Star Wars: The Investor Force Awakens

Every year, there’s a new blockbuster movie that seems to blow away the competition and set box office records. Last year it was “Transformers: Age of Extinction.” Two years ago, it was “Frozen,” and going back further it was “The Avengers,” “The Dark Knight Rises” and “Toy Story 3.”

Of course, this is all by design. The large movie studios, now more than ever, are focused on building and maintaining successful franchises, titles that spawn not only multiple installments but their own ecosystem of consumer products – including toys, video games, clothing, theme park rides and any other merchandise that help create recurring and diverse revenue streams for years to come.

This year, of course, everyone is anticipating the release of “Star Wars: The Force Awakens.” More than six weeks before it hits theaters, the seventh installment of the “Star Wars” movie franchise is generating more hype than any film in the history of hype.

When the trailer debuted during halftime of ESPN’s Monday Night Football on October 19, it overshadowed the game on social media, generating over 17,000 tweets per minute when it aired and over two million interactions on Facebook in the first hour. In the week that followed, the trailer was viewed nearly 50 million times on YouTube. All this buzz has buoyed advanced sales to record levels and set up a secondary market for tickets that rivals large sporting events, with sellers asking for premiums as high as 500% for opening night on eBay.

It’s difficult to overstate how big this movie will be. This is a full-blown phenomenon, one that is a perfect confluence of distribution, global hype and pop culture, and from an investor’s standpoint, it’s hard to ignore the possibilities. Here are some ideas how investors may profit from this amazing opportunity:

Walt Disney: In hindsight, Disney getting Lucasfilms for $4 billion was a steal – especially considering how some tech companies are currently being valued. Disney is a good investment, even without the Star Wars movie franchise. Though ESPN is slowly beginning to feel the effects of the cord-cutting revolution, having seen its subscriber numbers dwindle over the last year, the network remains wildly profitable and is likely to remain that way given America’s appetite for live sports content. Marvel and Pixar films give investors the opportunity to cash in on the upcoming installments of “Finding Nemo,” “Cars,” “X-Men” and “Fantastic Four.” Then, of course, there’s the theme parks, which are likely to experience an uptick in attendance during the holiday season and beyond, especially with the addition of the “Star Wars” rides. Most importantly, Disney is in the prime position to profit off “Star Wars” with the movie, royalties on hundreds of products, theme park rides and many squeals to come. With a new theme park coming to China in the spring, Disney is hitting on all fronts.

IMAX: Thus far, about forty percent of the advanced sales for “Star Wars: The Force Awakens” were for IMAX theatres. If that pace holds up worldwide, IMAX could account for a large part of the total receipts that could total more than $2 billion. With the immersive IMAX experience, viewers are sure to fill the theaters with many probably seeing the movie more than once. IMAX continues to expand around the world especially in China, IMAX is a great way to play the growing appetite for movies in Asia. With a strong brand name and experience, a great line up of movies going into 2016 and China’s insatiable desire for U.S. entertainment, IMAX is a unique opportunity to take advantage of the “Star Wars’ riches.

Electronic Arts: The latest “Star Wars” game, “Star Wars Battlefront” will be released Nov. 18, a full month before the movie hits the theaters, not only whetting the appetite of serious fans of the franchise but helping to create a steady drum beat of publicity in the weeks leading up to the premiere. The beta version of the game was excellent and the game will be a huge hit. With a $60 price as well as another $50 to access all the extra DLC, it becomes the most expensive video game yet. With DLC making game margins ever higher, EA is in a prime position to profit over Xmas. Not to mention the huge opportunity in Virtual Reality and the continued success of core franchises like, FIFA, Madden and Battlefield. If you like gaming, e-sports and Virtual Reality, EA is a great play.

Star Wars is perhaps the first movie franchise that has pull among four generations, from Baby Boomers (who took their kids to “Star Wars”), to Gen X (who saw “Star Wars” as kids), to Gen Y (who grew up on sequels, games and toys), to today’s generation, who will likely flock to see the latest installment, reinvigorating the franchise for the long term. “Star Wars: The Force Awakens” is poised to become the mother of all blockbusters, surpassing even “Avatar,” the highest grossing movie of all time, and as an investor, you’d be crazy not to try to cash in on this upcoming galaxy of profits.

Ross Gerber is CEO and president of Santa Monica, Calif-based Gerber Kawasaki, an investment advisory with approximately $410 million in assets under advisement. Clients and employees may own positions in various companies mentioned in the article, but readers shouldn’t buy anything without doing their own research.

By Ross Gerber
http://www.forbes.com/sites/greatspeculations/2015/10/30/star-wars-the-investor-force-awakens

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.

Gerber Kawasaki, 2716 Ocean Park Blvd. #2022 Santa Monica, CA 90405. Contact us at (310) 441-9393.