This article in Wharton Magazine (link below) provides an overview of the changing landscape in film-making. According to the article, three major factors are driving change in gross receipts: new distribution vehicles, international demand and 3D viewing technology. As distribution shifts among pay-TV channels, purchased and rented discs, and downloaded and streaming video, we see an opportunity to invest with the content owners, whose intellectual property is likely to be monetized in some form given the universal consumer demand for quality entertainment. The article highlights the growth of the foreign box office which increased +64% in the first five months of 2010 including China +189% and Russia +70%. This observation speaks to our Emerging Consumer theme which seeks to participate more generally in the spending growth that is accompanying the growing middle class in emerging markets—with filmed entertainment just one outlet for this secular shift in consumption, along with food and beverages, autos and even health care. Finally the article notes how important 3D revenues have been to the North American box office this year, comprising 11% of gross receipts compared to 2% in 2009. Our 3D theme is based on gaining exposure to owners and producers of high quality content whose value may be significantly enhanced by further consumer acceptance of 3D in a manner that is not currently appreciated by the marketplace.
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