Category: Business

Talks stall between ‘Mad Men’ creator Matt Weiner and AMC, Lionsgate
There may be some cutbacks coming to the advertising agency of Sterling Cooper Draper Pryce.
The companies behind the critically acclaimed drama “Mad Men” ó cable network AMC and producer Lionsgate ó are battling with Matt Weiner, the show’s Emmy Award-winning creator over a new contract and budget cuts, which would include trimming the large ensemble cast.
If Weiner does not agree to a new deal, AMC and Lionsgate have signaled they are prepared to continue to produce “Mad Men” without him. Lionsgate has an agreement in place with AMC for a fifth season with or without Weiner, whose contract expired after the fourth season ended last fall.
Dropping Weiner would be tantamount to blasphemy to the show’s incredibly devoted, but relatively small, audience. Like his mentor David Chase of “The Sopranos,” Weiner closely supervises the writing of every episode and is known for obsessing over the details of “Mad Men,” which uses the Lucky Strike-smoking, secretary-leering, four-martini-lunch lifestyles of Manhattan ad men as a lens into the culture of the 1960s at large.
The stalled talks mean that the show, which usually starts its 13-episode run in the summer, now won’t air its fifth season until early 2012. People close to the show think March is the earliest it could be back on the air.
Although “Mad Men” has modest ratings ó last season it averaged 3.2 million viewers ó and is not even AMC’s most-watched show (“The Walking Dead” has that distinction), it put the network on the map and fired it into the cultural zeitgeist.
When critics talk about the new golden age of television, “Mad Men” is often the first show they cite as an example. Since it debuted in 2007, the show has won 13 Emmys and four Golden Globes and was the first basic cable series to win the Emmy for outstanding drama series, an honor it received in 2008, 2009 and 2010. Set in the early 1960s, chronicling the upheaval between McCarthy-era conformism and the countercultural revolution to come, “Mad Men” has been praised for bringing new depth to the secret lives of secretaries, boardroom flacks and housewives.
For the show to remain under Weiner, he will have to agree to a three-year pact worth about $30 million, according to people close to all the parties involved in the negotiations who declined to be identified due to the sensitive nature of the talks. At that figure, Weiner would become one of the highest-paid producers in television.
Weiner, through his spokesman, declined to comment.
One of the major sticking points concerns the number of commercials in each episode. Currently, AMC pays about $3 million to Lionsgate for each episode of the show. To cover the rising costs of airing “Mad Men,” the network has indicated it wants to add more commercials, which would obviously cut into the show’s length.
Another obstacle in the negotiations are the use of so-called product placement and product integration in the program. The network would like to see more of them as a means of generating additional revenue. And certain to prompt outrage among fans, up to six members of the cast may be axed from the show in a cost-cutting move over the next three seasons, a person close to the show said.
For his part, Weiner has been extremely protective of the show and in the past has fought efforts to bump up commercial time on his show. Two years ago, AMC compromised with Weiner and added more commercials without trimming the program length.
Relations between Weiner, AMC and Lionsgate have over the years frequently been less than harmonious. In the current tumult, it’s unclear though when Weiner was first approached to discuss a new deal for a fifth season. People close to him say he was only recently asked about renewing his deal, while those in the Lionsgate and AMC camps say they’ve been trying to complete this for almost a year.
As for the cast, Weiner has cut characters before. For instance, a very popular closeted gay character Sal Romano, who was portrayed by Bryan Batt, was dropped from the show after Season 3. But that decision was Weiner’s, and ó according to people close to Weiner ó the show runner would regard being forced to shed actors as interference with the creative process.
Over the last four years, “Mad Men” has been a launching pad for previously little-known or unknown actors. Series’ star Jon Hamm, who plays Don Draper, the hard-drinking, womanizing ad executive, was working on a Lifetime television series, and his costar Elisabeth Moss was appearing in Excedrin commercials. And most notably, “Mad Men” transformed the network from an obscure channel filled with old movies into a major destination for original series programming.
The unexpected success of “Mad Men” naturally has translated into dramatic growth in advertising revenue for the network. AMC’s ad revenue in 2006, the year before “Mad Men” premiered, was $139.3 million, according to SNL Kagan, an industry consulting firm. In 2010, the cable channel took in $245.6 million. Not all that growth can be attributed to Don Draper & Co., but it’s clear that the culturally influential show was a crucial component in the network’s rise.
Meanwhile, Lionsgate has done well by “Mad Men” too. The company takes in $3 million to $5 million per episode from the show in fees from AMC, sales abroad and DVDs, people familiar with the show’s finances said. Lionsgate has said it expects “Mad Men” to ultimately generate more than $100 million in DVD sales. Lionsgate stands to potentially make more money when it eventually sells reruns of “Mad Men” in the U.S.
It’s unclear whether the lengthy break between seasons could hurt ratings for “Mad Men.” There are plenty of other choices. But as with HBO’s “The Sopranos,” which once went almost two years between seasons, “Mad Men” has such an intense following that its audience may be willing to wait.

