Friday, 25 September 2009

Hollywood Babble On & On #379: MGM- Must Get Moolah!

Welcome to the show folks...

MGM is in it deep today kiddies. A lot of the people holding the company's $3.7 billion debt are now pushing for the company to go into bankruptcy so they can sell off the MGM assets and move on.

Some folks are predicting quick millions to be made selling off the rights to the James Bond 007 franchise to Sony/Columbia, and the upcoming movie version of The Hobbit to Warner Bros., but I'm a little wary of that plan.

Yes, the Bond movies are solid moneymakers, that's a fact. However, if a company buys the franchise for the sort of money that might make a serious dent in the MGM debt situation then you can be pretty sure that amount would be the one thing that could kill said franchise.

Remember, we're talking about amounts in the HUNDREDS OF MILLIONS of dirty sexy money needed to buy these franchises in an way that can affect the debt of MGM. What company will want to start making movies that already cost a minimum of $100+ million that already have two to five times that amount hanging over it. The only way it could work is if the studio would be willing to lose millions for the first five or six movies until they franchise pays off its overhead. The Bond films and their perennial appeal could be handled as such a long term investment, but I don't see any company being that patient in these uncertain times.

As for The Hobbit, such a financial burden could kill the franchise more readily that Robert Shaye ever could.

Now the most valuable asset MGM has is its library. While the bulk of the "Golden Age" MGM films are now owned by Warner Bros., it does have thousands of other films in its catalog. I'm talking about the post-1952 United Artists library (including the Bond films), Orion Pictures, American International, Filmways, Cannon, Hemdale, and Polygram Filmed Entertainment.

But even then we have a bit of a pickle.

Not all these films are created equal. Some have perennial appeal, some have been forgotten, some rightfully forgotten, but that's just the beginning...

1. Most companies capable of buying the MGM/UA library have their own problems managing their own libraries, and the addition of Xenu knows how many thousand more titles will only add to those problems. So few would be willing to take on that responsibility, especially if it means dropping a few hundred million dollars to get them. It threatens to complicate an already needlessly complicated process, and has the threat of the MGM films being treated like the proverbial "poor cousins" and never reaching their full potential.

2. Home video sales are down, for various reasons, some blame can be based on the week economy, some blame can be put on uncertainty over the whole DVD vs Blu-Ray vs Download format. Also the TV market, at least judging by the channels my satellite dish gets, is waaaay underexploited with many channels, even ones that are supposed to play old movies, re-running Las Vegas, Bones, and Xena: Warrior Princess four times a day, only a handful of old movies, and even then decent prints of these films being even rarer.

Most experts are saying that any sort of forced bankruptcy sale would lead to a lot of these bondholders taking a financial bath. As you can see, I agree with that. The MGM management is asking for a forbearance, or a holiday on their interest payments so they can use the revenue they do make to make more movies, better market their library, and make some of the real cash needed to finally do something about their debt.

Of course, this could be part of Relativity Media's plan to convert debt into ownership and take over MGM, but only those deep inside know the truth.

What I do hope for is that something is done to rebuild MGM into a viable and successful company, because the rest of Hollywood could use the competition.

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