Hollywood Babble On & On #127: Paramount Might Get Para-Mounted

A tip of my jaunty stetson to Nikki Finke who reports that Paramount Pictures is facing a bit of a cash crunch, due to a falling out with the Teutonic Transactional Titans of Deutsche Bank and the utter lack of interest of other investors.

This is a pretty embarrassing blow for the venerable studio with the mountain logo, it has been a major Hollywood player since the dawn of the modern industry and it was called Famous Players. Legend says that Hollywood became Hollywood because partners Jess Lasky and Adolph Zukor stepped off the train in Albuquerque, saw that it was pissing rain, and said: "We can't use this town, let's keep going west and see what we find." The fact that Paramount is having this trouble attracting investors is a bad, bad sign of things to come.

Now you're probably wondering why Paramount is having these troubles when they recently bragged so loudly about being the first company to hit a billion dollars in revenue this year?

The answer is simple, and I answered it in another blog.

But for those of you too lazy to click the link, I'll explain again.

The huge profits Paramount has been reporting lately were an...
I just can't resist a Doug Henning reference.

You see Paramount has only produced a handful, if that, of the films it's released in house, and many of them didn't do very well. Paramount's hits were all done with DreamWorks, Marvel, LucasFilm and other producers, either in partnership, or just as a distributor. DreamWorks is on the way out, thanks to a Mumbai Maharajah of the Moneybags, Marvel is only interested in a distributor that functions within clearly delineated tasks, and profit share, and Paramount itself just hasn't got what it takes to make things on their own.

Now I've already talked about ways Paramount can get out of this hole, so I'll talk about the reasons why it's in this hole.

It's not the economy.

Movies thrived during the depression, so that's not a cause, it's an excuse, and a weak one at that.

It's basically their own damn fault.

In fact, it's the entire industry's fault.

Hollywood has built itself on an awful business model I call the "screw everybody" model.

Now investors in a business know that there are certain risks involved. You pays your money and you takes your chances, and if the business fails, then they know that they're not getting their money back with interest.

However, the beauty of Hollywood's system is that an investor can lose their money even when the movie's a blockbuster smash.

Why?

Because stars are getting paid too much, and the big names have back-end deals that take a chunk out of gross box-office revenues, many from dollar one from ticket one. (Often way beyond their capacity to draw an audience.)

Shady accounting practises make sure that the net profit is harder to find than the Loch Ness Monster, and it's certainly been seen by fewer people, and if you want to see any gross profits, then you usually have to call a lawyer and be ready to spend hundreds of thousands of dollars to do it.

These bad business practises have given production budgets a rate of inflation unseen since Weimar Germany.

It's what I call the Self-Fulfilling Idiocy of Hollywood. By trying to squeeze out some extra profits, they end up not only losing money, but scaring off investors as well.

So what's going to happen next?

I don't know.

What I do know is that the entire industry is going to need a complete reboot from the ground up, if it's going to survive it's own stupidity.