Category: Business

PUTTING OUT THE FIRE
Johnny Cash’s family quashing an ad campaign for hemorrhoid-relief products set to the tune of “Ring of Fire.”

Polaroid Warns Film Users Not to ‘Shake It’
LONDON (Reuters) – Outkast fans like to “shake it like a Polaroid picture,” but the instant camera maker is warning consumers that taking the advice of the hip-hop stars could ruin your snapshots.
Outkast’s number one hit “Hey Ya” includes the “shake it” line as a reference to the motion that amateur photographers use to help along the self-developing film.
But in the “answers” section on the Polaroid Web site, the company says that shaking photos, which once helped them to dry, is not necessary since the modern version of Polaroid film dries behind a clear plastic window.
The image “never touches air, so shaking or waving has no effect,” the company said on its Web site.
“In fact, shaking or waving can actually damage the image. Rapid movement during development can cause portions of the film to separate prematurely, or can cause ‘blobs’ in the picture.”
A Polaroid spokesman added: “Almost everybody does it, thinking that shaking accelerates the development process, but if you shake it too vigorously you could distort the image. A casual shake typically doesn’t affect it.”
Polaroid said its film should be laid on a flat surface and shielded from the wind, and that users should avoid bending or twisting their pictures.
Of course, “lay it on a flat surface like a Polaroid picture,” doesn’t sound nearly as cool.

Bowl Sponsor AOL Seeks Refund
LOS ANGELES (Hollywood Reporter) – The controversial Super Bowl halftime show, in which Janet Jackson bared a breast to the chagrin of the NFL, CBS and show producer MTV, has touched the world’s largest Internet service.
America Online has canceled plans to stream on-demand the halftime show that it reportedly paid $7.5 million to sponsor. The Time Warner-owned firm is reportedly seeking a refund for all or some of that money. Although AOL issued a statement distancing itself from what some government officials are calling a crass halftime performance, a representative declined comment on TW’s desire for compensation from Viacom.
“While AOL was the sponsor of the Super Bowl halftime show, we did not produce it,” the company said. “Like the NFL, we were surprised and disappointed with certain elements of the show. In deference to our membership and fans, AOL and AOL.com will not be presenting the halftime show online as originally planned.”
The $7.5 million AOL paid to sponsor the halftime show included several ads for its new TopSpeed service. The sponsorship, therefore, represents a significant discount to the $2.3 million CBS reportedly charged per 30-second Super Bowl ad.

Pixar Ends Disney Talks, Seeks New Partner
LOS ANGELES (Reuters) – Pixar Animation Studios Inc. on Thursday ended talks with Walt Disney Co. to renew a lucrative movie distribution deal that has produced such blockbusters as “Toy Story” and “Finding Nemo.”
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Pixar, the pioneering computer animation house founded by Apple Computer Inc.’s Steve Jobs, said it would look for another studio partner to distribute its films starting in 2006, when its current deal with Disney expires.
Shares of both companies fell 6 percent after hours.
Observers had expected Pixar and Disney to renew their partnership, which has generated five mega-hits since 1995 that have collectively earned $2.5 billion at the box office.
The Pixar deal has accounted for a large share of Disney Studios’ operating profit in recent years, but Disney said Pixar’s final offer on a renewed contract would have cost it hundreds of millions of dollars.
The move was an unexpected blow to Disney, which pioneered feature animation with 1937’s “Snow White” but has seen its traditional hand-drawn films like the 2002 flop “Treasure Planet” eclipsed by Pixar-style computer-animated hits.
Chief Executive Michael Eisner is also under fire from an heir of founder Walt Disney, Roy Disney, who claims Eisner has mismanaged the company and sapped its creative energy.
Analysts and investors said Pixar could be using its announcement as a negotiating tactic and some observers did not rule out a resumption of talks.
PIXAR ‘MOVING ON”
“After 10 months of trying to strike a deal with Disney, we’re moving on,” said Jobs, Pixar’s chief executive.
“We’ve had a great run together — one of the most successful in Hollywood history — and it’s a shame that Disney won’t be participating in Pixar’s future successes.”
Disney Chief Executive Michael Eisner issued a statement wishing Pixar success.
“Disney management could not accept Pixar’s final offer because it would have cost Disney hundreds of millions of dollars… under the existing agreement” without giving Disney enough return on new collaborations, the company said.
A source close to Disney’s side of negotiations said that Pixar had also wanted copyright to the valuable library of previous films by the partnership.
Disney now owns the copyright and can make sequels and other works based on the films in the current deal, which includes two upcoming titles — “The Incredibles,” set for a November release and “Cars,” due in 2005.
Pixar had been expected to close a deal by the middle of this year and had said it would prefer to renew with Disney.
Roy Disney, the former chairman of Disney’s animation department, said that the breakup would be bad for Disney shareholders long-term and accused Eisner of failing to nurture the relationship with Pixar.
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“It makes it look like Eisner did something wrong again, but we shouldn’t jump to conclusions. This could be a negotiating tactic by Pixar as well,” said Patrick McKeigue, an analyst at Independence Investment, which holds Disney shares.
“It’s not a happy thing when two long-time partners break apart and Disney, of course, will survive. However, psychologically, the market was hoping there would be an agreement shortly,” said Hal Vogel, a New York-based media analyst who runs Vogel Capital Management.
Other studios that have expressed an interest in a Pixar deal included Warner Bros., a unit of Time Warner Inc., Sony Corp., 20th Century Fox, a unit of Fox Entertainment Group Inc. and Metro-Goldwyn Mayer.
Banc of America Securities analyst Michael Savner said Pixar had set itself up to compete at the box office with Disney’s future family-friendly offerings.
“Disney could put out its movies at the same time as Pixar,” he said. Many investors had already assumed Pixar would get a much-improved deal, including on the two pictures in production, he added.
Staffing at Disney’s animation department has shrunk by more than 70 percent since 1997. Disney is set to release its first in-house computer-animated film, “Chicken Little,” in 2005.

