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The Roundup May 5 The Film Version

This is the most important news about filmmaking this year is on the investment side, not the boxoffice side.

Now the sources of film financing are running dry. This year has so far seen no new film funds, which are financing partnerships that include equity, mezzanine funding and bank debt. Studios use the funds to cofinance production. . . .

A money crunch would also change the kinds of movies coming out of studios. “You’re going to see a lengthening of the barbell effect,” says David Molner, founder of Screen Capital, a film finance company. “Lots of movies at the higher and lower ends with a thinning in the middle.” Molner expects studios to spend more on the blockbusters like Spider-Man and Harry Potter, pushing budgets as high as $250 million (before advertising costs). At the other end you’ll see more low-budget films like Vicky Cristina Barcelona and The Visitor. Movies costing $50 million to $100 million to make (like The Happening and The International) will be scarcer, Molner predicts.

(“The Color of Money,” Forbes, May 11) Although boxoffice is on a roll like never before, all the major studios have cut back investments and independent sources of financing are drying up faster than the Salton Sea. That’s tough for the creative folks, but great for potential investors. It means that we’re headed for a dry spell in content — fewer films available at the boxoffice, fewer DVD’s, fewer movies to fit the cable slots. In the last three years, we’ve seen a glut of independent films; so much so, that all the lustre — both financial and aesthetic — had faded from the magic term “indie.” Well, we’re now looking at too few films and a rising market for them, so, if you’re ever going to take a plunge in the Salton Sea of film financing, now’s the time.

And speaking of financing films, it’s never a good business idea to finance really, really, really bad films.

The studio’s operating income plummeted 97% in the company’s second fiscal quarter to $13 million, down from $377 million a year earlier.

Disney has been on something of a cold streak, as it ratchets back the number and variety of pictures it makes and relies more heavily on “branded” family movies and concepts forged on Disney Channel cable TV shows for the tween market. . . .

Indeed, at a time when many of the studios are enjoying a feast in ticket sales at the box office, Disney is experiencing a comparative famine. The studio so far this year has ranked at the bottom of the six major Hollywood studios — as it was in all of 2008 — in U.S. box office share because of several misfires, including the ill-timed comedy “Confessions of a Shopaholic” and the much-hyped “Jonas Brothers: The 3D Concert Experience,” starring the teeny-bopper phenomenon.

(“Walt Disney Studios’ operating income falls 97%,” Los Angeles Times, May 5) When Michael Eisner took over Disney, his CFO told him to shut down the film division. With profits straggling in at an anemic 2% for the film division, the CFO reminded Eisner that he could get a higher return for stockholders by simply investing the money in risk-free Treasuries. Now Disney films are hovering around 1% — just a tad higher than Treasuries. But let’s just stop and think for a minute. If you were a high-powered Disney executive with your finger on the tens of millions of dollars button, would you really have greenlighted total duds like Confessions of a Shopaholic? Or Race To Witch Mountain?

Bollywood’s bad news is your good news . . . maybe.

Acting stars in the world’s most prolific movie-making industry have seen their fees plunge by up to 80 per cent from the peaks they reached last year, producers say.

In addition, there has been a “30 to 40 per cent fall” in the number of new films being approved for production, according to Ronnie Screwvala, chief executive officer of UTV Motion Pictures, which has produced movies in partnership with Twentieth Century Fox.

(“Bubble bursts as hard times hit Bollywood,” Financial Times, May 4) Bollywood for a time looked like a major entrepreneurial opportunity here in the U.S. and elsewhere. The films were finding an American audience, and plenty of folks were lining up to be in line for the money changing hands. Most, like Tinsel Cinema, an online Bollywood streaming channel available by subscription, went under. However, the bad news is Bollywood is good news for anyone still trying to make money delivering Bollywood to American or European audiences. Why? The product has become cheap again. The previous attempts failed because “buy high, sell low” is not a long-term sustainable business model.

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