Spare a copper guv....?

[davem]

Looks like poor old MGM may need to find a Dragon hoard ......

May 14 (Bloomberg) -- Metro-Goldwyn-Mayer Inc., the movie studio controlled by Providence Equity Partners Inc. and TPG, is in talks with lenders to restructure $3.7 billion in debt....

The company, with the debt coming due in 2012, said it intends to stay independent. A specific restructuring plan hasn’t been determined, according to a person with the knowledge of the situation. Possibilities include extending the maturity of the existing debt or a debt-for-equity swap, said the person, who asked not to be identified because the talks are private.

The maker of “James Bond” movies also has been trying to raise money to finance new films, including pictures based on J.R.R. Tolkien’s “The Hobbit.” The studio is in compliance with its loan covenants and cash flow for the fiscal year ended March 31 was within budget projections, the company said. http://www.bloomberg.com/apps/news?p...d=aAkQCXqtlHvg

and as we all know from New Line's disastrous experience with the LotR movies there's simply no profit in Tolkien movies.......

[Boo Radley]

Originally Posted by davem

and as we all know from New Line's disastrous experience with the LotR movies there's simply no profit in Tolkien movies.......

I know! Sad, innit?

[davem]

Maybe MGM will find that New Line's 'creative accounting' over the LotR movies comes back to bite them badly as regards getting new finance - claiming that they made no profit from the trilogy might have seemed a good idea at the time, as a way to avoid handing over anything to those who worked on the movie & in particular to the Tolkien Estate, but how many investors will want to put money into the Hobbit movies (particularly in the current economic climate) if they may risk the same thing? After all, the Hobbit movies could apparently gross billions of dollars but still not make any 'actual' profit....

[Lush]

Urrrrrrrrrrgh.

This is the reason why I tell 99.9% of people planning on starting a production company to learn how to crochet instead (unless they're going small, niche and creative). The crisis is bad enough, but Hollywood essentially runs on outdated business models. There's hardly any money for anything good, so you get stuck making straight-to-DVD schlock, while changing media is ensuring that the idea of "big stars" is becoming more and more obsolete - which in turn makes "big blockbusters" trickier to pull off.

It's not nearly as bad as the music business, which basically poured gasoline on itself and stuck a match as a result of greed (yeah, getting rid of singles CD and trying to force people to buy an entire bad album was really, really smart right as downloading gained momentum), but it's bad.

On one hand, you feel bad for the big studios facing these crises, if only because genuinely good films under their wings are going to get their budgets slashed or grind down altogether, on the other hand, enough is enough.

[TheOrcWithNoName]

Originally Posted by davem

Looks like poor old MGM may need to find a Dragon hoard ......



and as we all know from New Line's disastrous experience with the LotR movies there's simply no profit in Tolkien movies.......

Could some kind soul elaborate on this one please? I rather naively assumed the LOTR movies had made NL a shedload of money. Or were the NL bean counters being a little creative with their final bottomline figures for the films, if only to get PJ off their back claiming that he wanted a bigger slice of the profits pie?

Moving forward, I rather think the financial crisis hitting Hollywood is both a good & bad thing. Yes it may mean some of the bigger studios either merging or going out of business altogether; but then it may mean the end of such ridiculous salary demands of some so-called "A" lists actors and their ageints with their $30m per film silliness.

Of course it will mean original screenplays will be few and far between as studios will only stick with what they know will be profitable. Much in the same way that some software houses that right computer games are more or less sticking to tedious FPS, sports franchises and not much else given the huge cost in developing & publishing a game.

I just hope The Hobbit film does get the green light, and that there's a little more honesty & transparency when it comes to watching where the profits end up

[William Cloud Hicklin]

I rather naively assumed the LOTR movies had made NL a shedload of money. Or were the NL bean counters being a little creative with their final bottomline figures for the films, if only to get PJ off their back claiming that he wanted a bigger slice of the profits pie?