McGuinty defends spending $1 million to bring U.S. talk show to Toronto
TORONTO (CP) – Spending $1 million to bring NBC’s Late Night with Conan O’Brien show to Toronto for one week is a “great investment,” says Ontario Premier Dalton McGuinty.
“Given the media coverage that we’re going to get and the viewing audience, given the fact they’re going to provide some great exposure to some Canadian talent, I think it’s a great investment,” McGuinty told reporters Thursday.
The federal and Ontario governments each kicked in $500,000 to relocate the cast and crew of the popular talk show to Toronto for the week of Feb. 10.
The provincial money is coming from a special fund to help the city’s tourism industry recover from the impact of last year’s deadly SARS outbreak.
“This city has gone through one heck of a year,” said McGuinty, referring to the devastating impact on tourism from SARS, mad cow, a higher dollar and even the Iraq war.
An official of the Canadian Taxpayers’ Federation had criticized the use of taxpayers’ money to pay some of the costs to relocate the NBC show to Toronto, rhetorically asking if the governments would want O’Brien to go out west next to help with the mad cow crisis.
Ontario’s Tourism Ministry expects the expenditure will help boost tourist visits to Toronto because of the five hours of American TV network exposure for the city.
“There’s going to be 20 million U.S. viewers there, and we look at that as a pretty good investment,” said ministry spokesman Jim McPeak.

