More and more, I find that meaningful dialogue in this community has been supplanted by five little words: How bad will it get?
No one even says, “How are you?” anymore. Inquiries instead are directed toward the state of the global economy. Understandably so.
Even battle-hardened veterans cannot recall a time when the economic signals were so dire — when 50 trillion dollars in global wealth simply melted into the night.
When I joined speakers at a top-level conference on globalization on March 7, I found a room full of confused people, which was troubling because most were lawyers, and lawyers charge big fees for certitude. In this economy, however, certitude clearly is an obsolete product.
Since the attorneys gathered at the UCLA Entertainment Symposium have a vested interest in keeping the flow of dealmaking alive, they searched hard for pockets of optimism. Yes, a few banks, hedge funds and specialty investors are still actively funding show business ventures — but their resources are skimpy and their terms are tough. Yes, a few countries overseas are still interested in co-financing or presales– but scoring a deal is laborious.
Harry Sloan, CEO of MGM, pointed out that foreign TV networks are still buying rights to American films and first-run TV shows even at the expense of local product– but their appetites will diminish if the recession rumbles into next year.
So the bottom line on globalization is this: If the U.S. hiccups, the world gets a hernia. But if foreign businessmen are looking to America to lead the turnaround, they may be in for a long wait.
Hollywood provides an apt microcosm: Actions by the majors may exacerbate the downturn rather than reverse it.
The surge in box office revenues, for example, was fueled by stepped-up production a year ago, which in turn prompted studios to release more films early in the year on dates traditionally considered less felicitous. The studios’ present strategy of trimming output more than 15% next year, however, may cause a shortfall a year from now. The trims, in part, stem from the disappearance of slate financing at studios like Paramount and Fox.
Companies also are becoming more risk-averse in their decisionmaking, defying the lesson of this year’s biggest sleeper: “Slumdog Millionaire” came very close to being a DVD release because the studios are so wary of “edgy” product.
Tough times cause bureaucrats to play it safe. Playing it safe in the movie business is a prescription for disaster.
And that’s the bad news about globalization: Hollywood’s nervous decisionmaking becomes the world’s nervous decisionmaking.
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Tough times distilled
The bumpy times are quickly stirring some sharp reversals in consumer tastes. The New York Times ran a survey of liquor stores, for example, and found that $700 bottles of wine were gathering dust. A good $20 chardonnay suddenly is a hot item. Thunderbird, anyone?
In the vodka arena, Popov is suddenly the hot seller, not Grey Goose. That used to be the brand that enlivened the punch at college frat parties.
Of course, folks out there may be pouring their Popov into their Grey Goose bottles.
It’s amazing what a downturn can do.