You got it! PJ had to sue and eventually settled for an undisclosed sum- but then the Tolkien Estate, which is owed 7% of the gross- gross, mind you- has sued New Line because they haven't received one red cent.

http://www.variety.com/article/VR111...goryid=13&cs=1

[Kent2010]

William, I think the Tolkien Estate will get their proper dues, it's just the American legal system is tremendously slow. Plus there are several sales of rights to wade through. United Artists, Zaentz and others broke apart the rights and sold different parts to different places. One company has merchandise rights, MGM and NL were in a battle over who had The Hobbit film rights, supposedly NL has the 7.5% gross receipt clause that is owed to the Estate, but NL was trying to claim they only leasers, and Saul Zaentz should be responsible for the 7.5%. Which is ridiculous, and NL has shown this "creative accounting" before, with the actors and Jackson's lawsuits.

This was all a while ago, so I may have fallen behind, but the U.S. legal system is molasses, and now that NL is absorbed, the execs in charge are gone, who knows what the Tolkien Estate can do? It would be great if anyone had updated info about the lawsuit.

[TheOrcWithNoName]

Such creative accounting seems to be quite rife across big corporations, film studos and of course, financial institutions such as the odorous banks & loan companies.

I hope lessons will be learnt and that there will be laws demanding more clarity when it comes to cash flow, profits and who gets what.




...although I am not holding my breath!

[davem]

http://www.laweekly.com/2009-05-21/n...llywood-style/

Now investment bankers Moelis & Co. have been hired to advise the studio on a potential restructuring and to explore options for optimizing its capital structure (i.e., talking to lenders about altering MGM’s long-term debt obligations). “You lower your interest payments, you free up cash to make more movies,” a source tells me. “With debt selling at a discount [50 cents on the dollar], every company is doing the same.”

I hope this new plan of attack can help. Because it’s vital to Hollywood that this buyer survive. Everyone knows that Mary Parent has been holding the studio together with the equivalent of chicken wire: specifically by partnering with studios left and right because they are willing to front the costs of each production. Things aren’t much better on the TV side. And if the auditors declare MGM technically insolvent, all hell breaks loose.

Honestly, I don't know if this could cause problems with the Hobbit movies - if MGM are unable to go ahead then doesn't Zaentz get the rights back?- & I would assume a bidding war among the studios follows - which may stop the current production altogether, & that throws out everybody's plans.

[Mithalwen]

Originally Posted by TheOrcWithNoName

Such creative accounting seems to be quite rife across big corporations, film studos and of course, financial institutions such as the odorous banks & loan companies.

Bear in mind there is just the one accountancy joke:

What is 2+2?

What do YOU want it to be?

[Morsul the Dark]

the tolkien estate makes 7.8 million dollars a year, and I hate to say this however, movie studios make movies so they need funds more dearly than the estate.

Creative accounting is everywhere, especially "Non-Profits" just give the "not profit" money to some as a bonus voila profit gone.

[Boromir88]

Creative accounting is everywhere, especially "Non-Profits" just give the "not profit" money to some as a bonus voila profit gone.~Morsul

True

the tolkien estate makes 7.8 million dollars a year, and I hate to say this however, movie studios make movies so they need funds more dearly than the estate.

True as well...but here comes the but (there's always a but )

The estate also gives millions of dollars to charities and the point of the lawsuit is to seek money that is owed to them. Money that they deserve from a contract signed 40 years ago.

Not to get into some philosophical state of the world (well I guess that is the point if I'm bringing it up ), but it's interesting how in LOTR there is a lot of power behind sworn words, oaths. Now we move into a world where a person's "promise" means very little (if anything at all) in a court of law. You need a signed contract, and now it's about trying to find loopholes to break a signed contract. They broke their obligations, and should pay up, whether it's to a multi-million dollar estate or not.

[William Cloud Hicklin]

Technically the plaintiff in the suit is not the Tolkien Estate, but the Tolkien Trust, its charitable arm, which gives millions in philanthropy.

More to the point: even if the plaintiff were the Manson Family, if they have a contract it must be honored. Full stop.

[davem]

This may be of interest - Charity Commission page for the Tolkien Trust http://www.charity-commission.gov.uk...idiaryNumber=0
You can download their accounts for the year ending April 2008 & see what grants they've made - a total of £1,325,425. (Its in the 'About this Charity' box on the top left - just click 'View Accounts') You'll also notice this little statement

The substantial increase (£187,716 in 2007 to £311,737 in 2008 - or £124,021) in Solicitors' costs and Other legal fees arises from the claim against New Line Cinema in connection with which legal proceedings were commenced in February 2008 ....

