How Is The Economy Affecting Movie Studios?

Published 6 years ago by

dreamworks How Is The Economy Affecting Movie Studios?

With things looking bad worldwide economically, why are movie studios hurting even though box office, TV ratings and DVD rentals are all up?  Why is the big DreamWorks/Bollywood deal about to go south?  With ratings up, why are networks still hurting for money?  And finally, why are DVD sales being affected (aside from Netflix cannibalizing them)?

So in the middle of this let’s also ask “what’s the latest concerning Marvel Studios?”  You may have heard that Samuel L. Jackson may not return to the role of Nick Fury for Iron Man 2, the Avengers, and potentially other movies, as well as the relatively lowball offer made to Mickey Rourke for a potential role as a villain in Iron Man 2.

So let’s take a look it one thing at a time:

1. Why are studios hurting with box office up since 2009 began?

To put it simply, their parent companies are hurting.  The studios are, by and large owned by parent companies that generally have nothing to do with film, television, and such.  For example, News Corp. owns 20th Century Fox, and they cover mostly news – and GE owns NBC Universal.  As they begin to feel the pinch from a recession, the studios feel it as it trickles down.  Remember, Warner Bros. did wonderful with their 2008 movie box office (driven by The Dark Knight), but Time Warner still took a massive bath in $25 billion in losses not related to the film division.

2. What’s up with DreamWorks and its deal with Bollywood?

It isn’t good, and it looks like they’re striking a deal with, GASP!, Disney, which are Jeffrey Katzenberg’s former bosses, to help the floundering studio receive $250 million to save the Bollywood deal.  Basically, they have a deal with Universal Studios (Steven Spielberg’s former studio) to release their new movies (after DreamWorks left Paramount), and a deal with Bollywood to match or even exceed any money DreamWorks raises.  When they asked for more money from Universal, the studio balked and DreamWorks went to Disney.  It’s apparently a done deal, and Universal is out of the picture.  If it sounds convoluted, it really is (at least to me).  I suggest you read Nikki Finke’s take on it.  A lot of DreamWorks’ financial problems have to do with the bad economy.

3. Television ratings are up, but revenue is down: Why?

This is simple: Advertising is down, or at least advertising revenue.  As more people stay home, in the long run you’ll see more ads for cooking at home, TVs, DVD players, etc., and ad revenue will increase again.  As I’ll say in my summary, this is all cyclical and it will get better – just not right now.  We saw this happen when the tech market imploded and with 9/11: The double-whammy that was felt around the world.

4. If more people are staying home, why are DVD sales down?

Why are studios worried about DVDs, period?  Well, because more people are renting movies… Especially from services like Netflix and VUDU.  And what’s with the big “DVD scare?”  Well, looks like Technicolor, the biggest manufacturer of DVD discs may be in trouble, and are seeking ways to bring in some extra money.  Read about it at /Film to learn more.

5. What’s the latest with Marvel Studios?

With a mega-hit film in Iron Man, all seemed well – until the Sam Jackson/Nick Fury news and Mickey Rourke supposedly being offered only $250,000 for Iron Man 2.  What gives?, many fans asked.  All I can do is speculate at this point, but I suggest you read Vic’s article concerning the matter.  Here’s what I think: Marvel went to Merrill Lynch to fund their production of movies.  The economy hit Merrill Lynch hard, and they got bought out by Bank of America.  Now Bank of America is in trouble (but getting better, thankfully), and like many of the other film studios, Marvel could very well be feeling the pinch from the top down.  This is only an educated guess, but it could be true.  Banks DID get hit when the mortgage crisis flared up, and it hit companies like Merrill Lynch and Bank of America pretty hard.

As I said earlier, this is all cyclical.  As more people go to movies, watch TV and DVDs, and even read more books and play video games, it will have a trickle-up effect to the parent companies who then won’t put the pinch on the studios so much.  We saw this happen between 2000 and 2002 – but things got better in the economy, and we all breathed easier.

When things go well, people eat out more, go on vacation more frequently and such, and the studios hurt because ratings and the box office struggle, it’s the parent companies who help them out, because they’re now doing well.  It’s cyclical there, too.  My advice to everyone is: Relax, the world isn’t ending.  The worst thing we can all do is let this get us down.  Then again, entertainment is always there for us, in good times and bad.  This goes back to the Great Depression (which we’re currently NOT in), World War 2, and on through the ages.

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  1. Great take on this Heath

    ALthough I don`t feel for studioTV executives…at all…
    I feel for the people losing their jobs because these companies and their parent companies cut thousands of jobs to try and maintain the same profit margins so their stockholders get to MAXIMIZE the returns on their investments…I feel the average middle class workers who are let go because these companies see an opportunity to even further increase their earnings potential by taking advantage of the current economic crisis and are crying “poor us“ while they continue to to collect fat paychecks and bonuses for their executives and CEO`s..In 2009 January was the first January in the history of the box office that movies collected over a billion dollars in box office tickets sales…A billion dollars(1.0745 billion actually for 32 movies..not including holdovers from 2008)..and they are slashing jobs but making more money than ever before…It`s the same old story that the middle class are taken advantage of in a recession…We have to fend for ourselves but they continue to get rich(er)… Bernard Madoff’s scandal was bad but how do you feel bad for Spielberg and others when they lost millions but are still wealthy…How come we hear nothing about the millions of middle class people like you and me who lost tens of thousands and many of whom have had their lives turned completely upside down…I know I`m ranting but I don`t feel sorry for these companies because they will survive It`s the job loses from their average employess that will suffer…

  2. Thanks for the reply! Everyone’s getting cut out, everywhere, unfortunately.