Hollywood Lesson in Diversification


We emphasize the merits of investment diversification. For example, balancing a portfolio’s allocation across securities with different characteristics may help position it to face an uncertain future. Last weekend theaters across the country swelled with moviegoers watching two very different movies: Barbie and Oppenheimer. This was not by chance. The simultaneous premieres were driven by a movie business practice known as “counter-programming,” which has some parallels to investment diversification. This latest joint movie launch quickly became a cultural phenomenon known as “Barbenheimer.”

Counter-programming is a marketing strategy that involves the promotion of two films with very different types of appeal. This provides an opportunity to boost sales for both films as audiences opt for a double feature, or two nights out at the movies, instead of the zero-sum game that might play out when two similar films are released on the same weekend. Barbie is, of course, happy, nostalgic, and doused in “Roscoe Pink,” while Oppenheimer is a sobering, 3-hour biopic chronicling the creation of the atomic bomb. It is easy to imagine deals struck between many couples along the lines of “I’ll go see Oppenheimer with you, but only if we can go see Barbie first.”

When Universal (Oppenheimer) and Warner Bros. (Barbie) scheduled their blockbuster films to be released on the same weekend, initial expectations were that the two would compete. Ultimately, however, the studios decided to work together on a cooperative marketing campaign. Many are comparing this approach to the previous joint launch of Batman – The Dark Knight, another Universal Studios movie directed by Christopher Nolan, and Mamma Mia!, a Warner Bros. film. This was also a combination of two movies in different genres. The Dark Knight went on to become the top-grossing film of 2008, and Mamma Mia! the fifth-highest grossing.

Last weekend’s results were even better. The craze around Barbie led to a worldwide shortage of “Roscoe Pink” paint, the color used to decorate the set, when fans began painting rooms of their homes the same color. According to AMC, over 40,000 people purchased tickets to both films on opening weekend. For the first time ever, one movie grossed over $100 million while another grossed over $50 million on the same opening weekend. In fact, Barbie reached $162 million in sales and Oppenheimer $82.4 million, combining for the 4th largest opening weekend box office performance of all time.

Watching the success of this strategy play out in the theaters, I could not help but be reminded of investment diversification. We build diverse investment portfolios by selecting securities that have different characteristics, like fixed income which historically has delivered moderate returns with less volatility, and equities with stronger returns historically but higher levels of volatility. Like what we saw in the movie theaters, the results of a combination of opposing pieces of an investment portfolio may lead to an outcome that better stands the test of time.

Corey Erdoes