Commentary: Hollywood feeling money crunch
Weakening economy putting pressure on studios to performThere's a huge sucking noise out there, and it's not the sound effects in "Iron Man" or "The Dark Knight": It's the sound of money being siphoned out of the U.S. stock market, and more quietly out of the maw of the Hollywood movie machine.
You can feel the backdraft in the ever more strident tone of the business news channels as they try to hold on to viewers wearied of seeing their wallets shrink.
Wall Street is awash in its own woes -- add Freddie and Fannie, Lehman Bros. and AIG to the growing list of companies that are, well, in another sense listing -- not to mention a Category 3 hurricane now taking aim at oil rigs in the Gulf, and you have an idea of just how rattled and fragile the broader economy is. Even those usually cocky private-equity players and hedge fund honchos are jittery. The credit markets essentially have dried up.
Meanwhile, whether they openly say so or not, Hollywood conglomerates are under ever more pressure to demonstrate growth and are having to place ever greater bets to move the needle.
Not even "Dark Knight," which is close to nudging $1 billion in worldwide grosses, has helped Time Warner stock, which languishes at around $14.50, near its five-year low.
Not even the splash Michael Phelps made at the Beijing Olympics for NBC helped GE's stock, which also is not far from five-year lows at around $27.50, way off its historic high in 2001 of $60.
Not even a much belabored and long-in-the-making merger between satellite radio behemoths Sirius and XM could inject any energy into their combined share price, which now languishes at 2003 levels.
The point is not just that media stocks are stubbornly stuck in the doldrums. On balance, the current season, if not the entire year, could go down as one of the most frustrating in years.
The crippling WGA strike last winter and an ongoing standoff between the studios and SAG aren't helping, the primetime TV season appears to be one of the most discombobulated and uninspiring in years, and the conversion of movie theaters to digital is taking more time and effort than its proponents had anticipated. And don't even ask about the publishing business, which continues to lurch from layoffs and the desertion of advertisers.
The numbers on consumer confidence are near their nadir for the decade, which helps explain why Las Vegas feels like a ghost town and more and more malls across the country are putting out "store for lease" signs.
So why are Craft and the Grill so crowded on most days? Perhaps I overstate, but it is something of a disconnect to hear so many studio executives claim that it's business as usual at their shops. Hollywood, they contend, is recession-proof, pointing to those long lines of moviegoers during the Depression. (Even back then, those lines eventually dwindled as the economy took its toll.)
News flash: MovieTickets.com reported this week that almost two-thirds of movie¬goers say the worsening economy is having some effect on their trips to the multiplex.
News Corp. president and COO Peter Chernin told an investor conference this week that he was pleased there was no more "dumb money" sloshing around in Tinseltown -- his point seemingly that so much moolah had inevitably bankrolled way too much bad product, cluttering the pipes and penalizing the good stuff. (His own movie studio enjoys a long-term deal with Chip Seelig's Dune Entertainment fund, and News Corp. is in more media businesses in more countries than just about anyone, so he arguably can afford to be disdainful.)
The jury is naturally still out on whether money from India earmarked for Steven Spielberg's DreamWorks (and a handful of other indie film players) and from the Middle East will be the next smart money or not.
But outside the biggies around town, life has gotten noticeably tougher.
"I've never seen it so difficult in our part of the biz" is a lament heard not only from the invariably beleaguered indie film contingent but also from other sector players. There are, for example, myriad more movies to sift through by film festival directors and film buyers each year, but the number of gems that get turned up, and actually make money, remains exasperatingly rare.
"Juno" and "Little Miss Sunshine" had the advantage of being upbeat; such beautifully crafted but downbeat upcoming hopefuls "The Wrestler," "Frozen River," "The Hurt Locker" and "Che" will face the added challenge of a beaten-down public.
As one Hollywood studio chieftain put it to me: "We're being very careful about greenlighting dramas right now. People right now want escapist fare, comedies, the big tentpoles."
The folks who best fulfill those needs right now are the happy few who are, despite the tough times, raking in the big bucks.
Christopher Nolan has to be basking in the glow of "Dark Knight's" sheen before he gets down to business on yet another Batman iteration. J.J. Abrams has to be ecstatic that his latest TV effort, "Fringe," shows the first signs of repeating "Lost's" impressive run. Fox phenom Seth MacFarlane has to be doubly animated now that he's re-upped with the studio for megamillions and is doodling for Google. And director Danny Boyle and one Dev Patel might see their stars rise thanks to all the buzz about their bodacious foray into Bollywood territory in "Slumdog Millionaire."
And hopefully everyone connected to "Mamma Mia!" gets to sing all the way to the bank -- and loud enough that we all feel better.