Media C-Suite Week No. 30, Issue No. 17

A Week in he Media C-Suite Issue 17

A Week in the Media C-Suite

It’s Sunday, the 23rd of July, 2023.

The first full week of strike action by the combined forces of the WGA and SAG-AFTRA unions have stirred both passions and questions. 

The passions are founded on fear that most writers and performers have for their professional futures. Well founded given the challenges they face. The questions are being begged by the overt disparity between those who create the content and those who sell it.

Just Catching Up?

You might have to run.

Here’s a taste of what you might have missed this last week.

Where There’s Smoke

A global industry is focusing attention on the historic heart of Hollywood in Los Angeles County. For many years now, it has been the wild fires that summer heat brings to the region raising plumes of warning to the rest of the world. 

But this week it is frustration that’s billowing up in great clouds of red flags. Those red flags are a signal to the world’s most experienced investors. Many of these investors have been pouring capital into the global Media & Entertainment industry as technology, global access and changing demographics all converge on an industry controlled by media conglomerates desperately trying to hold back the tide.

The media conglomerates have enjoyed decades of ridiculously free cash flow as they shed cost intensive regional distribution and delivery infrastructure in favour of the global internet and pushed nearly all financial risk onto the shoulders of content producers. Momentum has driven most of that profits for most of that time. But times are changing fast.

The business model that media conglomerates cling to so hard is clearly broken. When CEO’s of those media conglomerates can convince shareholders that total compensation packages reaching into the hundreds of millions of dollars are reasonable, but the creators of successful content can’t afford health care, something is clearly ready for the chopping block. 

If the pen is truly mightier than the sword, then it would seem foolish to leave those who wield pens with no choice but to strike. 

In a natural context, the balance of power between those who sell the content and those who create the content should be about equal. For those at the top the media conglomerates, fear of change is understandable. But change is coming. 

Investors don’t call it change, they call it disruption. And they can’t wait to back it. 

Read our latest article on the Media C-Suite for more.

Creatives Can Beat the Studios

Creatives Can Beat the Studios at their Own Game; and Should

But will they?  The only obstacle to equity in the Media & Entertainment industry is a mindset carefully cultivated by decades of corporate control that is today a mere illusion.

Other People’s Money

One of Hollywood’s most feted financiers to Indie producers filed for bankruptcy protection in the United States on Wednesday. The surprisingly large number of companies within the umbrella of the BRON Media group seems not to have fared so well despite backing DC Comics’ breakout Indie hit, Joker (2019), which raked in over US$1 Billion with worldwide gross revenues.

The production budget is estimated to have been a modest US$70 million and the film was marketed and distributed by Warner Bros. According to an analysis by Deadline in 2020, the net profits from Joker at the time amounted to an estimated US$437 million after production, marketing, distribution and participation costs were deducted from worldwide gross revenues. Deadline reported at the time that BRON may have earned as much as 25% of that net profit.

See the full 2020 Deadline analysis here.

But that seems unlikely.

BRON provided finance. Perhaps it financed 25% of the production budget for Joker under terms of its deal with Warner Bros. Due to the confidentiality provisions of most Hollywood contracts, the world may never know. But that is not equity. That is not participation in net profits. 

What BRON likely received was finance fees and repayment of principle from provision of debt capital to the project’s production company, Joint Effort (a company set up by Bradley Cooper and Joker director Todd Phillips). That debt capital was likely backed in part by the distribution agreement from Warner Bros. as collateral for a loan.

Where BRON found the money to finance 25% of the production budget is an open question. It is the same question that arises for each of their nearly 75 films on which they are credited as Producer.

For the moment, the bankruptcy proceedings in the United States are sealed. A hearing will take place in August to consider arguments from a number of creditors, and will coincide with similar proceedings taking place in Canada, where BRON’s founder, Aaron Gilbert, originally set up the company. 

Those hearings may just reveal a wider story on where the finance capital that pays for content production actually comes from. It’s not from the Studios, and its a discussion that is long overdue.

For some background on the content capital stack, read this:

A Confusing Presentation for Tax Credits

Soft Money, Tax Credits and Production Rebates

Why are so many film-makers getting it wrong when discussing tax incentives with investors? We take a look and help explain, so investors don’t walk away.

Looking Ahead?

That’s where opportunity is found!

The Calm

This weekend’s box office results are something to celebrate. 

Comscore estimates that this weekend will see a US$302 million US Box Office with a year to date figure of ~US$5.4 billion through Sunday. That is up 16% against the same period last year. Deadline is estimating a Global Weekend Box Office of US$465 million.

According to our friends at Screen Dollars, “The last three days will go down as the biggest box office weekend of this year, and the highest since April 26-28, 2019 when AVENGERS: ENDGAME set the record for an opening weekend with $357.1M, pushing the number for all films that weekend up to $402.1M.”

Read the full Screen Dollars’ Weekend Review, its impressive:

Weekend Review… 7/21-7/23

This weekend’s total box office of $302.0M has proven that the media buzz around “Barbenheimer” was much more than hype.

Cinema is finally in a resurgent state, and will likely do well for the remainder of the Summer and into the Autumn.

But films expected for the big screens following this Christmas season in North America are in doubt due to the strikes taking place now. If they are settled by October, most analysts predict little to no impact on the US Box Office. If not, then “foreign” films produced outside of the WGA and SAG-AFTRA environments will likely fill cinemas internationally and the US Box Office will likely begin to suffer.

The end result may be that US cinemas begin to expose Americans to an increasing number of high-quality films and highly talented actors from around the world. Distributors outside the US Studio “system” are already lining up and investors are looking to back them.

The Media C-Suite will report more on these circumstances and the opportunities they present in the coming weeks.

In the meantime …

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