How Will The Financial Collapse Affect Hollywood?

Just when Hollywood really started getting money to make movies from Wall Street, they go broke. Studios were tapping into hedge fund capital as another source of financing films. Now there is probably no money available from Wall Street to finance Hollywood films. Maybe the era of the $100 million dollar production budget for films is over. The CGI companies better find a cheaper way to generate those special effects. Of course, the rich celebrities will not suffer unless they put all of their money in the stock market, but members of the Screen Actors Guild could be at considerable risk of losing the limited increase in benefits they just received. And that could just be the beginning of what they could lose.

The sexopoly of Viacom, Fox, NBC Universal, Time Warner, Sony and Disney are very big companies but they too are subject to the laws of economic downturns. If people stop going to movies, the bottom line of the Alliance of Motion Picture and Television Producers (AMPTP) will suffer. AMPTP will share that pain with SAG. Although the public mostly hears about foreclosure nightmares, the possible recession/depression has not really gotten into the suburbs. The malls and multiplexes are still humming each weekend, but if things really turn south and the bailout does not work, Hollywood could be negatively affected by the economic downturn. Don't forget, it is the popcorn where the real money is made at the theater.

The first big sign is Hollywood big boy Viacom having trouble. Sumner Redstone controls Viacom, CBS and National Amusements Inc and all are adjusting to the liquidity and credit crunch issues currently rocking America. National Amusements had to sell $400 million of stock in Viacom and CBS to meet debt coverage agreements. Viacom is also expecting diluted earnings-per-share growth for this year. Viacom shares are currently at $16.50 per share and CBS shares closed this week at $8.10.

Some directors are now looking abroad for financing for their films. Stephen Spielberg, Spike Lee and Oliver Stone have all funded recent films with foreign capital. Some of the global group of investors include: Bill Block-QED International , Christopher Mapp-Omnilab Media (Australia), Thomas Sterchi-(Swiss investment millionaire), Albert Yeung & Albert Lee-Emperor Group (Hong Kong), Johnny Hon (Hong Kong venture capitalist), and Victor & Samuel Hadida (France).

(New York Post, 10/11/08) (The Wall Street Journal, 10/11/08)