Home entertainment sales drop for sixth straight year
LOS ANGELES (Hollywood Reporter) ñ For the sixth straight year, home entertainment revenue has slid as surging interest in digital distribution and Blu-ray disks failed to make up for dropping DVD sales and rentals.
The industry brought in $18.8 billion in the U.S. in 2010, down from $19.4 billion the year earlier, according to data released Thursday by the Digital Entertainment Group.
The peak year for the industry came in 2004, when revenue was at $21.8 billion, with $4.4 billion coming from VHS. But VHS quickly faded after that, bringing in zero revenue in 2009, and consumers began dabbling with digital distribution.
A next-generation DVD format war also didn’t help matters, and the industry has been declining every year since 2004.
Nevertheless, the DEG, headed by Warner Home Video president Ron Sanders, stressed that Blu-ray players are now in 27.5 million American homes and sales and rental of software surged 53% to $2.3 billion.
Also rising were digital sales and rentals, up 19% to $2.5 billion. VOD brought in $1.8 billion of that, up 20.8 percent for the year, while broadband EST grew 15.7 percent to $683 million.
Digital has never lagged Blu-ray, but the gap between them is narrower than it has ever been.
DVD sales and rental revenue fell 11% to $14 billion.

Warner Bros. to handle distribution on “The Hobbit”
LOS ANGELES (Hollywood Reporter) ñ Warner Bros. has taken over international theatrical rights to Peter Jackson’s “The Hobbit” from MGM, as well as video rights.
In exchange, MGM gets the loan money it needs to finance its half of the ambitious two-picture project.
Warners/New Line already owned domestic rights to the “Hobbit” adaptation, so they will now be able to collect a worldwide distribution fee, according to insiders.
The deal was announced by Warners and Spyglass toppers Roger Birnbaum and Gary Barber, who are now in control of the newly restructured MGM.
The pact resolves the prickly question of how MGM will pony up its half of the budget, with the other half coming from Warners/New Line.
In recent bankruptcy papers, MGM said it needed a loan of $265 million-$275 million for the two “Hobbit” movies, which are projected to cost at least $500 million to produce.
MGM will still retain international television licensing to the films.
Warners and MGM will collaborate on marketing and release plans.
Two films are set to begin production in February, with release dates targeted for December 2012 and December 2013. Both will be filmed in Digital 3D.

