Money makes the world go round and right now Hollywood is all about following the money.
Once upon a time the studios financed their own movies, and gradually as production and marketing costs kept rising, began looking for partners and financing to help them reduce risk.
While Paramount spun the news yesterday that they walked away from a $450-million Deutsche Bank slate financing deal, which would have funded 25 % of each film’s budget capped at $30 million per picture, the chill was felt around Hollywood.
What impact would this have on the elusive Ryan Kavanaugh of Relativity Media, who has also gotten funding from Deutsche Bank, which was withdrawing from the film business? Kavanaugh co-finances big-budget movies all over town, and also has his own deal to produce movies for MGM release.
No one should be surprised that banks are starting to demand tougher terms on these deals, which tended to favor the studios. Bigger forces are at work: money is drying up. And debt is more expensive. “At the end of the day, someone has to pay,” said one company chief.
The credit crunch will only put more pressure on studios like Paramount to be more risk averse (like morphing Vantage into a more genre-oriented label). “You’ll see more big budget sequels and remakes,” says one observer.
Meanwhile the Weinsteins are shuffling their deck chairs to stay ahead of the financial curve: they just announced a showy Showtime pay-TV deal for which they must deliver 95 movies. The question is, did they pay upfront to get that deal? Yes, they put down some sort of guarantee that they would deliver all the pics, but nothing anywhere near the fantastic $100-million figure that has been reported. I’m hearing it was way less than half that figure. The Weinsteins needed the Showtime deal in order to seal the additional financing they need. Locking in a pay deal was essential to going forward. When they extricate themselves from MGM distribution at year’s end, they might really be in business.
Source: Variety
