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EXCLUSIVE: In the next few days, the steering group of MGM’s creditors (which represents the largest holders of the debt) are expected to make some key decisions about the future of the nearly bankrupt studio. Here’s more evidence that the MGM auction is a bust: I’ve learned that last Thursday, right before Easter weekend, MGM Management gave an 8-hour presentation in the old MGM Screening Room to the creditors. Some attended. Some joined via phone. The studio’s management pleaded for a stand-alone but restructured MGM with a game plan to make 6 to 8 films per year. They requested that the creditors try to raise $500 million of equity capital and $500 million in a production fund. I as told that, basically it was a “give us the dough, more of the same” attempt at a Hail Mary. Management tried to portray every film in the business plan as a “big winner” (unlike so many previous releases). Although the MGM toppers were peppered with questions from the creditors in attendance, sources tell me that most of the questions didn’t seem to be “well informed” about the nature of the film business. So what will the creditors do? Well, there haven’t been any votes or polls. But knowledgeable sources tell me there does not seem to be much support among the major holders of the credit to accept either the Time Warner offer or the Len Blavatnik offer. What happens next is anyone’s guess…
Editor-in-Chief Nikki Finke - tip her here.
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Aside from another Bond film (which would be at least another 14 months away) I am not sure what MGM could do to get a hit film. Red Dawn s a crap shot at best, and A Cabin By The Lake seems to be coming out after the hottest fire of the 3D flame. Zookeeper is now Sony’s to play with. It would seem a bit like throwing good money away to hand over another $500 million or $1 billion to extend the independent life of the studio.
This also doesn’t in any way reflect MGM’s shortcomings in marketing/distribution, which seem to be no small issue, post-Hot Tub Time Machine.
Let’s hope they get their money so we can see more “statement” deals like 2 against 3 for ZOOKEEPER.
Finally, an article which, unlike the recent Wall Street Journal and Hollywood reporter articles, tells it like it is – no one has any idea of what is going to happen. Stop printing hypothetical situations and passing it off as news people!
The only bit of fact in the Hollywood Reporter article was that MGM and the creditors had a meeting, and even they got the date wrong…
Why not just take $500 Million and set it on fire then use the other $500 Million to put that fire out? You might end up with more money left over than the Hail Mary Parent plan.
I’ll tell you what will happen
If Mickey has any balls Disney will swoop in and pick up the library. The Marvel buy was the best deal since the Louisiana purchase.
Raise 500 mil for a stand alone studio with the previous years track record?
Good luck with that. Even if someone ponied up they’d fire the current regime as a condition of the investment(s).
Will they sell off projects that won’t get made this year or just keep these projects in the vault until they liquidate the entire company?
“sources tell me that most of the questions didn’t seem to be “well informed” about the nature of the film business”
- Yeah, like expecting the films to make money… why anybody would throw good money after bad with MGM’s track record, God only knows.
learn how to make movies audiences want to see and not movies only you and your insular friends care about. wow! how tough is that to learn?
You couldn’t be more right! Most of Hollywood’s problems are being caused by the ‘almost incestuous’ atmosphere that has developed there. A lot of Exec’s are making films based on the fact that their buddy wrote the script, or their girlfriend wants to be an actress.
New blood is essential in any business. Especially the entertainment industry. And their is a lot of good talent out there! Scriptapalooza, Final Draft and the Page Awards all have some top notch writers and scripts in their contests. Why not use them?
Neither of you are in the film business.
If you had a substantial amount of equity capital, and you wanted to invest in major motion pictures, where would you put that money? Surely, there are better places than here, and that doesn’t even take into account the brain damage of trying to do a deal with disappointed vulture investors. MGM is a melting ice cube, and betting on a new slate of movies to be produced and distributed by this failed company is simply too risky in today’s environment.
Is there really market demand for another “major independent” putting out 6 to 8 movies a year–when those films will go up against stable major studios’ output? Consider the lower number of films being released by the majors today, as compared to five years ago; consider the public equity valuation of Lionsgate; and consider the kind of movies it takes to bring the masses to the theaters today. MGM’s current bank debt holders are secondary market, hedge fund purchasers of distressed debt, and they, like the private equity investors that lost 100% over their investment in MGM, paid too much for their unfortunate place at the table. So now, for fear of taking a hit to their own investment portfolios, they won’t agree to the valuation that an efficient market has presented to them via an open and notorious auction–about $1.5 billion (and that will go down). Sometimes, folks, your first loss is your best loss. MGM is headed towards a traditional Chapter 11 case (meaning long and expensive), and then a liquidation in pieces.
