Studios are also scaling back the number of movies they are making.
Indeed, the capital crunch will help ensure it. Paramount and MGM weren't able to close "slate" film financing deals in 2008, and prospects for securing such arrangements in the near term appear bleak. Even one of the world's most famous filmmakers, Steven Spielberg, is struggling to raise hundreds of millions of dollars in debt financing to help bankroll his new studio.
Although most studios have long-term financing deals in place, their lenders are looking to renegotiate terms, including lower distribution fees that studios earn for releasing the movies. The studios may have to resort more to self-financing their productions.
That would force them to take on greater risk and make fewer films, says Richard Dorfman, managing director for the New York investment firm Richard Alan Inc. "The credit crunch will have a pervasive effect on the movie business in 2009 and 2010," Dorfman said.
Some studios say they are hoping to save money without having to sacrifice jobs.
"We have been implementing aggressive cost-containment initiatives specifically designed to mitigate layoffs," said Julie Henderson, a spokeswoman for News Corp., parent of 20th Century Fox. Fox expects to save $400 million this fiscal year by reducing marketing and production costs, slashing travel and entertainment budgets and not filling open positions, the studio official said.
Similar moves are underway at Culver City-based Sony Pictures. "We're cutting costs across the board, with restrictions on overtime, the filling of open positions and those that become vacant, use of temporary workers, and travel and entertainment expenses, as well as consolidating shared services," Sony spokesman Jim Kennedy said.
Executives there have been told to cut travel costs, stay at cheaper hotels and use a shuttle van instead of car service between the studio and LAX. Other studios say they too are cutting back on traditional Hollywood perks such as lavish premieres, first-class and "entourage" travel, limo services and hair and makeup sessions. Expect to see fewer executives at upcoming festivals in Cannes in the South of France and at Sundance in Park City, Utah, as well as industry events.
For the first time, Universal won't send executives to the movie theater industry's biggest trade show, ShoWest, scheduled for March in Las Vegas. Sony canceled executive meetings in Latin America in December and Europe in June.