DISC-ORD AHEAD
(Variety) HOLLYWOOD — Writers and studios are on a collision course over the red-hot DVD market.
The Writers Guild of America, responding to rising ire among members over their slim slice of the revenue pie, has elevated DVD to its top issue as it heads into bargaining.
That move is going to hit a rock-solid wall of studio resistance, and that impasse undoubtedly will complicate already complex labor negotiations.
Should the issue spiral out of control as writers become angry over the studios’ perceived intransigence, a strike would become a possibility. The WGA struck three times during the 1980s and nearly went on strike three years ago.
Despite that threat, budging even a millimeter on DVDs is out of the question for studios.
Here’s what they’ll argue:
Moviemaking costs have continued to escalate sharply, with the MPAA estimating in March that the average price of a major studio film had risen to nearly $90 million. Negative costs for 2002 films rose by almost 25% to an average $58.8 million and marketing expenses dipped 1.25% to $30.6 million.
DVDs aren’t ancillary income; they essentially keep studios afloat. Only one in 10 features recoups its costs from domestic box office; only four in 10 recoup after all revenues come in — foreign B.O., TV and DVD.
The future profitability of DVDs could vanish, given the already massive pirating of the discs. The MPAA is already claiming the losses amount to $3.5 billion annually.
If the WGA’s contract is adjusted upward, the studios probably will have to adjust the DGA and SAG contracts as well, meaning even higher costs for them.
The looming battle comes at a time of sizzling DVD sales for titles such “Finding Nemo,” “Pirates of the Caribbean: Curse of the Black Pearl” and “Seabiscuit” during this Christmas season. Those results have fanned the fires of discontent among the scribes.
The writers are stuck with uncommonly small residuals amid the current DVD bonanza because the payout is based on a formula unchanged since it was set in 1985.
With WGA member earnings remaining flat or increasing only marginally for the past five years, writers are clearly in no mood for the studios’ likely poor-mouthing about how agreeing to the guild demands will bankrupt Hollywood.
Here are the key points in the WGA’s argument as it heads toward negotiations:
These are boom times in worldwide box office and TV advertising.
Those gains pale in comparison with the DVD sales, which rose from $11 billion last year to $15 billion this year — an “astronomical” revenue stream, according to WGA East president Herb Sargent. The WGA estimates writers earned $18 million out of last year’s $11 billion in DVD revenues.
The 1985 formula, tilted toward studios to help the fledgling videocassette technology, doesn’t reflect changing showbiz economics in the years since then.
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The economics of DVD are enormously attractive. Wall Street analyst Jessica Reif Cohen of Merrill Lynch has estimated the 2002 profit margins for DVD at 66%, compared with 45% for videocassettes; average wholesale unit price is $16 with $2.75 for marketing, $1 for duplication, 90¢ for packaging and 80¢ for distribution, leading to a $10.55 gross profit per unit. A hit selling 11 million DVDs equals a $121 million profit.
Under the WGA’s contract, which expires May 2, about a nickel per DVD sold goes to the credited writers. The rate — set at 0.3% of wholesale revenues on the first $5 million, then 0.36% after that — has been in place since 1985, even though the standard WGA residual rate is four times higher, or 1.2% of revenues.
For a moderately successful film selling 1 million DVDs and generating $15 million in wholesale revenues, the credited writers would split a payout of around $50,000 — pretty tiny compared with the $10 million in profit the studio will see.
Even more aggravating to the WGA is how the revenues are calculated under this particular formula.
Unlike its other residual agreements, video/DVD revenues are based on producers’ gross receipts rather than distributors’ gross. The producer figure can be significantly less at major studios, since distributor costs can be subtracted.
“The residual formula for homevideo in the guild agreement is one of the worst formulae we have,” said Charles Slocum, assistant exec director at the WGA West.
The guild pushed hard on the video/DVD issue in the 2001 negotiations, asserting the 1985 costs of videocassette manufacturing were $14 per unit, but had dropped to $3 per unit with DVD manufacturing costs at $2 per unit.
The WGA asked first for a 100% hike, scaled that back to 25% after the first month of talks and then settled for no hike with a one-time $5,000 fee for the right to include the movie script on the DVD.
The WGA’s major gains in 2001 came from hiking residuals for foreign TV, the Fox net and pay TV. The potential strike threat was taken seriously enough that studios spent several months speeding up production to create a stockpile; negotiations went three days after expiration before a deal was hammered out.
Currently, no talks are scheduled, but the future looks rocky and the May 2 contract expiration is only four months away.
The WGA began polling its members last week on a 25-point “pattern of demands,” which highlighted DVD and gave special notice to healthcare and jurisdiction over reality TV and animation.
And in a notable change from 2001, the WGA isn’t demanding elimination of “A film by” credit, which provoked anger from the Directors Guild and proved to be something of a PR headache three years ago.
One of the 25 points simply asks that the Alliance of Motion Picture & Television Producers address “usage and validity of credits in film and TV, with special attention to the ‘A film by’ credit.”
The WGA will release the voting results Jan. 14, then craft its opening proposal to the AMPTP, the negotiating arm for studios and nets.
But during the past year, fuild leaders have stressed that members want a change in the DVD formula more than any other issue, since that area is clearly where the major revenue growth is occurring.
“What is clear to everyone — writers and employees alike — is that we are negotiating in an exceedingly prosperous new atmosphere,” Sargent and WGA West president Victoria Riskin wrote in the “pattern of demands” letter.
“What is also clear to us is that writers did not participate in this bonanza and, in spite of these boom times, were even forced into widespread rollbacks in important areas.”
Those comments went over like a lead balloon.
AMPTP prexy Nick Counter, chief negotiator for the studios and nets, immediately blasted the demands as “excessive” and “a disaster waiting to happen.”
Both sides are likely just warming up.
Before negotiations started in early 2001, studio execs accused the WGA of seeking increases that would add $2.4 billion over three years in entertainment union costs; the WGA called that number “hyperinflated” and said the three-year costs for writers, directors and actors would be $725 million.
Back in 1985, no one could have expected the shiny DVD discs would be the rage of the 2003 holiday season.
When the WGA learned in 1984 that 80% of videocassette revenue was being excluded by studios, it filed an arbitration suit, and that trial was going on when its negotiations with the AMPTP on a new contract fell apart.
The WGA, which had struck for 13 weeks in 1981 and delayed the start of the fall TV season, struck for two weeks in 1985, with the key issue being video residuals.
Under pressure from members who feared a repeat of the long ’81 strike, the WGA agreed to accept the same formula that had been worked out the year before by the DGA, which allowed studios to exclude 80% of revenues in order to give those studios a chance to recoup their investment.
In 1988, the WGA struck for five months, again delaying the start of the fall TV season. The stoppage had a profound impact on Hollywood as writers lost hundreds of millions of dollars and the Big Three nets never recovered all of the audience share lost to cable and local TV.
Partly because of those three strikes, the WGA carries a reputation for being the most assertive Hollywood union.
And though it has not struck since then, it came close in 2001.

