Saturday, July 19, 2008

Paramount's film financing deal collapse: a sign of trouble in studio debt financing? How about the indie films?

Earlier this week (July 15), the Associated Press reported in The Washington Post that Paramount’s attempt with Deutsche Bank to raise $450 million for new films had collapsed, link here.

Josh Friedman and Claudia Eller provided a short version of this story July 15 in The Los Angeles Times, to the effect that Paramount found the deal too difficult, link here.

Today (July 19), an expanded version of this story (apparently not available online) appeared in print on the Business Page 1, section D, of The Washington Post, credited to the Los Angeles Times (same writers). The story has the alarming title “Lights Go Dim on Film Financing: Studios to scale back as credit crisis adds drama to risky business.”

The general impression is that the credit crunch is affecting debt markets for films and raising interest rates or shortening the demand on the bottom line. The mentality would seem to apply more to the “shopping mall” genre films (summer action, comedies, etc) from major studios, using the majors’ standard trademarks in distribution.

Paramount has been concerned that some of its “Vantage” (e.g. “Paramount Classics”) films, while critically acclaimed, have not done as well at the box office as expected. These include “Babel,” “A Mighty Heart”, and “Into the Wild.” Films like these have been well attended when I saw them, as were “No Country for Old Men” and “There Will Be Blood”.

Other studios, such as Warner Brothers, Sony/Columbia/TrisStar/ MGM, Fox, and NBC/Universal, and Disney seem to have reasonable co-financing deals for the next two years. Some A-list stars are working outside the system with foreign sources like Reliance Big in India. There are some rather rigorous steps followed in standard film financing, including completion bond. IFP in Minneapolis covered these in late June “producers’ conferences” in Minneapolis when I lived there.

Studios have tended to work with hedge funds in financing big pictures, and many pictures have more than one studio.

In my mind, there is a question about the role of social or political activism in films. Many independent films have been made about the “war in Iraq” (fewer about Afghanistan) or about various problems about the way government and business deal with the environment (Al Gore’s film “An Inconvenient Truth” came from Paramount Classics). Individuals with enough personal resources (as from entrepreneurial success in "something else") can certainly invest in films that may have a social or political impact. I think a well conceived indie film with enough resources could put away “Don’t Ask Don’t Tell.” Dream Out Loud Films has just such a project; check this link.

Sometimes, though, it seems that studios know some of their films are duds. Last week, ABC Family aired MGM’s insipid and formulaic “Picture This!” about a teenage girl outwitting her father’s grounding her and insisting on tracking her by cell phone pictures. No, the cell phones didn't look "reverse engineered." The title of the film happens to match that of an indie distributor of LGBT films. It appeared to be a genre comedy (it had the full MGM lion trademark) wasn’t worth putting in the multiplexes.

It's interesting that all this news about film financing comes out when Hollywood finds it is suddenly having a good year at the box office, with perhaps a record opening for "The Dark Knight" (above) and people looking to be entertained during summer staycations.

Picture: No, that's not Paul Bunyan in Minnesota; it's in a fairground near Annapolis, MD. But the figure looks like "The Wicker Man" to me.

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