Hollywood no longer recession-proof?

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OscarGuy
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Postby OscarGuy » Mon Oct 20, 2008 10:00 am

I think it's largely because they have tied themselves heavily into the stock market. That mixed with their lackluster output has put a damper on their prospects at the box office, so people aren't going...
Wesley Lovell
"Any society that would give up a little liberty to gain a little security will deserve neither and lose both." - Benjamin Franklin

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Sonic Youth
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Postby Sonic Youth » Mon Oct 20, 2008 7:24 am

Signs of a Pullback Emerge in Hollywood
By LAUREN A. E. SCHUKERArticle
Wall Street Journal


Paramount Pictures' abrupt decision to delay two major holiday films -- including one with Oscar aspirations -- may be an early sign of Hollywood's retrenchment in the midst of the U.S. economic crisis.

Paramount late last week said it would delay "The Soloist" -- a Los Angeles drama about a homeless violin player and the newspaper columnist who intervenes in his life -- until next March. The movie comes from DreamWorks, the Paramount unit whose principals, Steven Spielberg and Stacey Snider, recently left to start a new film venture.

The decision to delay the movie came barely a month before its planned Nov. 21 debut, and means that Academy Awards consideration for "Soloist" star Robert Downey Jr. will be put off until next year.

The studio also delayed the limited release of "Defiance" -- a war picture with Daniel Craig from its Paramount Vantage specialty unit -- until the end of 2008, meaning the film won't be in wide release until January.

Paramount, a unit of Viacom Inc., announced the delays as part of a new business strategy in which it is cutting costs by reducing the number of films released each year from about 25 to 20. To start cutting back in 2008, the studio delayed a couple of films, which puts off most of the cost of marketing and distributing the movies until next year.

Including other reductions the studio has made this year, Paramount will wind up saving about $60 million in overhead in 2009. Paramount hadn't yet started a television campaign for "The Soloist," so the delay won't cost the studio any wasted advertising money, says Rob Moore, vice chairman of Paramount.

The new plan "is definitely responsive to the current economic climate," Mr. Moore said. He added that the studio has been eager to implement the new plan for some time but first had to resolve a number of outstanding issues, including the recent departure of DreamWorks' principals, before instituting the cutbacks.

"We now have a new strategy that wasn't possible before the DreamWorks deal was concluded," says Mr. Moore. "We couldn't engage in long-term planning because there was a big variable blocking that process."

The film industry has long argued that it is recession-proof, able to attract audiences during down times because moviegoing is cheaper than some other forms of entertainment such as sports and travel. Paramount's cutbacks signal that Hollywood is nonetheless bracing for the impact from the current economic turmoil.

Paramount Vantage/Courtesy Everett Collection

"Defiance," starring Daniel Craig, won't be in wide release until January.

Hollywood already made a round of reductions this year. Most of the major studios shuttered or downsized their "specialty" divisions -- which release small, indie-like films -- in reaction to a crowded marketplace that has made it more expensive to compete for audiences. In June, for example, Paramount absorbed the majority of the staff at its Paramount Vantage label into its main studio, cutting about 50 employees and reducing the number of releases. Time Warner Inc.'s Warner Bros. made a similar move with its New Line division.

Paramount's trims also come at a time of turmoil for Viacom, as the advertising downturnhas pressured its worsening financial outlook. Recent market swings even forced media mogul Sumner Redstone to sell a $233 million chunk of his holdings in Viacom and CBS Corp. to head off debt problems at his family's holding company.

Cutbacks are also beginning to show up elsewhere in the entertainment industry. NBC Universal Chief Executive Jeff Zucker told staff in a memo Friday that the company would be cutting its budget by $500 million next year.

At Paramount, Mr. Moore says the departure of DreamWorks' principals has changed the studio's approach. Previously, Mr. Spielberg and Ms. Snider could independently "greenlight" -- or put into production -- up to eight films a year. That existing deal made it difficult for Paramount to reduce its releases to 20 films a year.

A DreamWorks spokesman declined to comment.

With Mr. Spielberg and Ms. Snider gone, Paramount had room in its film slate for a new partner. It recently made an agreement with Marvel Studios, a unit of Marvel Entertainment Inc. Paramount will distribute all four of Marvel's feature films through 2011, as well as "Iron Man 3," if the film is made. The new business model, which Paramount announced this past Wednesday, reflects the new agreements with DreamWorks and Marvel.

Its big hits this year, including "Iron Man," involved distribution of other producers' films, meaning that the studio reaped a relatively small portion of the revenues.

A number of the films it produced itself fared less well at the box office this year, like "The Love Guru."
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