Successful film companies are successful because they attract and retain the best people. Right now, the best people are elsewhere, and they sure aren’t going to leave their chairs to work for distressed bank debt holders that now own MGM as a practical matter. This company is simply not a reorganization candidate, but those involved in this restructuring will try to convince a bankruptcy judge otherwise. There are enormous professional fees to be had in that process.
Bank debt holders should take the Time Warner bid for the library and IP assets, and sell the brand and meager distribution platform to someone else, who might be able to put that to good use…or at least try. And if they don’t do that, and try an “assisted stand-alone plan” with new capital, the new investor will surely seek safety by drilling down the valuation at the expense of the existing bank debt holders.
Put the poor kitty to sleep. It’s time.
Enter: Carl Icahn.
“Although the MGM toppers were peppered with questions from the creditors in attendance, sources tell me that most of the questions didn’t seem to be ‘well informed’ about the nature of the film business.”
You couldn’t make this stuff up if you tried, nobody would believe it. Aren’t most of these creditors classified as “professional money managers”? Somewhere in prison Bernie Madoff is blushing.
Never mind co-financing The Hobbit, how is this supposed new ‘MGM lite’ going to finance, produce and distribute the next Bond film now that Sony are ‘out of the loop’?
The criminally overrated Quantum Of Solace was a wildly expensive production for Sony and I don’t see Sam Mendes making an effort to pinch the pennies this time around for the sake of Mary Parent’s credit rating.
If MGM and it’s ‘more money than sense’ backers really want to play this big films/big money game with the big boys like Sony and Warners they had better realise that the ‘buy in’ is a sizeable chunk of change.
The next Bond film (if self financed) and even (co-financing) The Hobbit with Warners/New Line could easily cost MGM $400-500m of it’s proposed new finances.
Frankly I can see MGM blowing through the money given to them to keep the lights on and make films in no time at all and we all end up in this same position a few years from now with MGM on the chopping block with an even bigger debt hanging over it’s head.
And don’t forget bids even lower than $1.5 billion
MGM has been in the same losing business pattern for almost 30 years. There is no reason to rescue this studio that makes sense for anyone. All people care about is the logo and the library. Shut down, sell it off and let someone else take a shot at building a brand with the old logo. The old company itself…needs to be put away for good. And no moaning about losing a buyer for material. They haven’t bought shit for years. They’ve always been the last stop for projects and even then they seem to never have money to make films despite always having some 500 million dollar credit line and huge home video revenue. Enough already.
Just concerning the release of “Hot Tub”: The only reason people have turned out for it is word of mouth. Most tix buyers never heard about it until a friend told them to go. If MGM released ‘Avatar’, it would of flopped.
MGM hasn’t been a viable studio since I was pushed out in the mid 1950′s. In recent years management destroyed the film library by dumping it onto the DVD market all at once. What’s left?
