While the rest of the economy sputters, Hollywood is enjoying a windfall from the sickly U.S. dollar. The weakened currency is translating into a robust international box office and big profits for the entertainment industry.
But it’s also complicating life for producers who make movies and TV shows overseas, as the fluctuating exchange rate makes planning difficult.
“There’s so much talk in every studio about producing outside the U.S.” because of currency shifts, said Harry Sloan, the former MGM chairman who is spending a lot of time looking at acquisitions overseas with his new media fund, Global Eagle.
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“You shoot when the elements come together and the financing comes together,” said Jeff Steele, a film finance expert and the head of Film Closings said. “But you need to have a hefty currency reserve carved out, because if rates go all over the place, you’re going to need it.”
In April, the U.S. dollar hit a three-year low. Its value plunged 11 percent against a basket of major currencies through May of this year.
Nowadays, it takes $1.42 to buy a single euro; a George Washington now gets you 77 yen, and it takes $1.08 to match an Australian dollar.
Meanwhile, America’s currency has fallen to a record low against the Swiss franc, where investors have fled in search of stability.
Yet the weak dollar is feeding international demand for Hollywood’s content. Television shows are relative bargains for foreign distributors, who are willing to pay top dollar -- provided the currency is of the U.S. ilk.
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“That's good for the international buyer who's getting the project at a discount,” Bill Block, CEO of the international production company QED International, told TheWrap. “It's like getting a 20 percent gift."
But for producers of movies like “The Hobbit” in New Zealand, the weak dollar pushes the cost of production higher.
Warner Bros., like other studios, traditionally locks in the exchange rate when it greenlights a movie for overseas production.
But as “The Hobbit” faced endless delays stemming in part from co-backer MGM’s bankruptcy, the dollar weakened, which has driven up the cost of the mammoth shoot.
In the main, most agree that the weak dollar has helped Hollywood, giving an extra boost to tentpole films such as “Pirates of the Caribbean: On Stranger Tides” and “Harry Potter and the Deathly Hallows: Part 2.”
“If the rupee, the pound and the Australian dollar all get stronger, it doesn’t mean admissions are doing better,” Ashok Amritraj, chairman and CEO of Hyde Park Entertainment, told TheWrap. “It means that the box office is doing better as a function of where currency is at a particular time.”
