Daily Variety Gotham was, from birth, destined to chronicle a new age in media and entertainment. Through art or coincidence, it hit newsstands just as New York City — the headquarters of most showbiz conglomerates, seat of investment banking, home of analysts and investors, and unrivaled stomping ground for private equity and hedge funds — seeped into the structure and the tone of the entertainment business as never before.
Gotham’s earliest issues chronicled giant mergers, Wall Street constructions each more expensive than the one before. Viacom married CBS, Seagram sold itself to Vivendi and AOL acquired Time Warner in deals worth a combined $250 billion. Media chiefs and their banker-enablers lived the dream that vertical integration, owning a big chunk of everything in the entertainment universe, was the path to nirvana: a strong stock, healthy profits, stunning compensation packages and fat fees.
About a decade later, Gotham watched as Viacom and CBS divorced while the two other pacts were decreed the worst in media and entertainment history. Universal Studios is now ensconced within General Electric. AOL hangs around like a damaged limb as Time Warner’s new chief executive, Jeff Bewkes, ponders where to put it and explores splitting off other pieces of the media giant. What a difference a decade makes.
“Back then, there was something in the air (or the Kool-Aid) that bigger was better,” one Wall Streeter says. “But the business models did not prove that effective. There’s a much different feeling now, a shift in scope and direction.” The deafening pop of the Internet bubble in 2001 saw a herd of absurdly priced Netco stocks and the companies behind them bite the dust.
The meltdown seemed to vindicate “old” media — for about two seconds. Ever since, it’s been all about the change in consumer habits and how, or if, traditional entertainment companies can compete in the digital age. The jury is still out.
The business of music, which was the first casualty, has endured painful and dramatic change. But in film, and to a lesser extent television, a DVD boom that started in the late 1990s masked some woes and triggered a decade-long spending spree. Megapictures, or tentpoles, routinely started to cost well over $200 million in recent years as DVD sales poured billions of dollars into studio coffers. But as Gotham turns 10, DVD sales have flattened and may fall this year for the first time.
With the DVD market softer, digital strategies in flux and increasingly skeptical shareholders to answer to, parent companies closed the cash box and pushed Hollywood to seek outside financing in a way it hadn’t ever quite had to before.
In a decade, the biz moved from the tail end of insurance-backed cash to German tax shelter money, to its current love affair with the new masters of the universe: private equity and hedge funds.
New York Magazine dubbed an L-shaped area on the Upper East Side and midtown Manhattan as Lower Hedgistan. Upper Hedgistan is Greenwich, Conn., a short train ride from New York City, where 40% of the world’s hedge funds — with more than $1 billion in assets — are located. The New York-Hollywood axis is tighter than ever.
“The funds are here. Big media is concentrated here. Advertising is here. Tax and accounting people. Legal talent. They’re all a cab ride away,” says one investor.
Simultaneously, New York City Mayor Michael Bloomberg launched an aggressive drive to attract more film and TV production with a host of tax credits and other measures that have created hundreds of jobs and brought millions of dollars of new production to the city.
NYC registered 37,718 location-shooting days in 2006, up from a low of 14,898 in 2002. That earlier stat was in part the result of 9/11. The tragedy brought the city together and resulted in the creation of the Tribeca Film Festival, a massive, ever-expanding event with now-global prominence.
Steiner Studios, with the city’s largest soundstages, has been up and running for two years at the Brooklyn Navy Yard. Silvercup Studios in Queens is in the midst of a $1 billion expansion.
It’s no wonder staunch Gothamites Ethan and Joel Coen, whose film “No Country for Old Men” just won the top Oscar, thanked the Academy for “letting us continue to play in our corner of the sandbox.”