Thursday, 18 February 2010

Hollywood Babble On & On #457: Hey Bub, Wanna Buy A Studio?

Welcome to the show folks...

Sharon Waxman at
The Wrap is seeing all the movie companies for sale, and saying that it is definitely a buyer's market. Very few folks seem interested in buying companies like Miramax, Overture Films, (rumored that Summit's being considered for sale as well,) and the once venerable, now borderline bankrupt MGM, and the few that are, are not interested in paying the prices the movie companies think they're worth.

So let's boil down the reasons why to something that's easy to understand:


Really it does. It got drunk on other people's money during the great age of mergers and acquisitions, and while prices went up, value went down.

Making movies has become prohibitively expensive. Look at the budgets of the "small" movies like romantic comedies, and you'll see amounts that 10-20 years before were paying for "big budget" epics with large casts and mucho special effects. I've written extensively on why movies are so costly to make, and that I call it a "self-fulfilling idiocy," so I won't repeat them here. I'll just stick with saying that such inflation is unnecessary, and artificial, it was not created by natural market forces, so it is inherently unhealthy.

One of the things that used to woo bidders were the studio libraries and the revenue they could produce via home video, television, and other mediums. However, those libraries aren't raking in the green they used to. There are three reasons for this:

1. DVD sales are down. Folks aren't as free with their discretionary spending, and they aren't going to spend good money on something they can't eat, wear, or live in. Add to that the format uncertainty over regular DVDs, Blu-Rays, and online downloads, and you've got a recipe for instant boondoggle.

2. The independent libraries are too small. Most of these companies don't have the capacity to command the proverbial shelf-space whether in stores, or on TV channels, to be considered worth the money they're asking for. Toss in many of the extra jokers being held in those decks, and the value goes down even further. The major studios have literally decades worth of material in their libraries, which brings me to my third reason.

3. The major studio libraries are not well managed at all. My local satellite TV company is doing a free preview of Turner Classic Movies, and I have to admit, that channel reminded me what made me love movies. They aren't the overwrought noise factories being dumped into theaters for no other purpose than to create some sort of techno-based thrill ride. Which makes me ask: WHY ARE THESE MOVIES ONLY ON TCM? Think about it, why is TCM so popular, but these very same movies can't be shown on local stations on rainy weekends the way they used to be when I was a lad. They'll show the goddamn Hunt For Red October on five different stations on any given weekend, but they won't show Casablanca, or Vertigo, or 55 Days At Peking.

Of course I probably already answered my own question, which is corporate synergy. Time-Warner owns TCM, and the great majority of movies shown on TCM. They own it, and they want to be the only ones making money off of these movies. Which strikes me as a bad strategy. I probably won't be getting TCM once the free preview is over, because while I love the movies, I probably can't afford it. Another problem is that the local and basic cable stations would rather show the same piece of shit Woman in Peril pseudo-thriller scraped from the bottom of the Lifetime Channel's dumpster three times a day, than something in black and white, or cinemascope, for fear that stoned teenagers won't put down their iPods and Nintendo Wiis to watch it.

Well, how do they know if they don't try. TCM's popularity seems to show that people will watch it if you show it. But a combination of monopolistic greed (called "synergy" in corporate speak) and ignorance is keeping them from trying it.

The studios need to be selling the films, and that means going beyond just making them available. They should be really pushing them, and using their clout with local and basic cable stations to do it.

How can investors trust their valuation of these libraries, when Hollywood itself can't see the potential of it all?

But I digress....or rant...

Anyway, when you add in the attitude that glamor somehow equates value held by many of the people who run Hollywood, with the brutal reality of the real economics of it all, you have a perfect recipe for a disaster.

That's what I think, what do you think?


  1. I live in MI with our film incentives package of 42% tax rebates we have had scores of film some shoot here and hire locals. Also we have new studios being built
    including Unity 1 in Allen park, which is a few minutes drive from where I live.

  2. dcmatthews20/2/10 1:23 am

    What? Your system charges for TCM as though it was a premium channel?? Here on Bright House cable in Central Florida it's part of the "standard" tier of service (one step up from "basic").

  3. I live in Canada, where it's included among channels like HBO and such.

    I tried contacting the company for info on how to subscribe, like how much, but like most Canadian bureaucracies it's not exactly easy to navigate.