Thursday, March 12, 1998
MovieFone
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Phone: 212-450-8000
Website: http://www.movielink.com
Price (3/11/98): $8 5/8
HOW DID IT DOUBLE?
Hello, welcome to the MovieFone Daily Double, brought to you by the Motley
Fool. For the charming rags to riches story of MovieFone, press one now.
For a list of theaters and showtimes of this epic --
Beep!
You have selected the heartwarming tale of a company and its share price's
rise to prominence. In the case of film information and teleticketing specialist
MovieFone, a huge ruling and a large sinking ship worked in its favor over
the past few months.
A $22.7 million arbitration award in MovieFone's favor over a dispute that
had been going on since 1993 was welcome news this past summer. Back then
Pacer/CATS broke off a teleticketing joint venture with MovieFone, prodded
behind the scenes by a competition-weary Ticketmaster and Wembley.
Then this year Titanic became a box office smash. Naturally people
dialed up their local MovieFone directory to see where the unsinkable holiday
hit was playing. In the last week of 1997 the company handled 3.7 million
phone calls, the highest ever in its nine-year history.
However, because the James Cameron directed saga ran for more than three
hours, movie chains were limited to just being able to show the movie three
or four times a day at each screen. Even in a multi-screen, multi-plex world,
demand outstripped supply, and the movie was a perpetual sellout.
That is where MovieFone took investors to the lobby to have themselves a
treat. The company provided advance ticket purchases to one-fourth of the
13,000 screens in its directory. Soon the word got out that if you wanted
to secure a seat to see Titanic or other holiday hits that were selling
out in domino fashion, like As Good as it Gets or Good Will
Hunting, using MovieFone's teleticketing service was the best way to
avoid having to settle for a huge box of Jujy Fruits at an empty Mr.
Magoo showing.
BUSINESS DESCRIPTION
Through memorable phone numbers like 777-FILM or 888-FILM, New York-based
MovieFone provides a touchtone film database in 31 major cities, covering
13,000 movie screens.
Since its 1989 inception, more than 270 million calls have been greeted by
Russ Leatherman -- who is not only the voice of MovieFone, but also its
president.
The company also has a MovieLink
website where the same information can be retrieved with online enhancements.
FINANCIAL FACTS
Income Statement
12-month sales: $18.7 million
12-month income: ($3.1 million)
12-month EPS: ($0.24)
Profit Margin: N/A
Market Cap: $110.4 million
Balance Sheet
Cash: $1.7 million
Current Assets: $5.1 million
Current Liabilities: $3.8 million
Long-term Debt: None
Ratios
Price-to-earnings: N/A
Price-to-sales: 5.9
HOW COULD YOU HAVE FOUND THIS DOUBLE?
The Pacer/CATS settlement was nice, but still amounted to less than $2 per
share of MovieFone. The real story is how a company that has been revered
as part icon, part punchline, has become a moviehouse powerhouse. MovieFone
is now on the leading edge of leisure.
Back in the fall the company began teaming up with some Cineplex Odeon chains
in New York to provide reserved seating. Just recently the company introduced
the ability to use two-way pagers to find a movie and even get directions
to the theater.
The company certainly knew this was a good plot -- they announced a 500,000
share buyback when the stock was near its lows. The 6.7 million callers who
dialed up MovieFone over the two-week holiday period, along with the 1.8
million cybersurfers who logged on to MovieLink, may have been drawn in by
the simplicity -- but the deeper you looked the more there was to see.
WHERE TO FROM HERE?
This year the company has three basic goals. Obviously the first is to expand
into more markets. Not that there is that much left. While MovieFone is available
in just 31 cities, it represents 65% of the nation's movie audience. Expanding
teleticketing services, however, has plenty of room left to grow. The second
goal is to expand the reserved seating policy. The implementation sounds
like a logistical mess. While attractive to some, especially those who
pre-purchase for choice seats through MovieFone, will the more complicated
process find universal acceptance? Probably not.
The last company goal is to grow its research services offerings that they
can sell to companies like movie studios. MovieFone has prized demographics
and through its touch tone and website offerings the company often has a
brief survey to poll users. The MovieLink website has introduced MovieMail,
where free subscribers can get customized e-mail on Hollywood happenings.
MovieMail recipients get information, and MovieFone gets information right
back.
This is a viable multimedia leisure gateway. On March 3 the company held
its Third Annual American Moviegoer Awards, where users voted for the winners.
In the "Outstanding Line in a Movie" category, the logical frontrunner was
Jack Nicholson's reply to a compliment-fishing Helen Hunt in As Good As
it Gets. "You make me want to be a better man," he says and wins her
over. A year ago, with the stock at $4, frustrated investors were probably
hoping for some kind words. "You make me want to be a better stock," seemed
to be MovieFone's answer -- and the future won the investors over.
-Rick Aristotle Munarriz
([email protected])