hoc opus

Mixed amidst Viacom's first release of financial data ― net earnings of $130 million, down nearly 70% due to a $94 million loss in the studio driven by a 42% drop in worldwide theatrical revenues ― was more detail on its impending sale of the DreamWorks 61-title library. Executives indicated that the expect at least $900 million for the library, up from earlier estimates of $800 million-$850 million.

While Paramount is still in talks with George Soros' Soros Capital Management, according to Variety, other possible buyers include "Goldman Sachs, led by banker Joseph Ravitch, [who] is said to be readying an offering worth about $930 million. Ravitch helped put together financing for the Weinstein Co. and the sale of MGM to Sony and a group of investors. And another possible offer is said to be coming from Dresdner Bank representing some Russian investors." Should Soros prove successful, it is reported that he might be joined by Dune Capital Management the film co-financing entity, which is a spinoff from Soros Capital.

Whichever way it falls out, this puts the value of the rights to these films at an average of approximately $15 million.

Posted by Marc at 11:51 AM | Permalink | Comments (0) | TrackBacks (0)

Former Disney unit MovieBeam, with a service that allows customers to rent movies from a library of 100 titles stored in a set-top box, has been restarted with $48.5 million in fresh cash from Disney, Intel, Cisco and Mayfield Fund and Norwest Venture Partners, two venture capital funds. The newly independent company carries with it the distribution agreements that it has with all major studios excepting Sony -- which, while in discussions with MovieBeam, according to Variety, "is likely holding back content for its own video-on-demand service Connect, set to add movies in March." One should note, though, the recent reorganization of the currently-music-download-only-service and its uphill fight against Apple's iPod and iTunes Music Store combo, as reported on ZDNet News

Details about the service from Variety highlight Disney's demonstrated commitment to collapsing the distribution windows to a what-you-want-when-you-want-it-where-you-want-it model:

Most films will be available in the video-on-demand window, which typically comes 30 days after homevideo. But in a deal that's the first of its kind, MovieBeam will have films from Disney the same day they hit homevideo, with an option to watch in high-definition.

While there will no doubt be atremendous amount of press devoted to whether there is a demand for another box on the TV with limited content (access is only to movies that have been downloaded), the kicker is how the films are delivered in the initial twenty-seven (27) markets: piggybacked on PBS airwaves.

The LA Times also notes that "other experiments with video on demand, such as MovieLink and CinemaNow, have failed to catch on with customers. Adams Media Research estimates that Internet movie rental services reaped only $17 million in revenue last year."

This is another setback for NetFlix, which announced a delay in launching its own VOD service back in October, when "Reed Hastings, the company's chief executive, told analysts on a conference call that the costs of licensing content for a download service would be prohibitive in the current climate." (see MarketWatch)

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Sony has set its wholesale prices for next-gen Blu-Ray discs. Amidst all of the chatter of the flattening of the home video revenue juggernaut, it's not surprising that Sony is seeking to secure growth in home video. Even if people don't seek to upgrade their libraries, new title sales will still deliver more money.

As reported by The Hollywood Reporter,

"Catalog Blu-ray disc titles will wholesale for $17.95, about the same as DVDs when that format hit the market in 1997. New-release Blu-ray discs will wholesale for $23.45, a premium of 15%-20% over what suppliers were charging for new theatrical DVDs."

That translates into a retail price of about $34.95 for new movies and $29.95 for catalog films, from BusinessWeekOnline.

Sony's company line was presented by Benjamin Feingold, president of Sony Pictures Home Entertainment, "The premium is for a way better format and to remind retailers that at the time we launched DVD, VHS was selling for $55 wholesale in the first window."

In this announcement, Sony also highlighted its bundling of DVDs and UMDs for just pennies more than the cost of a DVD alone.

