Hollywood appears to be on the cusp of a new chapter, in which a smaller group of major entertainment companies, fortified by bigger libraries and deeper distribution channels, will hold a larger concentration of power.
With Comcast in the final stages of acquiring NBC Universal, and MGM up for grabs in the next several weeks between Time Warner or News Corp., the tableau of power players is set to shift in potentially significant ways.
For one thing, the oft-evolving MGM is almost sure to see the end of its ride as an independent, once-proud Hollywood studio – a blow to already struggling producers and directors seeking an outlet for their work.
If it succeeds in staving off bankruptcy, MGM seems likely to live on as a small moviemaking division of Fox or Warner Bros., not unlike New Line, which was folded into Warners in 2008.
Meanwhile, in buying NBC Universal, Comcast’s CEO Brian Roberts and COO Steve Burke, based in Philadelphia, will instantly become power brokers in Hollywood in ways that never interested General Electric.
For GE, NBC Universal was meant to be a profit center no different than any other division. One never saw Jeff Immelt at Oscar parties.
The Roberts are likely to be quite different Hollywood players.
With the purchase, Comcast would control not only the largest cable subscriber base in the country, but a major movie studio, a broadcast television network and a collection of top cable channels, from E! to Bravo to USA Network.
The combined power of content and distribution – though still without a significant new-media component – creates a new kind of player who may leverage one (content) to boost the other (distribution).
In general, it feels like the trend line in Hollywood is moving toward a smaller number of more powerful players.
Partly the shift is generational. The rise of Young Turks like Ari Emanuel at WME and Rich Ross at Disney accompanies the retirement or eclipse of once-dominant figures including David Geffen, Jim Wiatt and Michael Eisner; and the presumed departure of Barry Meyer and Alan Horn at Warner Bros. when their contracts expire in 2011.
But the presumed exit of both General Electric and Vivendi, a part-owner of NBC Universal, from the entertainment business may portend the decline of overall interest in investment in this space. Indeed, there are hints from the financial sector that electronics giant Sony also may be looking to separate from its entertainment unit, however successful it may be.
This is still a glamour business, but it is not flush with cash as it was a decade ago. For those that remain, they may reap the benefit of a much-winnowed playing field.
As business models for independent filmmaking continue to prove elusive, the major players have even more weight in determining who becomes a movie star, what becomes a franchise and which producers will survive.
The fate of MGM is likely to be decided in the next month, executives involved in negotiations say.
Merger and acquisition executives at multiple companies are poring over MGM’s debt-laden books, though bankruptcy is still not out of the question.
Top executives at both Time Warner and Fox say they believe they are well positioned to make the purchase, for a price that will likely fall between $1 billion and $2 billion.
That would include the debtors taking about 50 cents for every dollar owed them. Pressure is on to close any deal before the next interest due date, which falls at the end of January.
Time Warner is sitting on $7 billion in cash from the spinoff of its cable division. But Fox believes it is better positioned, since the studio has already been the international distributor of MGM’s rich library of 4,100 movies.
An MGM sale to Time Warner would strengthen the hand of Jeff Bewkes, as he tries to figure out the next major source of growth in his content-based empire. A sale to Fox would strengthen the position of studio chairmen Jim Gianopulos and Tom Rothman.
At that point, co-CEO Stephen Cooper, a finance expert, is likely to step aside. The other co-CEO Mary Parent – should she remain – could continue to run production, if she’s interested in becoming, like New LIne’s Toby Emmerich, a mogul lite.
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