Estimating Time Warner’s Gain From The Dark Knight Rises

The recently released movie, The Dark Knight Rises, marks an end to Director Christopher Nolan’s highly successful Batman Trilogy. To Time Warner’s (NYSE:TWX) filmed entertainment business, the trilogy has contributed a significant amount. The previous Batman movie grossed over $1 billion in worldwide box office sales and with the opening weekend sales estimates of close to $160 million, The Dark Knight Rises appears to be heading towards same success.

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A hypothetical case where one such movie is released every 4 years, based on time difference between last and current Batman movie, would imply yearly revenue of $250 million. Comparing this with Warner Brother’s current box office performance, we estimate that such a movie series will amount to close to 8% of annual revenues. We know that box office sales transform to further monetization of a movie via DVD sales and consumer products. Given that overall filmed entertainment business constitutes close to 35% to Time Warner’s value, a series of successful movies similar to The Dark Knight Rises will contribute close to 3% to Time Warner’s value. Although small, the amount is notable for a single movie franchise.

Lately, several movies have done well and they all seem to have one common trait – they are based on famous fictional characters. The improving special effects and improving economy have drawn more people to theaters. The growth of movie theaters in emerging markets such as India have helped the ticket sales. We expect the box office sales growth to continue, despite rise in streaming and DVD home entertainment worldwide.

Our price estimate for Time Warner stands at $40, implying less than 5% premium to the market price.