Hollywood studios don’t directly own much of cyberspace, but the investment community is impressed at how the film biz suddenly seems adept at harvesting it.
Netflix, for example, earlier this year licensed streaming rights to “Mad Men” for an estimated $800,000 an episode from Lionsgate, the producer of the TV series, and to library content from CBS in a two-year, $200 million deal.
Most pacts have loose exclusivity, allowing the same content to be licensed elsewhere, generating additional coin.
“The traditional media companies have generated incremental revenue in the digital space,” says Christopher Marangi, a portfolio manager specializing media and telecom stocks at Gamco Investors. “They’ve shown their content is valuable, and they are increasingly monetizing it.”
Still, it’s a comparatively small revenue stream, according to estimates by media researcher SNL Kagan, which classifies just over 2% of Hollywood’s $50 billion in global revenue in 2011 as coming from digital, leaving the traditional revenue streams of homevideo, TV and theatrical continue to dominate the bottom line.
But with Amazon, Hulu Plus, Netflix and others ramping up their streaming of Hollywood content, a growing lineup of digital outfits is gobbling up movies and TV programs amid competitive bidding.
“This is a business nobody imaged just a few years ago, and it’s found money for studios,” says Tuna Amobi, media/entertainment analyst at Standard & Poors. “This has excited investors on Wall Street who had been focused on the traditional media business maturing. The companies have demonstrated their content can be exploited at digital outlets for digital dollars.”