There’s a lot going on in Hollywood this summer, as the economy and DVD declines continue to take their toll on several struggling distributors, from MGM and Lionsgate to the Weinstein Co., Overture and Apparition. MGM is in flux, as it struggles to pull itself back from the brink of bankruptcy and figure out a way to get The Hobbit films made with Peter Jackson at the helm. But whether that’s possible is still the question. MGM needs help.
Lionsgate faces an internal assault from board member Carl Icahn, and its management is trying to stave off Icahn via a merger with MGM. Their combined library would total some 7000 titles. Liberty Media’s John Malone is entertaining offers for indie distrib Overture. And after Bob Berney’s exit from Apparition, Bill Pohlad is in talks to bring ex-Lionsgate exec Tom Ortenberg on board to run the fledgling distributor. At this point he is consulting for Apparition, Ortenberg confirms.
Meanwhile the Weinsteins are trying to put a positive spin on their debt restructuring, which does make it possible for them to stay in business. But not only did they lose their bid to buy back the Miramax library they left behind at Disney, but now they’ve given up more than 200 films as assets (from Halloween II and Scary Movie 4 to The Road) to their owner, Goldman Sachs–that’s what the bank is, at this point–in order to pay down some of their crushing debt. Now they’ve lost not one library, but two. That’s rough: it’s like losing your own children, in whom you’ve invested years of sweat equity and nurturing.
Studios are all about libraries. They bring in cash, which pays down debt. But their value is declining as DVD sales drop. If there’s money left over after Goldman Sachs sells the films, TWC will get some of it. And when the debt is paid off control of the movies will revert back to them. But the Weinstein Co. will now be able to raise production funding more easily than it could before, when the company was saddled with a debt albatross around its neck. They no longer have to pay off interest.
This sounds a lot like what MGM is confronting, on a much bigger scale. While Disney could decide not to sell Miramax if they don’t get their price, MGM is in a fierce fight for survival. It’s a vicious cycle. If MGM’s backers don’t get a lot of new equity the company could go bankrupt. They desperately need to make The Hobbit (landing Jackson as director increases its value) and the next James Bond film to yield some serious profits for the company so they can pay off debt. But the partners involved with those films don’t want to make them until MGM solves its financial problems, because they don’t want their rights and films tied up in any kind of bankruptcy.
MGM is doing a lot of posturing and bluffing right now–which is how I read the Lionsgate maneuvers. I hear that MGM would like Warner Bros. to buy the company outright. WB has offered real cash, $1.5 billion, but that figure isn’t high enough for MGM’s investors, which include Providence Equity Partners and TPG Capital–after all the MGM debt is almost $4 billion. So they are putting out stories about all these other possible partners–like Spyglass, or Summit–to come in and run the company so they can make their movies, putting in a bit of equity. They want to goose Warner Bros., my sources say, to come up with a better bid. And Warners and New Line are still the lead partners on The Hobbit, so this thing is coming full circle. How does The Hobbit get made with MGM still in dire straits?
It’s all about equity. If Pohlad had put up more money to buy more movies, or financed more P & A, instead of mainly looking after his films, he wouldn’t have lost Berney to Graham King (a deal that is in the works but has not closed). He happily let Sony Worldwide Acquisitions Group partner with The Goldwyn Co. on Sundance pick-up Welcome to the Rileys, which was always Berney’s baby anyway. That movie is terrific, but it will be a tough sell, even with outstanding performances from James Gandolfini, Kristen Stewart and Melissa Leo (it screens today at the LAFF). At this point Ortenberg is the leading contender to take over running Apparition, and shepherd the rest of Pohlad’s slate, including Terrence Malick’s The Tree of Life, which I hear may not make it to the Venice Film Festival after all.