Beatles paid directly by iTunes
NEW YORK – It seems that the EMI/Beatles deal that finally brought the Fab Four’s catalog to iTunes may be more groundbreaking than originally thought.
According to industry sources, iTunes is paying the Beatles’ royalties from digital download sales in the United States directly to the band’s company, Apple Corps, and is paying the songwriting mechanical royalties directly to Sony/ATV Music Publishing, which controls most of the Beatles’ song catalog.
That suggests the royalty split could be more lucrative for the Beatles than it would be under the typical provisions of a standard artist contract, which treat digital downloads as a retail sale.
Under a standard contract, a label issues an album, licenses the songs from music publishers, collects all wholesale revenue from the retailers and then distributes royalties to the artist and the publisher.
For superstar artists, the royalty typically equals about 20%-25% of retail revenue. So in the case of iTunes’ Beatles sales, where tracks are sold to the merchant for about 90 cents and are retailed for $1.29, a standard contract with a typical superstar royalty rate of 20%-25% would pay the Beatles about 18 cents to 22.5 cents per track sale.
But because iTunes is making royalty payments to the Beatles and Sony/ATV, EMI may be treating its deal with the digital retailer as a licensing pact.
Under such deals, the licensee pays mechanical royalties directly to a publisher and revenue from use of a master recording is split evenly between an artist and a label, making it far more lucrative for the artist than a standard artist contract.
An EMI spokesman declined to comment, as did Sony/ATV and representatives at Apple Corps and iTunes. And a high-placed source familiar with the deal insists that it’s “absolutely incorrect” that the agreement between EMI and Apple Corps is a licensing deal.
However one describes the EMI-iTunes deal for the Beatles’ catalog, its similarities to a licensing pact put it at the center of a heated debate over the nature of download sales.
Since the dawn of the digital age, artists, managers and labels have wrangled over whether a digital download purchase should be considered a licensed use of a master recording or a retail sale, much like the sale of a CD. Labels, of course, insist the latter designation is correct and have paid artist royalties accordingly.
But some recording acts, like Cheap Trick and the Allman Brothers, have taken their labels to court claiming that sales of their downloads should be treated as licensing deals. While Cheap Trick ultimately settled with Sony, the Allman Brothers case is still ongoing.
In another closely watched case, the U.S. Court of Appeals for the Ninth Circuit in September voided a jury’s decision on the royalty split issue that was favorable to Universal Music Group and against F.B.T., the music company that Eminem was originally signed to before Universal picked up his contract.
F.B.T. maintains that a digital download represents a licensing deal, which requires the higher royalty split. With the case sent back to the original court, UMG has filed a petition for the U.S. Supreme Court to review the lower court’s decision.
In addition to a potentially much more lucrative royalty rate, iTunes’ direct payment of U.S. royalties to the Beatles and Sony/ATV would give the band greater accounting transparency over their iTunes sales than they would if EMI distributed the royalties.
Other label/superstar contract negotiations have resulted in far costlier give-backs — for example, acts like AC/DC and Garth Brooks negotiated the return of their master rights.
Still, whether the agreement that put the Beatles on iTunes is a licensing deal or not, it’s still significant that the Fab Four and their publisher are being paid directly by iTunes.
U.S. music publishers lament that labels treat an iTunes download as a retail sale, because they want to be paid directly by any U.S. digital retailer selling downloads, rather than by a label.
Likewise, it would be a singular deal, label and publishing sources say, for an artist on a label to be paid directly by the retailer for the sale of the artist’s music.
In practically every other known instance, the retailer pays the label, which in turn pays the artist royalty.

Annual box office down a bit from 2009 record
LOS ANGELES ñ Domestic box-office revenues for 2010 won’t quite hit last year’s record-setting haul, but they’ll be awfully close.
Total movie-ticket sales will reach $10.556 billion, the tracking agency Hollywood.com said Tuesday. That’s a slight decrease from the $10.6 billion total from 2009, but it’s also only the second time that the annual box office has crossed the $10 billion mark.
At the same time, total attendance was down 5.36 percent from last year. That’s the biggest percentage drop year over year since 2005. This will also be the second-lowest attended year of the decade.
It looked as if 2010 might have set a new record at the beginning of the year, when 2009’s “Avatar” was still going strong well into February and March, said Hollywood.com analyst Paul Dergarabedian. James Cameron’s 3-D sci-fi epic boasts the biggest box-office take in history, collecting $2.7 billion worldwide, nearly $750 million of which came domestically.
“I started figuring the wheels might come off this thing when the summer season was faltering, and by the end of the summer it was the lowest-attended summer in over a decade,” Dergarabedian said. “Then I thought, maybe we can make it up in the holiday season, with ‘Tron,’ ‘Harry Potter,’ ‘Tangled’ and some other big movies on the way, but I didn’t know if there would be enough juice in the box office to make up for the loss of the summer, and it just didn’t happen.”
“Toy Story 3” was the highest-grossing film released in 2010, earning nearly $415 million. It’s one of many movies that were offered in 3-D or IMAX 3-D, which come with higher average ticket prices ó which is partly what helped boost the annual total as far as it got, even as attendance sagged.
“Without that, we’d be looking at revenues that may not even have surpassed $10 billion,” Dergarabedian said.
But he has hope for another record in 2011, when sequels to the hit comedy “The Hangover” and the “Pirates of the Caribbean” franchise are due, along with the highly-anticipated comic book-inspired “Thor” and “Captain America: The First Avenger.”
“My biggest lesson learned from this year,” Dergarabedian said, “is it’s always about the product.”

