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Attack of the killer crunchers

The media landscape has an eerie look these days, with “for sale” signs sprouting everywhere. A dizzying number of “assets” are being pitched, whether they be National Hog Farmer from limping Primedia or the book publishing division of once-haughty AOL Time Warner.

And despite the recession, there are a few buyers out there, warily kicking the tires as they engage in their ritualistic due diligence.

At the center of the swap meet is Vivendi Universal, as the French try to deal off operating units with a clumsiness that matches their foreign policies. Despite efforts to keep cherry-pickers at bay, there is keen interest in Viv U’s music assets and in its cable channels.

Paradoxically, however, it’s the movie studio, once the crown jewel in the corporate firmament, that no one wants to touch.

Listen to Wall Street’s banker babble and you can figure out why.

According to revisionist thinking, the studios aren’t hitting their numbers, and their costs are out of line. Besides, the piracy that devastated the music business may now be closing in on movies. Their bearish view is reflected in a recent article in the Economist suitably titled: “Lights! Camera! No profits!”

The conclusion: Why buy a studio when you can annex the USA Network? Who wants to bother creating things when distributing them is safer and less capital-intensive?

We’ve heard these arguments before, of course.

Movie studios were a drag on the market until the advent of video in the ’80s. They were fading again before the surge of DVD. But now Hollywood has tried to re-invent itself in a form that would appease the banker bozos.

“We’re in the tentpole business, not the picture business,” say the studio mandarins. “We only make movies that become pop culture events.”

This message resonated for a while, but now the crunchers are back and wherever you look, studios are cutting production budgets and chopping talent deals. Corporate emissaries have fanned out across Europe and Asia, begging TV networks and subdistributors for funding.

As one sales consultant put it, “Never before have I seen the rich begging from the poor.”

The specific motivations vary from company to company. Vivendi (Universal) doesn’t have the money, AOL Time Warner (Warner Bros.) needs to hoard its cash, Viacom (Paramount) prefers to pump resources into cable TV, and Disney is stretched too thin. One beneficiary: DreamWorks, which can take its pick of studio projects to co-finance.

Given this dilemma, some insiders believe the time may be at hand to rethink the basic structure of the studio system. If a studio exists principally to raise funding for the marketing and distribution of tentpole pictures, why then does it need the costly accoutrements of production and development?

Why does it invest in all the backlot services of props and wardrobe? What’s the rationale for talent deals? Indeed, if so many of the tentpole films are shot in Australia or some other distant location, who needs all those soundstages?

These may sound like radical questions, but United Artists in its banner years of the ’60s (“The Apartment” and “Some Like It Hot”) functioned in this bare-bones way.

Paramount’s halcyon years of “The Godfather” and “Chinatown” occurred during a period when its lean production staff moved off the lot into offices in Beverly Hills and summarily chopped off all studio overhead.

The present-day MGM-UA isn’t yet turning out a run of blockbusters, but it nonetheless operates without a backlot or other traditional support mechanisms.

If Wall Street’s crunchers want higher returns, then perhaps Hollywood may ultimately consider realigning itself into two types of entities: lean-and-mean marketing and distribution groups that would focus on their “event” pictures, and an assortment of creative pods that would furnish product in return for substantial backend participations.

Both entities would then deal with the forest of financiers who could invest either in the creative process or the distribution one, with each offering its own risk and return.

Such a structure would make the bankers more serene. It would endow the creative community with a bigger piece of the action. And, as a useful byproduct, it could free the talent from the bureaucratic blob that has become the studio system.

Who knows, some better movies may even start to emerge.

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