Wednesday, 7 April 2010
As expected, MGM was put on the block, and no one was really that willing to pony up a billion dollars, or whatever they were asking, to buy the company's assets. While there were some low ball offers, essentially, most of the action for the company is now coming in the form of financing to keep the studio making movies such as another 007, and The Hobbit. You know, movies that actually have a chance to make money. Instead of movies like Hot Tub Time Machine, that should have been made with nobodies as a straight to video for $5 million, and actually cost $50 million. Those are the kind of blunders MGM has been making for years, while they lived off revenue from their library. Well, the problem with libraries is, their aggregate value increases over time--if--big if--you can continue to effectively add to the pile. Because each individual film's value decreases over time. So, in that sense, it is essential to continue to produce winning films. Once the number of films stagnates, the value drops. This is where MGM really is right now. Like most studios, they have not been producing a lot of films the past few years--and it has been worse for MGM because of their financial troubles.
With MGMs current debt obligations, and issues meeting them, I don't expect anyone to loan the studio more money without a change in management and some institutional control. I can certainly see a hedge fund or equity firm getting involved, but I wouldn't give the current executive team $1 without veto power and some serious cost cutting measures. Films like Hot Tub Time Machine are a microcosm of what has been wrong with MGM. Too many misses, not enough hits.
Look for someone to save the studio with a financing arm--but, with some major caveats. I wouldn't want to make anything with MGM right now, other than proven franchises or sequels--Bond films and The Hobbit--until they get back on their feet.
It all might be too little, too late.
Posted on 04/07/2010 9:36 AM by Todd Carr
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