HMV asks Competition Bureau to review Rolling Stones deal with Best Buy
TORONTO (CP) – The fight over rights to sell a new four-disc Rolling Stones DVD has been sent to the Competition Bureau of Canada.
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Retailer HMV Canada made a formal application to the independent body asking it to review the Four Flicks DVD retail exclusivity deal the Stones made with Best Buy and its Future Shop subsidiary. The company took the step after trying to convince TGA Entertainment, the Stones’ management company, to make the DVD available, said Humphrey Kadaner, president of HMV Canada Inc. TGA never responded to the formal request, he said.
“There’s the risk that this could become a common practice and make the playing field unlevel,” Kadaner said. “At the end of the day all we’re asking is for artists, especially major artists, to make their product available to everybody, not just HMV, and let the consumer decide.”
The application, filed Wednesday, claims the exclusivity deal breaches Competition Act regulations over denial of access to supply of product as well as a reduction in competition at the retail level. It also argues that exclusive deals are objectionable to other retailers and most harmful to music speciality retailers.
The Ottawa-based Competition Bureau evaluates every application received to see if any laws have been violated, said Madeleine Dussault, assistant deputy commissioner. If the bureau suspect a law’s been broken, the case will be brought to a tribunal. The process can take about a year.
“Any industry representative can come to the bureau and raise concerns with us,” she said. “There’s a provision that says that under certain conditions exclusivity could be the subject of review . . . but just the fact that it’s an exclusive agreement may or may not be anti-competitive.”
The Competition Act is over 100 years old. The exclusivity provisions have been around since 1978.
HMV, Music World and Sunrise Records pulled everything by the Rolling Stones from stores shelves on Oct. 28. The Stones responded saying the deal was made with Best Buy because that chain offered the cheapest sale price for the set. It retails for $39.99 at the 16 Best Buy and 107 Future Shop stores across Canada.
“We have always believed in having the widest range of products available to our customers,” said Kadaner. “When we saw this exclusive deal we vehemently objected to it and hence pulled all the product from the stores to reinforce how strongly we felt about this.”
Kadaner said the company has yet to hear any fallout about pulling all the Stones’ material.
“The feedback at store level has been outstanding,” he said. “Canadian consumers don’t like to be told where to buy their product.”
The Four Flicks DVD is a unique collection of concert footage and backstage antics.
One disc is a documentary which takes viewers from the very beginning stages of organizing the world tour to opening night in Boston. Canadian fans will particularly enjoy the footage from Toronto rehearsals and from the surprise gig the band performed at Palais Royale. There’s also intimate footage of the band members with their children and spouses as well as a glimpse of Mick Jagger’s workout schedule and dance rehearsals.
The 2002-03 Licks tour played three types of shows: stadiums, arenas and theatres. Each type is showcased on a separate DVD – from New York City’s Madison Square Gardens, London’s Twickenham Stadium and Paris’s Olympia Theatre – providing fans with a wide range of songs from the band’s career. There’s also a five minute mini-documentary of the Toronto Rocks concert which the Stones’ headlined to help the city shed its SARS-tarnished image.

