The Business: Scared Straight?

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I'm Matt Holzman with The Business Brief, a guide to what's happening in and around the business.

As the government was cobbling together its plan to save the economy earlier this year, lobbyists for the entertainment industry headed to Washington with their Armani hats in hand. But about that time, lawmakers saw the impressive box office numbers for a surprise hit called Paul Blart: Mall Cop and they said "Hey, they don't need our help!" The business is recession proof!"

Blockbuster season this year will only bolster that misconception. Fast & Furious and Monsters vs. Aliens made big bucks even before summer had arrived. Wolverine made $85 million in its opening weekend last weekend and Star Trek just pulled in $76 million this past weekend.

And there's an incredible slate of sure-fire moneymakers on deck: the latest installments of the Harry Potter, Ice Age, Transformers and Terminator franchises, the next Pixar film, a second Night at the Museum, the follow-up to The Da Vinci Code and the next Borat-style comedy from Sacha Baron-Cohen. These movies will make a huge pot of cash…that is, if they don't cannibalize each other.

In fact, if I had a brain in my head and a dollar in my pocket I'd be buying Regal Entertainment stock right now, because all these big titles add up to a very profitable year…for movie theaters. But not necessarily for the studios. Because whatever upside there is will be cancelled out by the devastating results being reported by the other divisions owned by the conglomerates that own the studios.

You see, the movie business is more or less recession proof. It's just that no one is strictly in the movie business any more. Even the term entertainment business is a bit of misnomer. The media business is the term we should all use now.

For instance, while Fox is doing great on the movie side, News Corp, which owns the studio but also owns newspapers, just reported a 17% slide in revenues for the first three months of the year. The same is true throughout the industry.

But that doesn't mean that the government should be bailing out the business, because things weren't looking that good long-term for the movie studios and TV networks anyway, and it may be entirely too late for the record labels. Call it a "shifting media landscape" or call it the Internet, the business is headed for a terrifying and uncertain future. What's frustrating is that unlike the banks and the car business, the entertainment industry's struggles are due in large part to forces beyond its control. And yet the banks and the car companies are getting billions from Uncle Sam for mistakes for which they are almost wholly culpable.

The upside of the economic crisis and the Fed's tough love is that there's finally a fire under the butts of studio and the network execs to get some control over the things they can control – like costs. For instance, the recession has given them the leverage – and the cojones – to do what they've promising to do for years: just say "no!" to outrageous star salaries, outlandish producer deals and skyrocketing budgets. Because at the end of the day, unlike certain other American industries, Hollywood still puts out a great product – they just need to learn to do it at a cost. And the scary future has also given a surprisingly conservative business the courage to experiment – like putting Jay Leno at 10 o'clock. Say what you will about NBC, but at least they're trying something different.

"The party in Hollywood is over," recently said a friend of mine, a very smart and currently unemployed film executive. And that may be a bad thing for the bank accounts of individual stars and agents and executives – it might be good for the long-term survival of the entertainment…I mean the media…business.

I'd love to know what you think. You can comment on today's commentary or subscribe to the podcast at For KCRW, I'm Matt Holzman.



Matt Holzman