On March 19th Stockerblog submitted an article entitled 7 Studios That Will Get You Invested in Hollywood. I decided to take a closer look at two of the companies treated in that article: Peace Arch Entertainment Group, Inc. (PAE) and Genius Products, Inc. (OTC:GNPI). For this submission I have focused on PAE.
I work freelance in the film industry in Toronto where PAE is based, and I have a fairly good idea of what they’ve been doing and what they’ve got in the pipelines w/r/t film content.
In the last couple of years, PAE has established a thriving business of producing Direct-to-DVD content under the Archetype Films banner. In their first two years of production Archetype focused on low-budget horror, thriller and action genre films. These films have been successfully placed around the world through distributor Genius Products, who has been on a recent D2DVD distribution tear since The Weinstein Company acquired a controlling interest back in Dec 2005.
For the year 2007, Archetype has eight D2DVD productions planned (all productions shoot back-to-back, with the entire crew rolling over on a full-time basis—a very efficient business model) in the family drama genre. These films are financed substantially by US television broadcaster pre-sales, and their success hinges upon mid-level US acting talent known to drive sales, e.g., Jennifer Beals, Mimi Rogers, James Van Der Beek, Michael Madsen, Michael Ironside, Darryl Hannah and more.
Other recent events of note:
1) PAE teamed up with RHI Entertainment Distribution LLC (ex-Hallmark) in June of last year for a parallel stream of six MOWs, again shooting back-to-back over the course of a year. This marks a significant and potentially lucrative move deeper into television territory for PAE, a good sign that their various media operations are working in step.
2) PAE had two feature films screening at Sundance 2007, Chapter 27 and Delirious. Great optics for their theatrical film endeavors and for gaining the attention of larger audiences and thus bigger distribcos.
3) PAE acquired the Canadian home video distribco kaBOOM! Entertainment Inc., which gives it a significant library of revenue-generating titles, particularly w/r/t family entertainment. Canadian-produced family entertainment has proven to be a profitable venture in all markets over the years.
4) PAE acquired Castle Hill Productions, Inc., giving them another 500 titles for their distribution library.
As avenues for content distribution open and expand, those with significant libraries already under their belts will have an edge. PAE’s recent content acquisitions indicate that it knows how to build a library and therefore revenue.
One more significant event that cannot be overlooked in PAE's recent history was the appointment of Drew Craig as Director and Chairman of the Board in mid-2005. Mr. Craig is a Canadian media heavyweight and his appointment to PAE fresh off the sale of his own private media giant Craig Media in 2004 heralds a fresh strategy, movement and growth.
Finally, a brief technical analysis. PAE trades on the AMEX (and the TSX, but for the purpose of this submission I have examined its performance on the AMEX using stockcharts.com). On the weekly, the price is flirting with highs set at the end of May 2004 and touched again at the end of May 2006. The rising 50-wk MA has shown strong support on numerous occasions for the gradual uptrend that began in early 2006.
I do not currently own shares of PAE, however I strongly believe in the potential of the company’s growth strategies to realize profit in the coming year and beyond. I will keep my eye on the technicals, and if the price finds support on a dip to the 50-wk MA one more time, I will enter long in expectation of a significant near-term push above the 52-wk high of $1.69.
PAE 1-yr chart
Disclosure: Author has no position in PAE