Are Homer and the rest of the Simpsons worth more to News Corp. dead than alive?
On Wall Street, where stocks go up when workers lose their jobs, analyst David Bank of RBC Capital Markets, says that if Fox goes through with its threat to cancel The Simpsons after a record setting 23 memorable seasons, News Corp. could reap a $750 million windfall.
Fox is reportedly negotiating with the actors who provide The Simpsons’ voices, demanding a 45% pay cut. If the actors resist, it will stop making new episodes.
While this would be terrible news for Simpson fans, it would be good news for News Corp. shareholders, including Montgomery Burns, oops, Rupert Murdoch.
Bank says that killing the show would mean that the original Simpsons syndication agreement that limits distribution to local broadcasters would be abrogated. “When the show is cancelled, Fox would be free to sell the show into cable syndication (and to over the top distributors) where we believe it could generate $1 million to $2 million per episode across the entire 500 episode library,” he says.
Assuming $1.5 million an episode for 506 episodes, 60% margins (they could be higher since costs are already amortized), and a 35% tax rates, Bank estimates that the proceeds from syndication could be worth more than 10 cents per share.
That’s almost enough to make Mr. Burns crack a smile. Mr. Murdoch too. The rest of us, not so much.