Tuesday, 7 February 2012

Hollywood Babble On & On #847: MGM = Me Got Money, Now What?

Just when you thought it was dead, the lion roars again... sort of.

Bully for them.  Sure it's not the sort of full throated roar they would have let out when they were the biggest studio in the world, and boasted of having "more stars than in heaven," but it's not the weak whimper the company's been known for for the past 25-30 years.

Now while $500 million to make movies and TV shows is nice, I wish I had that, it's not the glorious situation you might at first think it is.

Remember, this is not $500 million in cash, free and clear, it's a credit facility, which means that they are deemed a safe bet to borrow money to make movies and TV shows. 

MGM is expected to pay that money back.

Then there's the amount.

Most of the major studios spend that much on 2 or 3 summer blockbuster movies. That's not a strategy that MGM can follow.

Yes, they have the Bond movies, which are pretty big budget, but they more or less share those with Sony, so they really don't count in this discussion.  

What MGM has to do is operate like a street corner fruit stand.

VARIETY: A successful fruit stand has to have a wide variety of fruits and vegetables in stock. In MGM's case this means making films in a wide range of different genres, and styles. The key is to always have something that somebody wants on hand so that if you've got some rotten bananas, you can get them off the shelf and replaced quickly.  Now this could be also achieved by forming partnerships with independent producers, but since MGM gave up its distribution that might not be as easy as it might be if it was a distributor.  Now giving up distribution was probably essential to retiring the debt ahead of schedule, but that doesn't mean I have to like it.

FRESHNESS AND PRICE: A corner fruit stand that can't offer fresh produce at a competitive price isn't going to be in business for very long.  For MGM that means being a lean and mean production machine.  They can't afford to spend years and millions of dollars on just developing a script. They need to get from the page to the screen faster and cheaper than everyone else. No wasting money on executives, and executive perks.  If it doesn't directly involve putting something of value on the screen, then don't spend it.

That means individual films have to have comparably lean budgets, I'm talking about $10-$50 million a piece. New technology means that you don't have to spend the GDP of a European country to create a professional looking film.  MGM can't afford it.  So they shouldn't even try outside the Bond movies, and even then, they should try to keep them as efficient as possible.

PAY YOUR BILLS:   A tip of my sombrero to regular reader Blast Hardcheese, possibly a pseudonym, who reminded me to harp on one of my regular gripes about Hollywood.

A fruit stand that doesn't pay its suppliers what they're owed, isn't going to stay in business very long. Either those suppliers cut them off completely for being deadbeats, or they make the stand pay more up front than their competitors.  Likewise with Hollywood, where shady accounting creates the self-fulfilling idiocy of Hollywood. They use accounting tricks to screw contributors out of their shares of the profits in the name of saving money, but in the end those contributors use whatever clout they get to demand more money up front. Hence the costs of everything skyrockets to levels not seen outside of Weimar Germany, and profit margins shrink and ultimately vanish.

If MGM is going to keep its costs down, it will also need to keep its accounting shenanigans down too.  If they get a reputation of being a square dealer, then they might be able to attract big names without having to shell out the big up-front fees, or profit killing dollar-one deals.

Anyway, that's what I think.


  1. Off topic but I wanted to make sure I got a hold of Sandy Peterson or Ken.

    Guys: is this the same b-fest as YOUR b-fest?

    (if so, total congrats)

  2. Blast Hardcheese8/2/12 11:30 am

    One additional thing a corner fruit stand has to do is Pay Their Suppliers. A business that doesn't pay their bills doesn't get deliveries. This is a drum that you've beat before, D. I keep waiting for one studio to 'get it' and stop with the screwy accounting. Just pay people what you said you'd pay them, and be done with it.

  3. Excellent addition there Blast Hardcheese, if that is your real name, I probably forgot to bang that drum because yesterday was so damn screwy.