DreamWorks Animation's strong first-quarter earnings report is getting rave reviews on Wall Street today: The company’s shares have soared 25%, and brokerage Goldman Sachs moved the stock back to its "buy" list.

DreamWorks late Tuesday said earnings last quarter more than doubled, to $62.3 million, or 71 cents a share, far exceeding analysts’ mean estimate of 45 cents.

As my colleague Richard Verrier notes in this story, the Glendale studio benefited from strong box-office and DVD sales from its "Madagascar: Escape 2 Africa" sequel -- exactly as CEO Jeffrey Katzenberg had predicted in late February, when the company otherwise disappointed Wall Street by reporting a 45% drop in fourth-quarter earnings.

Today, the stock was up $4.78 to $23.85 at about 10:40 a.m. PDT, in heavy trading. That's still well off the 52-week high of $32.57, reached in August.

Goldman upgraded the stock to "buy" from "neutral" today and lifted its price target to $27.

Although Dreamworks isn’t likely to generate much big news in the next few months, Goldman said, it expects the stock to gain ahead of "positive catalysts" in the fourth quarter and in 2010, including revenue from airings of "at least two new TV specials" in the fourth quarter, anticipation of three films in 2010 (including "Shrek Goes Fourth") and the potential for a "Penguins of Madagascar" TV series DVD for sale later this year or early in 2010.

Goldman expects the company to earn $1.50 a share this year and $2.18 in 2010. Based on the current share price, the stock’s price-to-earnings multiple on the 2010 estimate is about 11, which Goldman figures is an "attractive" valuation.

The brokerage also trotted out the perennial idea that DreamWorks could be a takeover candidate for a bigger studio.

-- Tom Petruno

Image: Some of the "Madagascar" team. Credit: DreamWorks

Disney shares, even at a six-year low, get a new 'sell' rating

Shareholders of Walt Disney Co. have lost 31% of their investment this year, on paper.

Now, analyst Richard Greenfield at Pali Research pulls the plug.

Greenfield downgraded Disney on Monday to "sell" from "neutral," after slashing his earnings estimates for the firm. The stock slid 24 cents to $15.59, a new six-year low.

Anticipating that clients would be asking, "Why now?" -- as opposed, say, to a few months ago, when the stock was $7 higher -- Greenfield wrote in a report: "While Disney has one of the best secular asset mixes within the media sector, essentially everything is going wrong at the same time, with the length of pain likely to extend further than we had previously expected."

He sees the stock heading for $12.50.

His change of heart on Disney says a lot about the grim mood on Wall Street: Faith in corporate earnings estimates for 2009 and 2010 continues to ebb as analysts push hopes for an economic recovery further into the future.

Greenfield said it was "increasingly hard to imagine the world economic landscape improving enough to drive Disney’s fiscal 2010 earnings."

He hacked his estimate of the company’s 2009 results to $1.63 a share from $1.82. In 2010, he now expects the company to earn $1.45 a share instead of $2.04.

He is far gloomier than his peer analysts. The median estimate of 30 analysts who track the company is for earnings of $1.75 a share this year and $1.93 next year.

Greenfield sees Disney’s operating income sliding this year across its major businesses of theme parks, studio entertainment and cable networks (ESPN, Lifetime, etc.). And things will get much worse for the U.S. parks, in particular, in fiscal 2010, he figures, in part because he sees foreign tourists staying home given the surprisingly strong dollar. . . .

DreamWorks' shares: Too cheap, or not cheap enough?

Trading in shares of DreamWorks Animation SKG today will move from the New York Stock Exchange to the electronic Nasdaq stock market, where the company must be hoping it will find a little more investor love for its battered stock.

After a disappointing earnings report, DreamWorks’ shares tumbled $2.14, or 10.8%, to $17.62 on Wednesday, their last trading session on the Big Board. That closing price was the lowest ever for the Glendale studio since it went public at $28 a share in 2004.