Hayek Gets Her Coke and Drinks it Too
LOS ANGELES (Zap2it.com) — Following in the footsteps of another Latin beauty, Penelope Cruz, actress Salma Hayek is lending her talents to the Coca-Cola Co’s. new ad campaign.
Directed by big-screen director Bryan Singer (“The Usual Suspects,” “X-Men”), the new advertising spot, “Hollywood Restaurant,” was produced in both English and Spanish and will run on national general market and Spanish-language television.
“As someone who is known to be true to herself and her roots, Salma Hayek personifies the spirit of the Coca-Cola Real campaign idea,” said Esther Lee, chief creative officer of Coca-Cola North America. “This spot is also reflective of Salma’s cross-cultural life as an actress who has made it in Hollywood and, at heart, a Hispanic who embraces the traditions of her Mexican homeland.”
Shot on location at the trendy West Hollywood restaurant Koi, Hayek sneaks away from a dinner meeting to the kitchen, where she orders a taco and a Coca-Cola while laughing with the chef and wait staff.

Warner, BMG Close in on Merger – Sources
LONDON (Reuters) – Warner Music and BMG, home to pop diva Madonna and queen of soul Aretha Franklin, have entered the home stretch in talks over a joint venture and could wrap up a deal next month, sources familiar with the negotiations said.
In a deal that would create the world’s second biggest music company, the industry heavyweights are still negotiating the nuts and bolts of combining their recorded music empires but are getting closer to an agreement, the sources said.
“If there is a deal, it will be done by the end of September, but it could be sooner than that,” said one source.
“The two sides are working hard to finalize key issues such as valuation right now, but progress is being made.”
Warner Music and its U.S. parent AOL Time Warner and BMG and its privately owned German parent Bertelsmann all declined to comment.
With rampant piracy tearing into global music sales, Warner Music and BMG see a tie-up as their best bet for beating the industry blues by offering the prospect of cost savings of $250-$300 million between them each year, the sources said.
Warner and BMG, which rank as the world’s fourth and fifth biggest music companies respectively, see eye-to-eye on the broad structure of a deal that would take the shape of a 50-50 joint venture of their recorded music arms, one source said.
But the two sides are still hammering out the details of a deal, which could see one of them put up some money or additional assets to reach a 50-50 split, the source said.
“Size is one issue, but profitability is another, and we have to evaluate both as well as cash flow. The difference is not very big though,” the source said.
Last year, Warner had revenue of $4.2 billion while BMG racked up $2.7 billion. Those figures include music publishing and Warner’s CD/DVD manufacturing business, which would not be part of the venture. Analysts estimate a joint venture could be worth somewhere in the low single-digit billions of dollars.
UP AGAINST THE REGULATORS
Regulators could present the biggest obstacle to a deal.
Two previous deals hit the rocks — one between EMI GroupPlc and Warner, and another between EMI and BMG — two years ago after anti-trust authorities made clear they would not accept the world’s five big music companies shrinking to four.
Warner and BMG are optimistic a joint venture of just their recorded music companies, excluding music publishing, would have a better chance of success. But they are prepared for regulatory investigations to last a good eight months, one source said.
“People say we have a good chance of getting permission. We might have to make some divestments in some markets if the market share is too high, but it’s easier doing a deal that just involves recorded music,” said one source.
The two sides see industry giant Universal Music as their prototype. Universal Music, part of Vivendi Universal, has dominated the global music scene since its merger with Polygram in the late 1990s, boasting a market share in 2002 of 24.5 percent and artists ranging from U2 to Eminem.
Warner Music and BMG would have a combined global market share just less than Universal Music’s but would leapfrog current number two, Sony Music.
The two companies would bring together Warner Music’s artists REM, the Red Hot Chili Peppers and Alanis Morissette with BMG’s Avril Lavigne, Carlos Santana and Barry Manilow.
Talks between the companies gathered pace after Warner Music agreed to sell its CD/DVD manufacturing business last month.
But who takes what management roles is another issue yet to be finalized. Both Warner Music Chief Executive Roger Ames and BMG CEO Rolf Schmidt-Holtz are expected to take top roles.
“Clear leadership is key for this to work. But the management of both companies want this deal,” said one source.