UPDATE: This isn't surprising given the announcement coming just a few weeks later, covered in Variety and The Guardian, that "Sony Pictures Home Entertainment, Paramount Home Entertainment and Warner Home Video are cutting back on movie releases for the PSP." Bundling will help Sony move the remainder of its inventory and prop up the type of numbers it reported in 2005 for UMDs. However, The Guardian summed it up in typical Brit bite:

"While it might not surprise you that UMD, a disc format that can only be played in one company's machine, costs more than a DVD, and can't be (easily) played through a TV might not have a great chance of thriving, the same thought clearly didn't occur to Sony's executives."

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Changes are afoot at MGM and the focus is finally clearing up. As pointed out by The Hollywood Reporter,

"Hollywood's once-mighty lion is, in fact, owned mostly by equity investors, including Providence Equity Partners (29%), Texas Pacific Group (21%), DLJ Merchant Banking Partners (7%) and Quadrangle Group(3%). Sony and Comcast each have a 20% stake. MGM has a distribution partnership with Sony that covers films produced by MGM that originate from the library, like the upcoming Bond installment 'Casino Royale.'"

"However," as noted in Variety, "a clause in the [acquisition agreement] will allow MGM to become an independent distributor and cease its arrangement with Sony in April [2005], if the company chooses."

First, MGM hires Harry Sloan as chairman and CEO in October of last year, who announced his intentions to beef up production activities. Then, it's announced that Rick Sands will be moving into the COO spot, just as Dan Taylor resigns his post as President. So, although the original story behind the transaction was for Sony to mine the value of the 4,000 title library, growing its value through new distribution channels (think VOD and VCast), now's there's an announcement that MGM is looking to become the indie rent-a-system pipeline.

That's right, the studios are consolidating - as Dreamworks moves into Paramount and Pixar makes permanent its Disney pipeline - but smaller players are flush with cash - think The Weinstein Company. In fact, specifically think about Harvey and Bob, because Variety reported that MGM "is close to a deal with the Weinstein Co., and in talks with several production companies, including Lakeshore Entertainment and Bauer Martinez, to forge distribution pacts." It has been reported that any such deals would be non-exclusive and focus MGM on distribution and marketing, without spending its own funds on development or production. The Los Angeles Times gets to the meat of the matter for why anyone would want to distribute through MGM,

"Movies flowing through MGM's distribution pipeline would qualify for the studio's existing pay TV and other ancillary deals in the U.S. and in such foreign markets as Japan, Australia, Latin America, Brazil and Europe. Those deals are financially significant to producers because they can yield tens of millions of dollars that can be used to fund new productions."

What's not yet clear is how MGM will work with the Weinsteins on home video, given Genius Products LLC, a joint venture that, according to The Hollywood Report, "will get exclusive U.S. home video distribution rights to all feature films and direct-to-video releases owned or controlled by the Weinsteins." Also afoot is the potential sale of United Artists, after The Times Online reported that MGM has been approached by at least one party with a $500 million bid for the unit, which would be sold with some library titles and, likely, its post-theatrical distribution agreements.

Posted by Marc at 08:21 PM | Permalink | Comments (0) | TrackBacks (0)

And just as quickly, it appears that DreamWorks won't be consumed by the mothership just yet. Variety reports today on the end of the two-month exclusive negotiation window for the potential acquisition of DreamWorks by NBCUniversal and the breakdown in discussions.

While focusing on an apparent price change by NBCUniversal that would bring the sale below the initial $1 billion level, the article points to Steven Spielberg as the greater cause of disruption. Desiring creative control and an intact organization, DreamWorks used the price change as reason to walk away from the table.

Variety makes clear that Universal will still be looking for acquiring content to fill the big empty pipe they are regaining from the UIP slimdown with Lions Gate still seen as prey around town (despite moves to bulk up). Also, there are other studios that may find DreamWorks a tasty morsel, including Paramount -- with its own UIP pipeline issue -- and Disney -- with an unclear future with Pixar, DreamWorks Animation is an alternative.

At the end of the day, that price point may be the key obstacle. Noting that with only a 60-title library the relative valuation far exceeds that of MGM when it was acquired by Sony, Variety intuits that financial buyers would not step up.

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