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Hollywood Losing Power to Wall Street? October 14, 2006

Posted by David Card in Media.
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The Times says Hollywood power is shifting to Wall Street. Maybe.

The story’s hook is Warners producer Joel Silver, of Matrix “fame,” signing a six-year, $220M production deal for 15 relatively low-budget movies with a group of funders including CIT Group, JP Morgan and DE Shaw.

    To his new partners, Mr. Silver seems like a good bet. In more than two decades as a producer on the Warner Brothers lot, he has produced 46 movies, which have generated $5.6 billion in global ticket sales.

I’m at home and don’t have access to Kagan data — and I should really defer to them on this kind of analysis anyway — but let’s look a little closer. This is according to my back-of-the-envelope analysis, based on data from two of my all-time favorite Websites IMDB and Box Office Mojo. Of the dozen released movies Silver produced (not counting exec producer billing) since 2000, seven had budgets under $40 million, which is what he’s doing for the financial consortium. (He’ll still do big movies for the studios.) Those seven produced box office grosses of just over $500 million, and production costs of just over $200 million. (No video sales and no marketing costs from me today.) The similar figures for his five big-budget blockbusters were $1.5 billion and half a billion.

Hollywood accounting is notorious, but the return on the big-budget movies looks better in both absolute dollar and percentage terms. And the finance guys will still need to pay the studios for distribution. According to the story, Silver’s getting ownership of the movies, DVD rights, and a bigger cut. So you tell me, who’s got the power?

Of course, if this is a real trend, it means the studios are placing all their bets on franchises and megahits, with only distribution fees to smooth out what are sure to be wild swings between hits and misses. The power’s still in Hollywood, all right, it’s just all with the talent or the franchises.

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