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Ahead of the Academy Awards, we look at how the awards season impacts stocks in the movies and entertainment sector.

Within this report we shall discuss:

  • Whether award ceremonies such as The Oscars and BAFTAs positively impact share prices of movie studios
  • The key points in the year for movies and entertainment stocks
  • Which companies may see a post-Oscar bounce, with Time Warner seeing an average 5.4% return in March in the past 25 years
  • How Oscar winning studios have historically bounced, and who may see an award winning bounce this year

It's long been thought in the movie industry that wins at the big winter awards shows like the Golden Globes or BAFTAs can help to boost box office and DVD revenues for winning films. With the granddaddy of them all, the Academy Awards aka The Oscars, coming this weekend, we ask whether award ceremonies have any impact on the share prices of movie studios.

Seasonality in the stock market and the movies and entertainment sector

Stock markets over the long-term have tended to perform better or worse at different times of the year. Over the last quarter-century, on average, the Dow has started out slow, rallied in March through May, having a correction between June and mid-October (except for a July bounce), and then finishing the year strong.

The movie business also has its peak periods at different times of the year with the summer blockbuster season running from May through August and the holiday blockbuster season running from November through January. The sector also tends to attract a lot of media attention in January and February during awards season.

Results show that movie related stocks have on average tended to start out the year very strong outperforming the Dow in January and February. March has seen a bit of a letdown after the awards season wraps up, suggesting a post-Oscar flop. Returns then ramp up ahead of the summer blockbuster season.

Interestingly the biggest time of the year for the movie box office, has historically been the worst time of the year for movie stocks which even manage to underperform a low broad market benchmark.

This summer swoon could be due a combination of factors, including the stocks having run up on anticipation of the summer releases seeing profit taking, selloffs on concerns over the impact summer flops could have on earnings and traders looking ahead to the traditionally slower fall season. Movie stocks then tend to outperform in an October rebound ahead of the holiday releases and perform pretty much in line with overall market performance to finish the year.

Average Return 25 years

Dow

S&P

Sector

Index

Sector

Versus

Dow

January

0.03%

1.70%

1.67%

February

0.10%

2.01%

1.91%

March

1.34%

0.50%

(0.84%)

April

2.50%

2.72%

0.22%

May

0.97%

1.61%

0.63%

June

(0.97%)

(2.17%)

(1.20%)

July

1.67%

(1.20%)

(2.87%)

August

(1.13%)

(2.06%)

(0.94%)

September

(0.84%)

(0.89%)

(0.05%)

October

1.39%

2.76%

1.37%

November

1.79%

2.19%

0.40%

Source: CMC Markets, Bloomberg L.P.

How have individual studios performed relative to the sector historically in March?

Although the overall sector has historically underperformed the market in March, individual studios have acted differently and some of them do appear to experience a post-Oscar pop.

Average Return 25 years

Time

Disney

21st Century

Fox

Viacom

(Paramount)

Sony US

(Columbia)

Comcast

(Universal)

Lions Gate

MGM

Holdings

January

0.89%

4.64%

0.65%

(1.68%)

2.11%

1.12%

4.53%

6.92%

February

3.07%

3.63%

2.10%

0.86%

1.43%

0.52%

4.95%

0.00%

March

5.44%

(0.12%)

1.68%

4.97%

1.26%

(0.33%)

5.53%

3.59%

April

3.82%

2.90%

3.26%

3.16%

(0.56%)

0.74%

(4.31%)

4.36%

May

0.87%

2.17%

1.24%

1.45%

1.17%

2.91%

2.58%

22.47%

June

0.17%

(2.98%)

1.33%

(3.56%)

(1.28%)

0.92%

0.26%

(4.13%)

July

(0.06%)

(0.51%)

(2.15%)

(1.19%)

0.03%

(0.32%)

1.89%

(1.97%)

August

1.76%

(2.68%)

(0.68%)

3.83%

(2.72%)

0.11%

3.40%

3.18%

September

3.70%

(1.69%)

0.13%

0.64%

(1.92%)

2.28%

3.00%

14.00%

October

3.89%

3.50%

1.46%

0.71%

(0.74%)

2.15%

1.68%

2.39%

November

5.47%

3.78%

1.07%

(2.35%)

(0.10%)

1.71%

(1.78%)

4.50%

December

7.98%

0.65%

3.67%

5.92%

5.92%

4.82%

1.59%

9.92%

Source: CMC Markets, Bloomberg L.P.