DreamWorks said fourth-quarter profit was down 45% from a year earlier, to $51.6 million, or 58 cents a share. DVD sales of the hit "Kung Fu Panda" totaled $102 million in the three months, far short of what "Shrek the Third" delivered a year earlier.

But in their conference call with analysts, DreamWorks execs sounded supremely confident (this is Hollywood, after all) that DVD sales of "Panda" and the studio’s other 2008 big hit, "Madagascar: Escape 2 Africa," will deliver for the company this year.

During the call, CEO Jeffrey Katzenberg categorized DVD sales of "Madagascar" as "very strong" since its release three weeks ago.

He also noted that the studio’s next big theatrical release -- the 3-D "Monsters vs. Aliens," coming March 27 -- will launch amid a time of booming box-office ticket sales for the industry, as the horrid economy stokes peoples’ need to escape reality.

Given the company’s expectations for "Panda" and "Madagascar" DVD sales and a big box-office take for "Monsters vs. Aliens," Katzenberg said he was "hoping that [investors] will have the same confidence out of this that we do, and we certainly look at our stock today and think it’s undervalued."

But is it? Even after Wednesday’s plunge in the shares, Wall Street gives DreamWorks a higher valuation than what Walt Disney Co., Viacom Inc. and Time Warner Inc. get: DreamWorks’ price-to-earnings ratio is 12 based on expected 2009 earnings of $1.48 a share. The projected P-E's of its three larger rivals all are below 10.

Still, for a proven hit-maker with little debt and $260 million in cash on its balance sheet, DreamWorks is "extremely attractive at this level," analyst Brian Shipman at brokerage Jefferies & Co. told clients on Wednesday.

Richard Greenfield, an analyst at Pali Capital, put this question to Katzenberg during the conference call: "Is there any point where if you don’t get the return from shareholders, that you would more actively think about strategic alternatives?" He presumably meant going private or selling the company.

Katzenberg’s reply: "That’s too wide open a conversation, Rich, and I’ve got too many people waving at me in the room, ‘Don’t answer that.’ "

-- Tom Petruno

Photo: A scene from the upcoming "Monsters vs. Aliens," DreamWorks' first 3-D movie. Credit: DreamWorks Entertainment

Katzenberg says Madoff losses dire for his philanthropy

Hollywood mogul Jeffrey Katzenberg says the losses on his personal investments with Bernie Madoff have done "extraordinary damage" to his philanthropic efforts.

In an interview on CNBC today, the DreamWorks Animation SKG chief said it was a "disgrace" that Madoff remained free pending the next phase of his case.

Madoff, 70, is accused of running a $50-billion Ponzi scheme, resulting in massive losses for individual and institutional investors worldwide, including a number of Hollywood figures.

From Bloomberg News:

"The first time I heard the name Bernie Madoff was about three weeks ago when I found out that, you know, he had swindled all this money," Katzenberg said on CNBC. "This is extremely painful and humiliating for me," he said. "It has done extraordinary damage to my philanthropy."

Katzenberg’s funds were invested with Madoff via the studio executive’s business manager, Gerald Breslauer, the Los Angeles Times has previously reported.

Katzenberg didn’t provide details about the scope of his loss. But two sources have told The Times that he lost at least $20 million with Madoff.

Bloomberg noted that the Marilyn & Jeffrey Katzenberg Foundation listed assets of $22.1 million as of 2007, according to a September tax filing. Contributions in 2007 totaled $455,333, Bloomberg said, citing the filing.

That Madoff remains free "I think is a disgrace," Katzenberg told CNBC. "And this guy is living in a $7-million apartment today walking free. There is something very, very wrong."

Federal prosecutors are trying to persuade the judge handling the case that Madoff should be imprisoned pending trial.

Katzenberg, 58, serves on the boards of the Motion Picture and Television Fund, the Museum of the Moving Image, Cedars-Sinai Medical Center, California Institute of the Arts and the Simon Wiesenthal Center. He also as been a major fundraiser for AIDS Project Los Angeles.

