EuropaCorp: from film to 3D

In the French stock-market landscape, EuropaCorp is a rather atypical company- not so much because of the personality of its owner, Luc Besson, nor because - despite its discreet profile - it harbours the ambition of becoming Europe's leading independent film studio, but because its business model is unique.

The company produces films that are, for the most part, pre-financed, which means that operating risk is low. This was evident over the last financial year when, despite evident failures, the company made an operating profit of 6.2 million euros.

Even more important, the company is gradually building up a catalogue of films or rights that is even more valuable in that it is made up of recent works. The market value of Gaumont successes with the TV channels is, by nature, much less than that of the different Taxi works. This catalogue is valued every year by recognised experts. And whereas it was estimated at 100 million euros one year ago, on 31 March this year it was valued at 128.1 million. The quality of the films has a lot to do with it.

Increasing demand for broadcasting rights linked to explosive growth in the number of TV channels is one of the main factors in this inflation and is what explains, in large part, the 41.1% rise in revenue, to 181 million euros.

The third dimension of EuropaCorp is the lead it has taken over its rivals in two promising fields: digitization of films, which will considerably reduce broadcasting costs, and use of film or animated films as one of the main supports of multimedia "entertainment". This is what prompted EuropaCorp to buy Cipango recently. The new technologies allowed by vehicles such as the iPad will allow EuropaCorp to sell broadcasting rights to a cartoon like Arthur differently, followed by the comic strip rights and rights to spin-off products such as colouring-in books. A new way of creating value, but also of increasing the value of the catalogue, which is already 25% higher than the market capitalisation. In other words, before reading EuropaCorp's financial statements, you shouldn't forget to put on your 3D glasses.