UPDATE: Stock Market Collapses, Dow Down 980 Points, S&P Down 91, Then Claws 2/3 Back; How Is Big Media Faring?

COMMENTS (7)

• Due to a human error when wanted to sell millions of shares and not billions.

  Comment by Sean — Thursday May 6, 2010 @ 1:05pm PDT  Reply to this post

• If you fancy a little European decadence and can negociate a “Special riots and strikes” discount from your travel agency, come and visit us.

  Comment by Thierry Attard — Thursday May 6, 2010 @ 1:35pm PDT  Reply to this post

• The real fallout is not the vagueries of the Stock market. Rather it is the tremendous capital requirements Big Media companies must fund. News Corp spent about $500 million, give or take, on AVATAR for production and marketing. As their Q3 profit release noted, “much” (others have estimated 40%) of the revenue from AVATAR goes to the private equity partners who financed AVATAR. As Murdoch noted, making movies like AVATAR is risky — it might fail, so when money gets that big, Big Media Companies don’t fund these movies themselves but seek financing partners.

  I expect the same to happen in scripted TV if it has not already happened … a production budget of say, $4 million per episode and a license fee covering only $2 million implies a $44 million deficit per season, gambling on reaching 100 episodes for syndication and DVD sales, increasingly a big gamble.

  Europe’s collapse with Greece, Spain, Portugal, Ireland, and particularly Italy having unsustainable spending/debt levels (put the UK in their as well, and Germany as well, given the huge debt levels and implicit federal guarantees to States and Cities) means financing is not coming from Europe any time soon. Credit Agricole, or Society General, or German Landsbanks, or Royal Bank of Scotland need to fix their balance sheets before they can lend Big Media half a billion for the next AVATAR.

  Wall Street is unlikely to spring into action either, can you see the next Goldman Sachs that took TARP money defending investing half a billion in a movie that bombed? China is funding most of its growth internally, and has its own bubble about to pop. Don’t expect Chinese money to prop up Hollywood’s model.

  Which leaves global private equity, mostly money from the Gulf and other fairly iffy sources of income. Iffy because there is not that much of it, and the funds will demand returns fairly high (to compensate for risk) and all sorts of strings (likely ironically to depress returns domestically). I.E. no Americanism, patriotism, etc.

  Hollywood has devolved or put itself into a financial trap: only a few big blockbuster movies make money, and they cost a ton of money to make. Many of them fail, increasing cost. Smaller movies mostly lose money or make small profits. DVD sales are not holding up Hollywood any more. Blu-Ray has not saved the day.

  And playing with other people’s money seems as dead-end as Goldman Sachs (which Hollywood in it’s “screw the customer” attitude increasingly resembles).

  I agree with Nikki — Hollywood ought to make more movies like MAMMA MIA, or SEX AND THE CITY series, because they are cheap and tap an un-used demographic — older women. Why not? I would not see those movies if you paid me, well I would but you’d have to pay me, but I’m glad to see them make money. Hollywood ought to take the next step and make more movies aimed at … men. Beyond just big budget and horribly expensive IRON MAN type comic book movies.

  Lower stock prices won’t hurt Big Media — dependence on increasingly scarce and high-cost private equity to fund most money makers will.

  Comment by whiskey — Thursday May 6, 2010 @ 2:45pm PDT  Reply to this post

• the studios love it– they can use it to justify cutting more jobs, of course it’ll be working class jobs, not the fat cats at the top.

  Comment by cookmeyer1970 — Thursday May 6, 2010 @ 2:51pm PDT  Reply to this post

• secretly a big Icahn conspiracy.

  Comment by anon — Thursday May 6, 2010 @ 4:59pm PDT  Reply to this post

• I gotta tell you dream works animation is the most inflated stock of all the entertainment companys. The company is certainly not worth 37 a share based off the crap they put out like the upcoming shrek 4. They put out less than 2 movies a year , it befuddles me how the stock can be worth so much

  Comment by jeff — Friday May 7, 2010 @ 12:10am PDT  Reply to this post

• Ok, I may be a little young being 16, but History is definitly repeating tiself. The government and our people need to learn that relying on other countries almost completly is a terrible thing to do. We are gifted so much to have the technologies that we have, but I also believe we may spend to much money on it. The U.S. just needs to wake up from the past fantasy of having everything provided from other countries, and being able to pay them less. My final subject is that every country either need to learn to be freindly to each other, or just “grow up”.

  Comment by Brad Morgan — Wednesday May 12, 2010 @ 4:05am PDT  Reply to this post