Saturday, May 10, 2008

Bottom lines and bubble money versus Eternity

9-10 May 2008

I’m looking at what I wrote earlier this week (see foregoing post) as I think about the item in the Calendar section of today’s Los Angeles Times about Warner’s shuttering its independent divisions – I mean the whole enchilada. NO indie shop under the Warner umbrella – and no, I’m not particularly sanguine about the prospects for the New Line execs shepherding their projects adroitly within the Warners corporate flowchart (I realize this is just talking off the top of my head – I don’t routinely read the trades and rarely discuss the business with friends or family involved in it – but the last 20 years or so don’t give much cause for optimism). Am I the only one for whom this sounds just a bit draconian? (Oh yeah – and another seventy people out of work.) It’s sad when you think that some of the more interesting films showing up in the movie houses (Pan’s Labyrinth and La Vie en Rose, to name just the two the L.A. Times cited) came by way of Warner’s Picturehouse division.

The idea at Warners is that their regular development, financing, advertising and distribution arms will be able to perform the acquisition/development and/or promotion/distribution functions their indie kids did more or less, uh, independently. In other words, cut duplicative costs. Good bottom-line thinking, I’d say – assuming IT WORKS – which, given the difficulty some of these people have successfully putting out a picture at almost ANY price point, including the most astronomical, for anyone with an IQ over room temperature is pretty optimistic. In other words, if the company just puts out a few more bad movies or, worse, continues to hemorrhage cash, it’s NOT so cost-effective.

But – stepping back from the business for a sec and back to BUSINESS, as in Wall Street – this is just the news leader. The rest of the story is the same one that’s been going on for the last eight or nine months. The money has simply dried up. Would that the bad movies dried up, too – except that it’s almost too goddamned easy to make one. (But not, I would note, to write one.) The cash that was chasing these kinds of investments, thinking to score at least on the ancillaries or direct-to-video, is drying up. Haven’t you noticed? People in Hollywood are having trouble paying their bills. Sure, they’re still flying first-class, trying to kick up a little dust over breakfast wherever people breakfast these days in Beverly Hills or Manhattan (don’t look at me – I can barely crawl out of bed at that hour), dropping a few quid here and there. (Though it’s interesting to see the celebrity/designer clout behind all those new super-low priced lines for Target, H&M and all the knock-off chains.) But, as my sister has reminded me, that’s Hollywood – always keeping up appearances. The gardens will always look lush and manicured; the Bentley polished and detailed within a coronary-inch of your life.

Which brings us to – that’s right – the fine arts markets. (What – you thought I was going into Hollywood whine mode? Take me straight to Cedars next time that happens.) The relative strength, or at the very least, stability, has been noted in the most recent sales both in New York and London. Sure, there’ve been disappointments – unsold lots, guarantees that made the sales virtually break-even (or even slight losses) for the auction houses. But what’s surprising is that, on a certain level, it’s business as usual: the best works are commanding good prices – and not just from newly rich Russians or Asians or the petro-rich, but even those cash-poor (or poorer, anyway) Americans. Contemporary sales are always a bit trickier, as compared to Post-War Modern; but as we head into the week of the New York spring sales, I’m thinking that – especially as Chinese and other Asian money moves out of T-bills (hey – if nothing else works, starve the U.S. out of Iraq), hedge funds, derivatives and, well, everything from CDOs* to bad movies – it may find its way into the things that – relatively speaking anyway – endure. There are commodities and then there are commodities: stuff that resists ‘fungibility’, so to speak; the values that are, relatively speaking, eternal.

*** For those of you who don't read the business pages: collateralized debt obligation -- think junk cubed.

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