Is the blockbuster model a bubble?

[Aspiring Mogul]

Steven Spielberg has said there will be a meltdown if several blockbusters fail at once, but that happened this year, and there was no meltdown. Another way of describing the current obsession with blockbusters is to say it's a bubble.

But most movies lose money anyway, so, even if the studios were to put the money in several small movies as opposed to one big one, they could be facing the same problem. Last, but perhaps not least, no one knows anything in this business, so who can say what's the right strategy?

 

[Santhem]

The blockbuster model and increased costs of production are making the business of filmmaking more high-risk/high-reward. That said, I don't think there's a bubble.

Why? Well, a bubble is an overvaluation of a group of companies, or market sector. I don't think the major movie companies are currently dramatically overvalued.

Take Disney for example, they'v had quite some big flops over the past couple years (Lone Ranger, John Carter, etc) yet they still manage to make solid money for their shareholders.
Currently, a share in The Walt Disney Company trades for around 73 dollars, and generatees around 3,40$ in dividends each year. That is a price / earnings ratio of about 21.

In other words, you need to hold a Disney stock for 21 years to make your money back (and keep the stock, so you essentially double your money, but it will be worth less due to inflation).
Do you think Disney will still be posting good results in 2034, or not? To be fair, I'm oversimplifying this. The value of a stock also depends on growth opportunity and
the general economic situation. But then again, Disney has spent quite a lot on aquisitions, buying pixar, star wars, and more.
This indicates that they might grow their earnings significantly over the next couple years.

The real bubble is on the Nasdaq, where whacky web companies with unbelievable price/earnings ratio's are trading at record highs.
We have never seen social media and app companies live longer than a couple year. Yet companies that never seem to have made any profit (nor are likely to make any soon)
are valued at billions of dollars (looking at you, 33 billion dollar Twitter, and you 3+ Billion dollar Snapchat). These valuations are purely based on the potential profits these companies
could make if they keep growing like they currently do for the next decade or so, something I highly doubt they will. Valuations of film corporations are far more real: they are valued
more on how much they made their investors in the past.

I think a lot of people want the blockbuster model to fail because theyr either nostaligic about the good old days or are very pro-indie... or both.
I'm not sure, but I always notice a lot of hate on these forums when it comes to big blockbusters, huge special effects sequences, etc. It always feels to me like some people
would rather just take everything back to the way they were in the 70's; Shooting a guy in a Godzilla suit on film seems to be the dream.
But... I don't see it happening. Film studios are making good money, and the old-school and indie stuff isn't really getting bums in the theatre seats (on the internet though, other story).

tldr; I dont think there's a bubble in the blockbuster company, they are financially solid, have been for a while and seem to maintain their position well.