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The Roundup May 18

Shakespeare in Line. (Unemployment line, that is)

Disney doesn’t break out the financial performance of Miramax, and Cook declined to say whether the unit was profitable. Miramax released eight movies last year, including the religious drama “Doubt,” based on the Pulitzer Prize-winning play. Those films generated $65.8 million in total U.S. ticket sales, down 50.3% from $132.3 million for the eight films that Miramax released in 2007. . . .

Miramax today is a much-scaled-back specialty label from its heyday. Disney slashed the staff to 80 from 500, pared the annual production and marketing budget to about $250 million from $750 million and capped movie budgets at $20 million.

(“Can Miramax survive?,” Los Angeles Times, May 18) Miramax is a useful lesson for businesses across the spectrum, not just entertainment. Harvey Weinstein set up a business model that is the closest you can come to actually having your own money printer. By purchasing distribution rights to offbeat independent and foreign films for very little money, cutting them mercilessly based on his instinct for the American audience, and relying heavily on patient and creative marketing rather than money-burning media marketing, he limited the downside of the business while still retaining a potentially huge upside. If he lost money on a film, it was literally in the tens or hundreds of thousands of dollars. All he needed, then, was the occasional film that topped 10, 20, 30, or 50 million dollars. Voila! It’s raining money at Miramax! The biz model, in other words, was a ruthlessly financial model — the best in the business. The biggest mistake the Weinstein’s made (and Disney afterwards) was to change that model and increase the potential downside of the films they make and distribute. So is Miramax on its last legs? Yes. The only way to do independent film successfully is to lower the downside of the business. But all the independent houses, including Miramax, are being run like mini-versions of the studios. (And, by the way, “Doubt” was a pretty sucky movie — you never make money making bad movies unless Carmen Electra is in it.)

Where’s Michelle Bachmann when you need her?! If whe were in charge, man, the nukes would fly!

Brazil and China will work towards using their own currencies in trade transactions rather than the US dollar, according to Brazil’s central bank and aides to Luiz Inácio Lula da Silva, Brazil’s president. . . .

An official at Brazil’s central bank stressed that talks were at an early stage. He also said that what was under discussion was not a currency swap of the kind China recently agreed with Argentina and which the US had agreed with several countries, including Brazil.

“Currency swaps are not necessarily trade related,” the official said. “The funds can be drawn down for any use. What we are talking about now is Brazil paying for Chinese goods with reals and China paying for Brazilian goods with renminbi.”

(“Brazil and China eye plan to axe dollar,” Financial Times, May 18) We’ve already written about what this means in economic terms, but for entrepreneurs and small businesses, a gradual decline in the use of the dollar as an international trade currency will inflate . . . slightly . . . the cost of manufacturing and importing goods from China to the U.S. As the China discount erodes, American manufacturers, marketers, and retailers will turn to other countries — Vietnam, Indonesia, and eventually African countries.

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