Arundel Partners: The Sequel Project Harvard Case Solution & Analysis

Arundel Partners: The Sequel Project Case Solution

Need to buy sequel rights

The film industry has been enormous for its popularity over different sequels made. Since Arundel was looking for an opportunity to take over different sequels of films,during 1992, Arundel focused on investing in film studios in order to generate high profit margins. He proposed different amounts to the six biggest studios of the U.S.

arundel partners case solution

arundel partners case solution

The economic trend shows that prior to the sequel series, there was a huge profit margin in first film production and this also led to higher cost associated with production, distribution as well as exhibit.

Although Arundel was not interested in investing in new series of films because the cost would be high and therefore, it was unable to invest in the studios for a long period of time. However, the proposal was only for 1 year of investment and showed that there wasno need to heavily invest in new production film.

The historical data also shows that sequels havebeen less profitable and required less amount to invest. However,it could generate high profit margins if the first picture was successful in the market. Moreover, Arundel took the opportunity to invest in any sequel in order to cover the negative cost associated with it.

The negative cost in the past few years was over 20% and this made the upcoming sequels of the films less profitable. Now, the company has to make sure that it will cover the overhead cost and generate moderate profit margins in any of these given studios. For that, it had theoption to invest in any of the given sequels or to cover the entire studio for maximum earnings.

Selected studios for sequel rights

Arundel has the opportunity to invest in the selected sequels of studios where it generates more profits to cover the initial cost. There were six dominated studios to make film series in the U.S market and he searched for the film financing from different potential investors in order to expand the sequel series of films.

The analysis indicates that the small portfolio of studios can be an opportunity for Arundel to invest in different selected sequels or to invest in overall studio to make large profits. For that, it will make an assumption to indicate whether the objectives will meet or not.

Arundel in this case wants a negotiation for its investment over a series of sequels and shows consistency over its involvement for film production through financing the amount.

The companyalso analysed some studios that couldbe suitablefor the investment in the firstyear of contract. Firstly, MCA universal can be an opportunity to invest asit will bear less negative cost as compared to others. Arundel has an advantage to finance in the whole studio production asit will cover all the overheads for negative costs as analysed by the market players.

W.D Company had the smallest portfolio among the studios and can produce more sequels of films however, itrequired some amount to invest. Therefore,Arundel’s takeover of W.D can be a perfectopportunity to invest for profit maximization and to allow discount rate over its negative cost as given in the case.

These two portfolios can bear the smallest amount to invest and will generate high profit margins as compared to other mentioned in the case.

 Substantive difference of Portfolios

The analysis of the case shows that Sony pictures can be considered as the biggest portfolio to invest as it has numerous films,which expanded into different sequels as well as it could be a threat for investment since the overall performance was not good as compared to the predicted amount.

On the other hand,Paramount pictures is considered as the second large studio to invest for generating profits. It has been the most successful studio since late 1980’s and produced quality of films with sequels in the past. Now this studio is not in favour for investment as it can bear huge negative costs with lowest amount for profits............

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