Movie biz ain’t so crumb-y

Industry takes exception to GMI report

There could hardly be a dicier time than the present to publish a report saying Hollywood studios are losing large amounts of money. Especially when a lot of Hollywood potentates say it just ain’t so.

Such is the unusual circumstance for Global Media Intelligence, a division of U.K. media research company Screen Digest.

Its Oct. 24 report, prepared in association with Merrill Lynch, is titled “Do Movies Make Money?” It was leaked first to the New York Times for a Nov. 12 story that took it largely at face value, focusing on talent’s cut of studio profits and how that has complicated union negotiations.

Since 2004, when profits were surging, worldwide revenues across all streams have been “flat-to-down,” the report says, while the cost of production, marketing and gross points keeps rising. “The result? Making movies … has gone from a modestly profitable activity to one that now generates, GMI believes, substantial losses,” at least in the short term.

Fox and New Line are “both prominent exceptions,” the report notes.

After the Times piece, the 16-page document was then dutifully picked up and summarized by other media outlets.

But more and more film biz vets, specifically the ones able to see the studios’ books, have taken exception to the report.

“Of course studios make money,” one veteran dealmaker insists. “Of course we make money,” echoes a senior exec.

Getting them to denounce the report on the record in a time of labor chaos was all but impossible. One who agreed to do so was Peter Hoffman, head of Seven Arts and — full disclosure — onetime boss of report author Roger Smith, an executive editor for GMI and a former studio finance staffer and onetime Variety columnist.

“His statements about video are just dead wrong,” Hoffman says.

Of the report’s caveat that it assumes studios hold 100% equity in each pic, as opposed to the private-equity cushion that now exists, Hoffman notes, “Margins are effectively higher since studios are less exposed.”

As to the strike timing, Smith insists there is “no sinister cabal trying to screw the unions and help the studios.”

He also qualified the thrust of the report somewhat.

“It’s not that movies don’t make money; certainly if you’re an agent or manager or lawyer or star, yes, there is a tremendous amount of money. It’s that the shareholders of the big media companies don’t make money.”

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