Last week's dismissal of Tom Cruise from Viacom's stable of stars by Sumner Redstone turned heads in Hollywood, by all accounts. Once again, we were treated to a display of the glaring differences between how the financial and entertainment communities view the classic Hollywood business style of spending anything to retain and satisfy the "talent."
Saturday's Wall Street Journal carried a timely piece discussing the entertainment industry's woes regarding DVD sales. It seems they are finally cresting, and no replacement vehicle is in sight. The article quoted numerous film execs as focusing on and cutting costs, as well as being more selective in their choice of properties to develop. The role of outside investment partnerships, including hedge funds, was even blamed for bringing too much capital into the sector, causing movies to be made which were best left as only screenplays.
What really shocked me, though, was the realization that Disney studios had, only just last fall, analyzed the contribution of their non-children-oriented films to the studio's profitability, and found them unsustainable.
Which brings me to the title of this post. With this backdrop, does Sumner Redstone really seem so off his rocker? The WSJ piece alleges that Viacom barely broke even on "Mission Impossible III," while Cruise earned a reputed $80 million.
Given Wall Street's harder-nosed approach to business than Hollywood's, is it really likely that a hedge fund is going to pick up funding for Tom Cruise's ventures at the same price that Viacom did? After the allure of Tom visiting a few trading floors, I think reality will sink in.
Remember Kevin Costner's fame some years ago? He began making his own movies, irrespective of the advice of others, critics, or even box office sales. Last time I saw him, he was co-starring with the venerable Robert Duval on a cable channel western movie special. So much for lasting fame and fortune in Hollywood.
Meanwhile, back to the film companies. The other interesting development is how companies as diverse as Apple and Wal-Mart are squaring off over the prices they will pay for online distribution of video content from the studios. Everyone can see the potentials among various distribution channels, and nobody wants to be left out. Wal-Mart, with its 40% of DVD sales, has enormous clout right now. And they appear to be using it.
As I have said before about the digitalization of media, whichever ways things develop, it looks like the consumer is going to make out very well, with great product available at competitively-tested, affordable prices.
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