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Gandalf rules, AOL drools?
graphic December 16, 2001: 7:30 a.m. ET

AOL Time Warner could be tempted to risk a 'Rings' success.
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    NEW YORK (CNN/Money) - Gandalf will beat Dumbledore's butt. It just may take a little while.

    Of course, if he does, will revenue-worried AOL Time Warner burn him out?

    Unless you've been living under a rock, you know I'm talking about "Lord of the Rings." The first installment, "The Fellowship of the Ring," goes public Dec. 19.

    Along with "Harry Potter and the Sorcerer's Stone," this movie is going to be not only an end-of-year money boost for AOL, but also an ongoing franchise for years to come. You see, AOL's New Line Cinema has already produced all three installments at a cost of $270 million. The next installment, "The Two Towers," is scheduled for release in December 2002, and "The Return of the King" is scheduled for release in December 2003.

    But AOL faces temptation, especially since times are tough. Ad revenue is  hurting. Outgoing CEO Gerald Levin says that won't change anytime soon. The company gets about a fifth of its money from ads. The media empire (of which CNN/Money is a part) might see pressure on its subscription revenue as well, if the economy stays sour. Subscriptions make up roughly 45 percent of revenue.

    If the bottom line starts to sag, will AOL start to look at those two films in the can? If "Fellowship" goes gangbusters, those films sitting on the shelf could represent a hefty chunk of change. Do you release both films in 2002, six months apart, in hopes of carrying the balance sheet through to better times? By then your next "Harry Potter," which AOL owns the rights to, might be ready.

    Accountants might be tempted. But movie business experts believe there's a dangerous downside.

    "A one-year gap between films is pushing it as it is," said Gitesh Pandya, editor of Boxofficeguru.com. "Normally you want two years between sequels. An audience needs a little time to regroup."

    Putting the franchise at risk is something AOL management won't want to do, says Vince Farrell, chairman of Victory SBSF Capital Management.

    "No matter what happens (incoming AOL CEO Richard) Parsons and gang are going to concentrate on calming market expectations. Period," Farrell said.

    A second major movie franchise will calm Wall Street as well. "Harry Potter," which is already close to breaking the $300 million mark, made up for a lot of stumbles this year from Warner Bros., AOL's other major studio. Now another hit from New Line gives the company some major traction. And "Fellowship" is certainly looking like a major hit.

    "It'll do very, very well," said Pandya. "It won't open as big as "Potter," but it will probably have better legs over the holiday. 'Harry Potter' burned through its audience pretty quickly."

    That's my bet as well, after on seeing both movies. "Harry Potter and the Sorcerer's Stone" was entertaining. But "The Fellowship of the Ring" rocks.

    Now, that's coming from a long-time "Lord of the Rings" fan. And that's the major trouble point I see for the movie, business-wise. I wonder how well it will play with people who aren't steeped in the lore of Middle Earth.

    Say you've seen "Legend," "Dragonheart," and a host of other movies involving elves, dwarfs, and wizards. But, because you are a child of the television generation, you've never sat down and read the trilogy-plus-one set of books by J.R.R. Tolkien.
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    So here comes "Fellowship of the Ring." Do you bow down in veneration, knowing this film is a version of the great grand-daddy of the fantasy genre? Nah. You just want to see some action and effects.

    You get those. But you might get a little confused too, at least early on. The first 10 minutes is a quick primer on Middle Earth and rings. In the books that knowledge comes a little more slowly, doled out over chapters. There's also a hurry-up offense on where the Ring of Power - the centerpiece of the story - currently resides. That could raise more questions than answers if you haven't read "The Hobbit," the prequel to the Lord of the Rings trilogy.

    So could it end up like Dino De Laurentiis' "Dune," where people who haven't read the book are so lost that the movie flops? Hardly. Whatever confusion you have early on will dissipate. And the movie rocks.

    More to the point, "Fellowship" will appeal to adults more than "Harry Potter," which is better for long-term sustainability. Frankly, Gandalf, the major wizard of the Rings, is more doggone serious than Potter's Dumbledore, who's just cute.

    But despite their differences, both are money makers - if AOL doesn't ruin the magic. graphic

    Click here to send mail to Allen Wastler

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