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Medium Profitability

Leo vs. The Space Invaders

#Media
ProHub Comment

This is a strong profitability case that requires candidates to build a financial model comparing two distribution strategies with similar expected profits ($105M theater vs $100M streaming). The case emphasizes that quantitative analysis alone is insufficient—candidates must identify and weigh qualitative factors such as reputation risk, strategic positioning, and long-term implications to make a defensible recommendation.

Estimated Time 15 minutes
Difficulty Medium
Source Duke
50 / 100
Your client is a production studio looking to release it’s new film, Leo vs. The Space Invaders, in the next year. The film is the fifth movie in the franchise, and the studio is deciding whether to sell exclusive rights to a 3rd party streaming service or stick with the original plan and release the film in theaters. How would you advise the CEO?

Clarifying Information

Company:

  1. American film studio that has released several blockbusters in the Leo franchise.
  2. The first three movies made over $200M each in the box office, but the fourth finished with only $50M in revenue due to a global pandemic.

Market:

  1. Only focused on the U.S. market for this release.
  2. It is currently 2021.
  3. Theaters are opening back up after a global pandemic. Some people may be hesitant to go, but many are excited to get back out to the cinema.
  4. There were 5,000 theaters in the U.S. as of 2019.
  5. There are 15 main streaming services, and the one with the most subscribers is offering to buy the film.

Financials:

  1. The 3rd party streaming service is offering $150M for exclusive streaming rights of the film.
  2. A strong candidate will also ask about future DVD sales or purchased downloads post-film release, but we are more concerned about the short-term profitability.
  3. If the candidate asks about costs, say that we’ll discuss those later.