On one hand Mary Parent’s point of view is old hat, and on the other hand so are the insights on this Comment page. Is it possible that no one can see a better way than business as usual or selling the Studio piece by piece? What’s valuable: The library, but only as long as there are fresh titles each year. An international television idea that puts in motion co-production relationships on event television that could easily be mined from the existing library. What’s not valuable: Mary Parent’s group, Distribution infrastructure and Marketing. So what to do in the event recapitalization is possible; and let’s be clear here, you can’t blame these creditors for entertaining the notion because both current bids are so low as to almost be swindling the assets away. Lop off the heads of current ways of doing business and unfortunately that means people will have to lose jobs. Commit to what one has historically considered a UA type filmic profile (although with each Cruise/Wagner debacle we forget more and more what that is). Stop managing the projects so intensely and go to filmmakers with a budgetary point of view that is defensible. A number of years ago, Michael Kuhn ran Polygram and essentially, after deciding a film had a shot they crunched numbers; subject matter, talent, location, foreign value, home video etc and arrived at a budget. They then offered the film at that budget and made deals with Producers and Directors that made them responsible for overrages. However, they also gave them creative freedom and the latitude to make the movie they wanted to make. They failed because they lost their financing for cash flow at a time when Studios co-financing was not de rigeur. But today it is. So make a strategic relationship to co-finance the big franchises you have and fully finance a modestly budgeted series of films that are either Judd Apatow-style comedy but in the hands of someone like Judd Apatow, or dynamic independent and “important” films from “important” directors. I’d suggest you give those filmmakers housekeeping deals so they can develop for you; nothing cheaper than office and phones. But if you want to attract talent, the biggest thing you can do is let them make their g-d damn movie and stop thinking that just because you have an EVP title before your name that you have better insight into character behavior than a writer! It’s truly what is killing our creativity in every medium; intrusiveness by people who are compelled to defend their job at any cost. If you achieve this kind of fiscally sound game plan, with strategic partnerships for Output and Financing, the Library will start to tick up and the Studio will have a shot get back on its feet. And this is without even discussing what to do with original television and the Digital platforms or dare I say, making a deal to move back on to a smaller lot (think Raleigh-like in size) in order to get out of the corporate tower and back into the atmosphere for film and television creativity. There are so many things to consider before you think about letting Jeff Bewkes absord the label as simply another business deal relegated to a Time Warner Shareholder announcement call. How sad is that!
MGM should focus on financing The Hobbit, together with Warner/New Line and a new Bond movie with Sam Mendes ready to roll. A lot of money is to be made with these two movies. And please, let’s not forget the RoboCop remake, Darren Aronofsky and David Self are ready to move forward if only MGM finance the whole thing. I think these three movies could end up making a lot of money for MGM.
“sources tell me that most of the questions didn’t seem to be “well informed” about the nature of the film business”
Well, this should surprise no one. Not only are the creditors not “well informed” about the nature of the film business, but a very large number of the execs in place since pre-2008 are clueless about the film business. I wouldn’t count on any of those execs to be able to answer questions, since that’s just the blind leading the blind.
Get the Broccolis to make a stake in the equity holdings (for ownership of the bond pictures) in return the bond producers can create a REMAKE schedule for THE ENTIRE BOND LIBRARY. Then shoot the remakes focused on action set pieces for the ENTIRE series, before getting involved in script development and casting. Issues re: using Chechnya, Eastern European producers who often dole out the same shooting locations for action pictures can be remedied through series planning in advance. Daniel Craig is also very replaceable. And really QOS was a POS. Very lacking in females. TERRIBLE TITLE…a new emo band? It looked low budget. Borefest all around and STILL made $$$.
“Although the MGM toppers were peppered with questions from the creditors in attendance, sources tell me that most of the questions didn’t seem to be ‘well informed’ about the nature of the film business.”
As someone who has worked in that space (film finance) in several studios, including MGM, I can tell you that this is by far the rule and not the exception. Throughout my career I have been consistently amazed at how little the people signing the checks know about the business.
Would it not make the most sense to just raise the necessary amount to cover overhead and the next Bond film alone? That profits would infuse enough cash and buy MGM enough time rethink it’s strategy for survival. Fuck the 6-8 pics per year idea for now and go with what works- Bond.
To survive at all, they are going to have to seriously look at what works and tough it out, ignoring whatever insiders think is better. Give the public what it wants and you will do well. It’s not rocket science, though some would like you to believe it. How they need a person like Irving Thalberg right now, without his health issues, and present day sensibilities. His creative genius and hardcore work ethic is what made MGM a legend that some do not want to lose. The Bond series and their incredible library are about the only things that have really kept them alive these recent years. I’m always surprised when I see the lion anymore in trailers – it’s so rare.
Where is our Hero when he is really needed? Not Batman but Kirkman.
Time is running out on all levels and isn’t it time for Kirk to own the studio one last time?
MGM must survive, the overseas film industry is killing us. Hollywood is where it’s at, don’t let anyone tell you otherwise. Like my old boss Wally used to say “234 or else”.
MGM. A name that once meant the best in motion picture entertainment now means very little. Somewhere in heaven, Irving Thalberg is crying.