It's important to note that some of the studios are buried in larger conglomerates with the film business return mixed in with broadcasting, cable, consumer electronics and other operations. However, March has historically seen significant improvement in results from Time Warner (NYSE:TWX), Viacom (VIA, VIAB), and MGM (OTC:MGMB), suggesting a post-Oscar pop. For Lions Gate (NYSE:LGF), March represents the peak month within a strong seasonal period. Disney (NYSE:DIS), 21st Century Fox (NASDAQ:FOX), Sony (NYSE:SNE) and Comcast (CMCSA, CMCSK) have historically seen a post-Oscar slump.

Heading into the spring, some of the companies that outperform in March have then retreated in April on average like Lions Gate while some of the weaker March performers have then rebounded into April and May, particularly Disney. A summer swoon then has historically started for most Studios in June and continuing through July and even longer in several cases. By September after the Toronto International Film Festival kicks off the run-up into the holiday season most of the studios have started another advance that has carried through the end of the year and into award season once again.

Oscar winning studios have historically bounced

Looking at the performance of Best Picture winning studios shows that Oscar winners do get a halo effect in the market. On average the studio most closely associated with the Oscar winning film has outperformed the sector by 1.7% over 15 years studied in the table below, with the winner outperforming the group in 9 of the 15 years.

Some years were not included where either the winner was a private company or data is not available for the current public parent.

Best Picture winner

March Return

Year

Winning Studio

Sector

Studio

Winner vs Sector

1990

Warner

0.17%

1991

MGM

(2.50%)

1992

MGM

(2.42%)

1993

Warner

0.29%

12.82%

12.53%

1994

Universal

(7.56%)

(11.05%)

(3.48%)

1995

Paramount

(0.36%)

1996

Paramount

(1.37%)

1997

Disney

(0.39%)

(1.88%)

(1.49%)

1998

Paramount

0.92%

1999

Disney

0.04%

(11.52%)

(11.56%)

2000

Dreamworks

13.60%

2001

Universal

(9.27%)

(3.24%)

6.03%

2002

Universal

(0.71%)

(3.71%)

(3.00%)

2003

Disney

(2.17%)

(0.24%)

1.93%

2004

Warner

(1.77%)

(2.25%)

(0.47%)

2005

Warner

1.56%

1.86%

0.30%

2006

Lions Gate

(1.31%)

12.40%

13.72%

2007

Warner

0.29%

(3.05%)

(3.34%)

2008

Disney

(3.73%)

(3.18%)

0.55%

2009

Fox

12.07%

19.18%

7.12%

2010

Universal

10.49%

14.54%

4.05%

2011

Weinstein

(1.29%)

2012

Weinstein

1.82%

2013

Warner

5.61%

8.47%

2.86%

Average

0.80%

1.94%

1.72%

Source: CMC Markets, Bloomberg L.P.

Who could benefit from an Oscar win this year?

This year, five studios associated with public companies are in the running for best picture. Warner Brothers (Time Warner), Columbia (Sony), and Paramount (Viacom) each have two entries while 21st Century Fox and Universal (Comcast).

This year's best picture nominees

Film

Associated Studio

12 Years a Slave

Fox

American Hustle

Columbia

Captain Phillips

Columbia

Dallas Buyers Club

Universal

Gravity

Warner

Her

Warner

Nebraska

Paramount

Philomena

Weinstein

Wolf of Wall Street

Paramount

Source: Oscars.

And the potential for an Oscar bounce goes to...

Source: Movie Stocks In March: Post-Oscar Pop Or Drop?