Saturday, September 27, 2008

Economic Realities

I know many people think that Hollywood is some strange kind of fantasy land, populated by humans yet somehow isolated from much that is real about living on this planet and in this country particularly. Well, I can say that’s pretty true, yet also strangely not true. The events of the past few weeks surrounding the economy were catastrophic, but not a complete surprise to us living and working in the entertainment industry. The writing’s been on the wall about the economy for quite some time here in Fantasyland – and in a few ways. The most obvious clue was when sales at the major coffee outposts (Coffee Bean and Starbucks) in SoCal began to fall. Southern California and LA especially is full of people who will pay premium prices for anything. Valet your car at the mall, it’s only ten dollars! $4350 for a purse? Only if I can buy a $2000 miniature replica as well to put inside the big one so I can use it as a wallet! It doesn’t matter what my car can do it just matters that you know how much I paid for it! So when people decide that they can no longer afford to regularly spend five dollars on coffee we should all know that something is going on.

Last year’s writer’s strike was another ringing bell that no one seemed to pay attention to and not in the way you think. Before the strike many writers and showrunners had deals set up with studios. In the most basic sense, those deals generally mean that writers get paid to write, have an office on the lot, and the studio gets to make their work. It’s a good deal for everyone, generally. But when the strike started, most deals were cut off citing a force majeure clause in the contract. It was expected, so most weren’t frightened by it. What frightened people the most was the fact that each of those deals weren’t brought back after the strike was over.

The absolute biggest canary in the mine for the economy (if Hollywood was the sole canary, yada yada) had to do with our friends at DreamWorks. (at MD TOTAL, we love DreamWorks.) They brilliantly decided that they wanted to leave Paramount, and since Brad Grey ain’t trying to make any enemies he’s allowed it to happen even quicker than it took to buy it. DreamWorks put the feelers out and had some offers, finally settling on Reliance Media from India. Together, DW and RM decided that they would then get a revolving credit line based on the strength of the Reliance’s initial investment. That’s a seriously long story short, but you get the idea. But here’s how it got tricky – DreamWorks and Reliance had a difficult time securing the second half of the financing due to the facts that banks are on the strugs worldwide. A studio that will be run by Spielberg and has half a billion dollars in cash(!) from the deep pockets of Bollywood had difficulty getting loans? What the fuck is going on in banking on this planet? That’s how bad it is.

© 2008 MD TOTAL all rights reserved.
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