It is hard to understand why companies that can make billions of dollars find themselves seeking the advantages of the United States bankruptcy system. The last couple of years has seen countless examples of such bankruptcy cases, many of which created new standards for corporate filings.
MGM Studios, a Golden Age of Hollywood production starlet founded in 1924, has started its final steps toward total emergence from its pre-packaged bankruptcy that was approved earlier this month. The studio is now substantially smaller with fewer employees and substantially less financial overhead.
At this point, the company only needs a formal court ruling to be “out of bankruptcy.”
Many of the company’s creditors decided to accept ownership stakes in exchange for the debt they were owed. The company was able to persuade them to accept the investment in ownership primarily because of the upcoming movies it has in its development sights, the largest being the two-part “Hobbit” project, now to be helmed by “Lord of the Rings” master Peter Jackson.
In fact, the very success of the bankruptcy depended on Jackson’s direct involvement. No Hollywood figure working today understands the intricate workings of J.R.R. Tolkien’s fantasy realm better than Jackson. Without his insight, the films’ box office returns would not bring much magic.
Still, that film, along the James Bond franchise and a re-make the of 1980’s teenage war-epic “Red Dawn,” which has been in the can for quite some time, remains in “development hell,” an industry term used to describe films whose production or release remains in question as a result of the complex “Hollywood machine.”
MGM’s bankruptcy strategy also included $500 million in new financing through JPMorgan Chase & Co. that is intended to help back the films and television projects on its slate. The company is now being directed by Gary Barber and Roger Birnbaum, who are known for creating Spyglass Entertainment.
Like in many industries, 2010 proved to be a challenging year for the film and entertainment business. The Walt Disney Company, perhaps in an effort to distance its mainly family-friendly fare from the more adult-oriented, independent appeal of its subsidiary Miramax Films, sold the company for $663 million.
Few consumers realized that the same company responsible for characters like Tinkerbell and Princess Ariel also brought us guys like the nefarious, ear-slicing diamond thief “Mr. Blond” in “Reservoir Dogs” and Billy Bob Thorton’s drunken, sex-addicted Kris Kringle in 2007’s “Bad Santa.”
Out from under the Disney regime, Miramax has partnered with Bob and Harvey Weinstein, the brothers who once led Miramax but were forced out due to creativity and subject matter conflicts with Disney. The new effort will target the production of sequels to many of Miramax’s popular films, including “Shakespeare in Love,” “Clerks,” and even “Swingers.”
MGM is hoping to level off its employee count at around 320 after releasing 50 staff members last week. For a company that once dominated the Hollywood studio industry, that is a startling small number of employees. However, in today’s Hollywood, studios can accomplish much more by outsourcing service lines that once were all consolidated under one roof, such as marketing and distribution and special effects.
Additionally, studios are no longer saddled with lengthy actor contracts, a one-time standard in the industry, like professional athlete contracts. Today, actors sign short-terms deal only for specific films and typically seek portions of box-office sales in lieu of large studio pay-outs.
As of this week, the first of “The Hobbit” films and the next James Bond movie are expected to hit theaters in late 2012, probably around the holidays.