financing failure: the more "financing", the more losses
MGM is in financial crisis, which is nothing new in Hollywood. In 25, MGM, which was in debt of $2 billion, was acquired by Sony consortium for nearly $5 billion, which seemed to inject a glimmer of life into MGM after years of debt turmoil. However, after a series of films with weak cost control and poor box office receipts, MGM, which was supported by Sony's financial resources, not only failed to come back to life, but doubled its debt in just a few years and became a bottomless pit for the whole industry to avoid-these are just the beginning.
As the saying goes, a hundred-footed worm is dead but not stiff. Even in 28, MGM's economic strength is still strong from the data point of view: MGM opened a credit account of 25 million US dollars in JPMorgan Chase at that time, and its United Artists company can also provide considerable financial support. According to Harry Sloan, then CEO of MGM, they are ready to release films under the name of United Arts. At that time, the loan amount of MGM was $3.7 billion, and the annual interest paid was as high as $3 million. Sloan said optimistically: "We have found the investment, and now all we have to do is start the project."
It's a pity that after only one year, Sloan paid a painful price for his optimism. On September 25th, 29, MGM called an emergency creditors' meeting because it could not repay the interest. At that time, besides paying interest of $25 million, it lacked funds of $15 million to maintain the filming plan, and the company could not even come up with the $2 million needed for short-term capital turnover-this is not as good as the price of a Hollywood A-list star! This time, MGM exposed its dirty linen, and the creditors who had long seen the situation made a fuss and threatened to ask for liquidation. Bankruptcy seems to be the will of the people. Finally endorsed by JPMorgan Chase, MGM reached an agreement with several major creditors to postpone the repayment of interest and money payable. Obviously, however, procrastination is only a temporary strategy. MGM has no projects that can get the funds back in a short time, and the 23rd big-budget films, 7 and The Hobbit, which are highly anticipated, are in dire need of investment. It is only a matter of time before the MGM-style bubble bursts.
Sony's aid, creditors' fund-raising, where are these hundreds of millions of dollars squandered by MGM? Just look at the films produced in recent years: last year, we made every effort to invest 1 million dollars (excluding publicity expenses) in the action blockbuster "Riding the Subway", but only recovered 65 million dollars of local box office, which is just a microcosm of MGM-style tragedy; It is a well-known fact that MGM itself rarely has a giant system for more than ten years, and it is mostly supported by several well-known brands of its United Arts. Unfortunately, apart from the high investment cost and star pay, even the global production of 7 series has brought limited benefits to MGM. This mode of relying solely on the box office revenue of movies is incompatible with the current film industry trend, so no matter how much money is injected, it will eventually become the funerary object of MGM's collapse.
Unfavorable policy: the antitrust law is at the bottom of the barrel
Once upon a time, the word MGM was a model symbol of Hollywood and even the global film industry.
in p>1924, Metro, which was suffering losses, went against the current and bought Goldwyn, which was also on the verge of bankruptcy. The discerning boss then hired Louis Mayer from a small production company to entrust him with the heavy responsibility, and MGM, which was composed of three initials, was born. In 1925, the epic "Ben Xu" pushed the company into the top ranks of the industry; The arrival of the era of sound films in the late 192 s provided the east wind for MGM to emerge. By the end of the 194s, MGM's reputation and financial resources had reached the historical peak, and many masterpieces such as The Grand Hotel, The Wizard of Oz, The Philadelphia Story, Gone with the Wind and so on had been released continuously. The film actors under its contract were almost a list of superstars: Clark Gable, Gary Grant, Spencer Tracy, Katharine Hepburn and Greta.
however, the general trend of the film industry is changing, and MGM, a ostentatious luxury cruise ship, can't escape the iceberg on its way. In May, 1948, the American antitrust law was promulgated. In order to avoid monopoly, major film companies were required to focus only on production, but not on distribution and cinema business, which undoubtedly brought heavy losses to the major film companies integrating production, distribution and projection. Most of MGM's financial resources were cut off and its income plummeted. To make matters worse, after World War II, the television industry began to spring up like mushrooms after rain, and the whole film industry was hit like never before. In the 195s, the number of people going to the cinema was half less than that in the previous decade. In 1957, MGM's 3-year profit situation was broken for the first time. Within the company, the contradiction between Meyer, the founding hero, and the board of directors and assistants intensified day by day, and he finally had to leave, which made MGM lose the confidence to turn the tide. Although in the late 195s, Michael ushered in a brief revival by spending a huge sum of money to remake his classic "Ben Xu", it is an indisputable fact that it is difficult to rebuild his former glory in the overall trend.
