Tuesday, 16 September 2008

Hollywood Babble On & On #167: The Bull, The Bear & The Bullshit

Hollywood is in a tizzy right now because there's been some upheavals a transpiring on Wall Street yesterday and today. The sub-prime mortgage boondoggle has already brought the venerable merchant bank Lehman Brothers into bankruptcy, and caused Merrill Lynch to be sold to Bank of America, as well as other upheavals. The Bull Market, which has been dominant, off and on, since the 80s, is on one of its off phases.

Now how does this affect Hollywood?

Well money is the life's blood of the movie industry, and if you go by the word of the studios, Hollywood movies, especially the blockbusters, don't make any money. To stay in business they need a steady supply of suckers investment capital from Wall Street.

Most of the major studios, minus Paramount & MGM, have long term deals with outside financiers, and it's uncertain how, or even if these upheavals in Wall Street will affect them, but a lot of people are predicting doom and gloom for the economy in general and film financing in particular.

I have to differ.

I'm not an expert, or an economist, but I have seen the ups and downs in the markets for most of my life. I remember the gas shortages and malaise of the 70s, the recession and interest rate freak-out of the early 80s, the swings between the "Greed is Good" 80s which saw highs, crashes, and all sorts of shenanigans, the S&L bailout, the go-go 90s, the dot-com boom and bust, the early millennium CEO perp-walks, and everything in between.

Despite what many say, America is not entering another Great Depression. Approximately 6% unemployment is a long way from 25% unemployment, and while Wall Street is entering a period of uncertainty and unrest, things will settle down and recover. This is what happens when Wall Street puts all of its eggs in one basket, it's happened before, and it will happen again.

Now there is a way for Hollywood to turn this upheaval to its advantage. Remember this is an industry that actually thrived during the Great Depression, so riding out this unpleasantness should be easy.

Easy if it pulls itself out of the death-spiral it's put itself into.

Financiers are already leery of getting into bed with Hollywood, even when times are good, and lately have been willing to only put in money it could afford to lose, or to take advantage of some sort of Bizarro world tax-shelter scheme where losing money is transformed into a plus.

So how can Hollywood ride out the Bear till the Bull comes back.


Eliminate the Bullshit.

That's right, Hollywood will have to follow this simple plan to keep their industry solvent. And they can have it all for the low-price of 5% of all gross profits earned with this plan. (I'm not greedy.)

1. SIMPLIFY: I know I'm a broken record on this issue, but it's essential. Too much Hollywood business is built on hare-brained, overly complicated schemes that make Ponzi schemes look positively rational. People are now suspicious of such vehicles, especially since the chief reason the sub-prime mortgage market collapsed (apart from giving away mortgages like candy in a grossly overinflated market) was that when things started to backfire, no one knew who owned what due to the incredibly Byzantine structures of these deals.

2. EMBRACE REAL CAPITALISM: The purpose of real capitalism is that both sides in any deal are supposed to walk away happy. It's the reason why both you and the clerk at the sandwich shop both say "Thank you." You both got what you wanted out of the deal. This means treating investment partners as investment partners, not marks.

If a film loses money, they will understand not making any money on it, but when a film makes money, and in some cases, lots of money, and they still don't see a dime, they're not going to stand for it anymore. End the silly games that screw people out of money, and pay people what they are owed, when they are owed it. Don't let every deal end in litigation, it'll cost more in the long run than anyone can imagine.

3. END STAR SALARY MADNESS: I've talked before about how too many "stars" are being paid too much money for delivering too little at the box-office. The day of the "star" being the main selling point of a film is pretty much over, thanks to the bottomless chum-bucket of our celebrity tabloid culture. I don't mean that stars should get paid nothing, no, I think they should be paid a rate in accordance to what they're worth. A standard should be set for determining how many dollars a star actually brings in, and how that relates to their salary. Most films these days lose their profit margin simply because its star got paid too much for what they can deliver. Also the policy of paying massive up front fees and large pieces of the gross deals has to end.

I like people being paid well and getting a piece of the action, but not when the practise is used as an excuse to not have any profits at all. That not the way to win any new investors.

What must be done is to slash the up-front salaries of the top ranks of the under-performing A-List to something more in line, sweeten the deal for those who can deliver with a piece of the action, and actually pay that piece, even if it's a piece of the net, don't jerk them around. If an actor can't live on $5,000,000 - $10,000,000 a picture as an up-front fee, and a piece of the profits, then they have bigger problems than anyone can solve.

4. CONTROL COSTS: Technology has made film/tv production cheaper to do, yet costs usually have an inflation rate that goes beyond Zimbabwe or Weimar Germany. Why? Star salaries is one thing, but inefficiency, managerial incompetence, extravagance, and an attitude that uses money over imagination to solve film making problems are also big contributors. Look back in film history, and some of the greatest, funniest, scariest, and most thrilling moments in cinema have been born from the necessity of completing a film on time and on budget. Every producer and director, when faced with a problem to solve in a film should say to themselves: Yes, we have the means to produce eye-popping effects, but is it as satisfying as some of the simpler tricks done in more frugal times?

5. EMBRACE THE AUDIENCE: Too many films are being made to appeal to Hollywood under the guise of "art" and not Mr. & Mrs. Average Moviegoer, leaving only the big blockbusters as the only source of real entertainment left. Bring back the middle-ground, movies with good guys and bad guys, laughs, thrills, and anything else that will appeal to people, and most importantly movies that don't insult them, or their beliefs.

No one is going to pay money to see a movie whose purpose is to make them feel bad about themselves, simply because it makes some Beverly Hills millionaires and their butt-kissing toadies in the critics corner feel superior to the great unwashed masses as if the average ticketbuyer was an enemy to be spurned instead of the foundation of the industry.

Mass entertainment requires a mass audience, and until recently, there was no one who brought in the mass audience better than Hollywood, and it's time they did that again. Better economic times can support darker, more cynical fare, but for now, it's time to take a break and make some money to afford that brand of snobbery.

It's not that hard, though it will take hard work and integrity, two things that seem to be missing in Hollywood these days.

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