MGM Completes Restructuring!!
Two months after filing for bankruptcy protection, Metro-Goldwyn-Mayer Inc. has announced that the company’s restructuring has become effective, with exit financing of $500 million in place. The company’s “pre-packaged” plan of reorganization was confirmed on December 2, 2010, by the US Bankruptcy Court for the Southern District of New York. The immediate plans for the studio involve the 23rd James Bond movie and The Hobbit. The studio has not revealed its new plans regarding home video, especially the James Bond films still unreleased on Blu-ray.
Gary Barber and Roger Birnbaum, Co-Chairmen and Chief Executive Officers of MGM, said: “Beginning today, MGM is a stronger, more competitive company, with a solid financial foundation and a bright future. We look forward to working with MGM’s dedicated employees to build upon this company’s legacy.”

Pink Floyd albums taken offline
Some of Pink Floyd’s most famous albums have disappeared from the internet after a distribution deal with their record label ran out.
The band’s works, including The Wall, Animals, Wish You Were Here and The Final Cut, have been removed from online digital stores due to the expiration of their contract with music giant EMI, which came to an end on June 30.
Representatives for the group are now said to be working on securing a new deal to licence the band’s complete back catalogue for internet downloads.
The news comes just months after Pink Floyd won a long running legal battle with EMI, which ended in the record label paying the group a substantial settlement as part of a dispute over online royalty payments. The rockers successfully banned the label from breaking up their albums and selling individual tracks on the internet.

Disney sells Miramax to investor for $660 million
LOS ANGELES ñ The Walt Disney Co. said Friday that it agreed to sell its Miramax Films to an investor group for about $660 million, ending a 17-year association with the studio and a six-month bidding process.
Miramax’s Oscar-laden film library has more than 700 titles, including prestigious films such as “My Left Foot” (1989), “Pulp Fiction” (1994) and “Good Will Hunting” (1997).
But Disney had been looking to sell Miramax amid a studio overhaul because it no longer resonated with its other family centric studio units such as Pixar and Marvel.
“Although we are very proud of Miramax’s many accomplishments, our current strategy for Walt Disney Studios is to focus on the development of great motion pictures under the Disney, Pixar and Marvel brands,” said Disney president and CEO Robert A. Iger said in a statement. “We are delighted that we have found a home for the Miramax brand and Miramax’s very highly regarded motion picture library.”
The entertainment company signed an agreement late Thursday with Filmyard Holding, an investor group led by construction magnate and Hollywood outsider Ronald Tutor. Other investors include Colony Capital LLC, a real estate investment group, and its CEO Tom Barrack.
Tutor and his partners put down a nonrefundable deposit of $40 million to Disney on Thursday. Disney said the deal could close as soon as Sept. 10.
Despite its past success with prize-winning films, Miramax also faces challenges.
Earlier this year, Disney stopped investing in its new projects, laying off all but a handful of staff beginning in January in a major round of cost-cutting and reorganization under its new studios chairman, Rich Ross. It was one of many niche labels shuttered or downsized in Hollywood recently, plagued by high costs and few commercial hits despite their occasional critical success.
The label was founded in 1979 by Harvey and Bob Weinstein, who named it after their parents, Miriam and Max. It was sold to Disney for $80 million in 1993, and the brothers stayed on as managers.
But the duo left in 2005 to found The Weinstein Co. after years of troubled relations with Disney and a public spat over Michael Moore’s 2004 documentary “Fahrenheit 9/11,” which Disney refused to distribute.
The Weinstein’s recent bid to buy Miramax with the financial backing of supermarket magnate Ron Burkle was halted after Burkle cut the offered price to about $565 million from $625 million.
Disney shares closed Thursday at $33.71.