-- Tom Petruno

Photo: Jeffrey Katzenberg (credit: Tracey Nearmy / European Pressphoto Agency)

Not so iron, man: Marvel's shares tumble on 2008 outlook

Marvel Entertainment Inc. may have to send Tony Stark back to the lab: The company’s latest financial outlook didn’t cut it with investors.

New York-based Marvel, whose spring movie hit "Iron Man" featured Robert Downey Jr. as the scientist-genius-egomaniac Stark, today reported a 60% jump in second-quarter profit, thanks mainly to a surge in revenue from licensing of merchandise tied to "Iron Man" and others in Marvel's large cast of characters.

But Wall Street focused on the company’s revised revenue and profit forecasts for 2008. Although Marvel boosted its revenue estimate for this year to a range of $450 million to $480 million, an increase of 20% from its May forecast, analysts’ consensus was for $516 million, according to Bloomberg data.

The company’s new 2008 earnings forecast -- a range of $1.55 to $1.75 a share -- also was below analysts’ consensus estimate of $1.90.

Given the big rally in Marvel’s stock in spring on the box-office success of "Iron Man," maybe investors were just looking for an excuse to bash the shares. In any case, they did: The stock slumped $4.07, or 11.5%, to $31.19, though the price still is up almost 17% year to date.

Hollywood accounting being what it is, Marvel didn’t record any domestic revenue for "Iron Man" or its other flick, "The Incredible Hulk," in the second quarter. It did however, record $28.9 million in revenue for foreign pre-sales of the movies.

What seems to have unnerved investors was the company’s warning that the domestic payoff from the films, including DVD sales, won’t come until 2009 -- after Marvel's distributors have subtracted promotional costs.

Investors were drawn to Marvel shares in the first half of this year on excitement about the company’s decision to begin producing its own films (starting with "Iron Man") as opposed to letting other studios reap the rewards (as Sony Corp. has done with Marvel’s "Spider-Man" franchise).

Long-term optimism about the film business may still be there, but Marvel today essentially warned investors they'd have to be patient.

In this market, that’s asking a lot.

Photo: "Iron Man." Zade Rosenthal / Marvel Entertainment

DreamWorks shares take a kung-fu hit after earnings report

Wall Street is scaling back its dreams for shares of DreamWorks Animation SKG.

The Glendale studio’s stock tumbled today after the firm’s second-quarter earnings report late Tuesday.

Although DreamWorks’ profit of 28 cents a share (excluding a tax benefit) beat the consensus estimate of 23 cents, analysts are reining in their expectations for earnings growth over the next year.

Goldman, Sachs & Co. analyst Ingrid Chung said she still considered the stock a "buy" but pulled it from the firm’s highlighted "conviction buy list." She cut her 2009 earnings estimate to $1.75 a share from $1.87, citing expectations for higher foreign marketing costs for the hit "Kung Fu Panda" and for DreamWorks’ next movie, "Madagascar: Escape 2 Africa" (due Nov. 7).

That’s the problem of the weak U.S. dollar coming home to roost: It’s costing DreamWorks more to market its films abroad.

Another expected drag on the bottom line -- although great for Glendale and environs -- is the company’s plan to spend $85 million over the next two years to expand and improve the Glendale studio, including for 3-D productions. DreamWorks sort of buried that announcement in the earnings press release.

Michael Pachter, who follows the company at brokerage Wedbush Morgan Securities, downgraded the stock today to "hold" from "buy" and trimmed his 2009 profit estimate to $1.71 a share from $1.78, also citing expected higher costs.

Analysts still are upbeat about the company’s long-term outlook given its movie successes and the likelihood of profitable spin-offs (such as the upcoming stage show "Shrek the Musical"). But with the studio warning on costs, Wall Street is retreating until future profit streams have more "visibility," as Pachter put it.

The stock ended down $2.72, or 8.7%, to $28.57, after falling as low as $27.20. It's still beating the market year to date, up almost 12% after falling 13% last year.

Photo: "Kung Fu Panda." DreamWorks Animation SKG