The Trustees have been advised that they are entitled to an accounting for their share of a gross profit participation due in respect of the recently released films based on "The Lord of the Rings", as successors-in-interest under a contract entered into in July 1969 which disposed of the film rights in that work. Together with two other plaintiffs jointly entitled to such accounting, they commenced legal proceedings against New Line Cinema in the courts of Los Angeles in February 2008. The three plaintiffs are collectively claiming compensatory damages in excess of $150 million and other relief in the proceedings. An audit is in progress to quantify the claim and the proportionate entitlements of the plaintiffs. The anticipated cost of the legal proceedings remains in the range $1.5 to 2.5 million.

in other words £124,021 which could have gone to good causes has had to be spent by the Trust in pursuing its legal obligations - & yes, as I understand it they are obliged to chase New Line for the money.....

[Bêthberry]

If New Line is found negligent, can they not be required to pay the Trust's legal costs?

[Morsul the Dark]

look it depends on the wording, Nobody denies they get money what's unknown is from who.

[Boromir88]

Originally Posted by Morsul the Dark

look it depends on the wording, Nobody denies they get money what's unknown is from who.

True it could be Saul Zaentz, or whatever rights got split up over the various years. But Zaentz is another plaintiff, along with the Trust, and the Trust is not suing Zaentz so I guess they don't think it is his responsibility.

This could be trying to suck New Line completely dry, but just realize that New Line does not have a good track record at making payments. They failed to pay Jackson what they said they would, they failed to pay a group of LOTR actors, they failed to pay Zaentz, and now the Trust believes they didn't get paid what is owed to them. It's hard to make any good defense for New Line, other than admitting they didn't own up to a contract, considering their track record.

If New Line is found negligent, can they not be required to pay the Trust's legal costs?~Bethberry

I believe that is something the Trust would have to ask for in their lawsuit...I haven't looked at it in a long time, so I forget whether they have or not. But, a judge cannot award money to someone if that person/group of people isn't asking for it.

[radagastly]

Originally posted by Boromir88:

But, a judge cannot award money to someone if that person/group of people isn't asking for it.

Yes, a judge can, but seldom will. I would find it impossible to believe that the Tolkien Trust has not asked for legal fees to be included in this suit, as well as possible punitive damages, considering the track record detailed by Boromir88. Bear in mind, these troubles orbit around a single New Line project. If they appear vulnerable, they may begin seeing lawsuits and audits centered on many other New Line projects, going all the way back to Freddy Krueger.

[davem]

Originally Posted by Bêthberry

If New Line is found negligent, can they not be required to pay the Trust's legal costs?

If they are - but, in the words of the great E.L. Wisty "British justice must not only be done, it must be seen to be ..believed" & I've no doubt American justice is not too different

The real point though, is that even if the Trust do succeed & get their costs awarded (by no means guaranteed, & even if they do what's left of New Line may claim they have no cash to pay it) they have still to spend money fighting the case which they could be donating to charities in real need. Or in other words a lot of real suffering by real human beings will have continued which wouldn't have continued if New Line hadn't been a bunch of 'creative accountants'. Not to mention what the Trust could have done over the last 8 years with the profits they should have got.

[William Cloud Hicklin]

Nope- in the US (unlike Britain) parties to a suit pay their own attorneys' fees, win or lose.

It is however very true that the Tolkien Trust is a fiduciary and as such has a legal obligation to recover monies owed to it.

It's no longer a question of "sucking New Line dry," since New Line as a legal entity has ceased to exist, having been absorbed into Time Warner (which is thus now responsible for New Line's liabilities).

[Morsul the Dark]

Hate to say it, but as with all such matter Time Warner has nearly endless resources they'll simply wait out the estate until it gets sick and quits.

[Mithalwen]

Originally Posted by Morsul the Dark

, movie studios make movies so they need funds more dearly than the estate.
.

Not sure that their need is greater than the many medical, humanitarian and educational charities that the Trust gives to. I don't see why the trust should effectively subsidise the film industry which is what they will be doing if they give up and go home - which seemingly isn't an option anyway.

However given the scandals close to home... surely there is a point where the accounting is so creative that it becomes a criminal rather than a civil matter? Surely the taxmen must be after their cut too?

[davem]

http://www.nbcmiami.com/news/enterta...-Them-All.html

Seems the Trust are in front at this stage.