Big Advertisers May Be Tinseltown's Next Cash Cow

With Wall Street battered and technology changing the rules of the movie game, Hollywood moguls are under pressure to remake the industry. We went to Sky Moore, of Stroock & Stroock & Lavan LLP, to take Tinseltown’s temperature.

Q: What do the studios have to do to get control of their businesses again?

Moore: They have to go back to studio system and stop paying residuals to the guild. Studios need to put people on long-term contracts and sue them when they breach. They have to got to be tough to get costs down. Residuals are idiotic. If you look at history, they were intended to be a few bucks on the side for TV and video. What’s happened over time is that by a fluke of history, video is now the main event, so residuals have skyrockedted from what was originally intended.

Q: With Wall Street pretty much out of the game, where is the funding for the film business going to come from?

Moore: The money is going to come from India, China and advertisers. There are going to be equity investments from advertisers where they take over the content.  There was a trilogy of soccer films called Goal!, funded 70% by Adidas, that’s a good example.


Q: Doesn’t that come with its own problems?

Moore: Hollywood sold out years ago. Castaway was just a big FedEx commercial, and Transformers was one big toy and car commercial. Companies such as Red Bull, Pepsi, Coke, and BMW are funding shorts, TV, and internet clips. All of them have entertainment divisions now. In Goal!, 70% of screen time had to have Adidas products; that was easy because it was a soccer film. Castaway is also a good example where the product doesn’t have to be so blatant.  Advertisers are very savvy. They know how to do it.


Q: What about Chinese and Indian investors? Why do they want in right now?

Moore: Part of it to is be on worldwide stage and say ‘We’re here.’ It’s almost more a nationalist statement and an international media play. It has nothing to do with bringing Indian films to U.S. or U.S. films to India.
In China, it’s the same: they have large entertainment companies there, they speak English, have money, and want to play on a worldwide stage.


Q: What’s going to have to change for this business to stabilise again?

Moore: Talent salaries are going to go down; they’ve got to go down. Offers right now are going out at a fraction of what they used to be, sometimes as much as 50%. There just aren’t as many offers. Half of the films are getting made. Volume drop has been big. All the big studios are going to benefit. They have trademark value and library value. Independents will get crushed. You need the kinds of big movies where everyone wants to go. Warner Bros. tried to do with Watchmen.

Schuyler (Sky) M. Moore handles complex financing and tax issues facing the entertainment industry. His clients include producers, sales agents, foreign distributors, studios and financiers. A frequent columnist for The Hollywood Reporter, Moore serves as an adjunct professor at UCLA School of Law and he teaches Motion Picture Financing at the UCLA Anderson School of Management.

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