Actual top grossing U.S. movies
Lengthy lines, sold-out theaters and high-profile premieres are commonplace for Hollywood’s blockbuster productions. But when the credits have rolled and the receipts are tallied, the most commonly referenced movie calculation is missing one key player: inflation. When it comes to ranking movies by revenues, today’s higher admission prices give more recent films an unfair advantage.
Let’s examine inflation, how it’s calculated and how the “blockbusters” perform when inflation is accounted for.
Inflation
Generally speaking, inflation in the film industry measures the rate at which overall prices are rising. Periods of inflation occur as prices rise, and the purchasing power of each dollar declines. Periods of deflation are identified as prices decline and purchasing power of a single dollar increases.
Over the long-term, prices tend to rise and each dollar becomes less valuable. For example, $1 in 1940 has the same purchasing power as $15.57 today.
Calculating Inflation
The Consumer Price Index (CPI) is perhaps the most commonly referred to statistic used as a gauge of inflation. The index is calculated by tracking the prices of goods and services in urban areas over time and has been maintained by the Bureau of Labor Statistics since 1919. Changes in CPI are used to evaluate changes associated with the cost of living.
Some items used in the CPI calculation include medical care, food, and utility services such as water and sewer. Some items excluded from the CPI calculation include homes and investments.
Inflation at the Box Office
Recent box office prices have easily outpaced inflation, but when comparing the revenues of new movies to those of previous years and especially decades, it is important to make the necessary adjustments. In the first quarter of 2010, the nationwide average price of a movie ticket increased 8% from the same period last year. (Summer movie season can be a major money maker for big studios, especially if they can produce a smash-hit.
Blockbusters Ignoring Inflation
With “Avatar” and “Titanic,” director James Cameron can lay claim to the two highest grossing movies of all time in the United States. Domestically, the films brought in roughly $750 million and $600 million, respectively.
Ranked by box office domestic revenue, here are the top five highest grossing movies of all time:
1. “Avatar” (2009) $749 million
2. “Titanic” (1997)$600 million
3. “The Dark Knight” (2008) $533 million
4. “Star Wars Episode IV: A New Hope” (1977)$460 million
5. “Shrek 2” (2004)$441 million
And The Inflation-Adjusted Winner IsÖ
The list of highest grossing inflation-adjusted movies is commonly found by using current day movie ticket prices and adjusting them to reflect the change in dollar purchasing power. After considering inflation, the list of top breadwinners undergoes a massive rewrite.
After accounting for inflation, “Gone With the Wind” is the highest grossing movie of all-time, having earned over $1.6 billion. Avatar falls to fourteenth on the list, after being bested by several pictures ranging from The Exorcist to 101 Dalmatians. Ranked by box office revenue in terms of today’s dollars, the top five highest grossing movies are:
1. “Gone With the Wind” (1939)$1.6 billion
2. “Star Wars Episode IV: A New Hope” (1977)$1.4 billion
3. “The Sound of Music” (1965)$1.1 billion
4. “E.T.: The Extra Terrestrial” (1982) $1.1 billion
5. “The Ten Commandments” (1956)$1.0 billion
Of course, each movie on the list has time on its side. The most recent of the top five movies was originally released over thirty years ago, whereas “Avatar” is less than one year old. “Gone With the Wind” also has the advantage of multiple releases over the course of the seventy-plus years since its original release.
Roll the Credits
Since box office revenue is the most commonly quoted statistic on movies, it is understandable for the general public to view the success of a movie as a function of box office receipts. But when comparing the blockbusters, the effect of inflation is too large to be ignored.

Blockbuster in bankruptcy financing talks: report
NEW YORK (Reuters) ñ Blockbuster is in talks with bondholders to get a $150 million debtor-in-possession loan, a sign the movie rental company could be closer to seeking Chapter 11 protection, the Wall Street Journal reported on Friday.
Dallas-based Blockbuster, which has been trying to restructure its more than $900 million in debt, is still pursuing other options, the WSJ said.
Some companies negotiate bankruptcy loans as a precaution, in case they are unable to reach agreements with their bond holders.
Blockbuster has been trying to avoid bankruptcy as it has lost customers to mail service Netflix Inc and DVD rental kiosk company Redbox, a unit of Coinstar Inc.
Separately, Blockbuster is also talking to some possible partners about a cash injection, the WSJ reported, citing a person familiar with the matter. Such a deal would likely involve some bondholders converting to equity investors, the unnamed source told the newspaper.
Blockbuster hopes to restructure outside of bankruptcy, the WSJ reported.
Blockbuster would not file before its June 24 shareholder meeting, the source told the newspaper.