In fact, MGM was not alone in the depression of the film industry in the 195s and 196s. At that time, eight major production companies were groping for ways to survive: Universal reached a cooperation with music companies, Paramount was acquired by oil capital group, and Colombia took the lead in the TV industry, shooting TV films for TV stations or selling classic old films to TV stations through subsidiaries. MGM was no exception, but it was unfortunate to meet someone who was not suitable. In 197, the company was bought by gambling tycoon K Corklien, and the new executives sold the company's props and clothes, and the funds were transferred to casinos and hotels. The words MGM were hung up in the casino building, but the company's dilemma was not alleviated at all. In the early 198s, MGM ushered in a major event in the company's annals-the merger of United Art Company, which was associated with the same disease, with the intention of copying the miracle at the beginning of that year. United Art has produced Oscar masterpieces such as "The Graduate" and "Flying Over the Madhouse", and brought the famous 7 brand. However, when MGM, who has been neglected for ten years, returned to the film industry, she found that the taste of the times had changed, and she missed the transition period of Hollywood industry. Competitors such as Warner Bros. and Paramount occupied the market with diversified themes, and films such as The Godfather and deer hunter, which challenged traditional values and were more zeitgeist, became the aesthetic mainstream. At this time, MGM had been left behind by several grades in terms of software and hardware conditions.
poor management: blindly leaning on the old, with a style Out
MGM, which used to be a roaring lion, has now become synonymous with old age.
The 7 film series first appeared on the big screen in 1962. At that time, under the tense cold war mood of the whole society, this kind of spy war films with both practical significance and entertainment spirit stood out. Lianyi Company began a long-term cooperation with the Blolik family, the original author of 7. Excluding inflation, 22 7 films have generated a considerable box office of $12.2 billion so far, after the merger of Mi-Lian. However, in recent years, with the rapid development of Hollywood technology, movies like 7, which only rely on plots and fighting scenes to win, are no longer the only favorites of fans. Large-scale productions such as Harry Potter and Spider-Man are surging. In contrast, the routine of 7 movies for decades seems boring and old-fashioned. Reflected in intuitive figures, the ratio of box office to investment is particularly unsatisfactory compared with the previous decade. MGM in trouble, however, regards it as a lifesaver, eager to turn the tables by revisiting the classics.
MGM doesn't live up to its reputation of "respecting the elderly" and blindly relies on established stars. For example, Tom Cruise, a superstar who joined United Arts after being swept out of the house by Paramount, still earns top-notch salaries. In recent years, the box office of lions for lambs and Valkyrie for United Arts and MGM has been unsatisfactory, and others, such as Denzel of The Great Debater and Riding the Subway. They all belong to the nominal superstars with low cost performance. The golden age when movies relied on the personal charm of stars is gone forever. Now the general strategy of major companies is to save the money of top stars to create more visual effects scenes. Last year, the whole film industry blew an unprecedented 3D whirlwind, which attracted major studios to test the water one after another. MGM, which is still in the same place, is obviously retrograde on the wheel of history. In 29, the highly anticipated The Lord of the Rings prequel "The Hobbit" ended a long-standing lawsuit, and it fell into MGM's new line bag, which became an important part of the grand plan of "reviving MGM through a series of films". MGM finally expected to have its own popular film brand, but it was too late for time and money.
The failure of the film casting strategy is actually only a superficial symptom of MGM, and its real chronic disease lies in the limitations of the business model. Today's major Hollywood film companies no longer take products as their industrial core. Universal was acquired by NBC, Paramount by Viacom, and 2th Century Fox was owned by media giant Murdoch. MGM is one of the few film companies that have not been acquired by media groups. It does not have cable TV channels or broadband networks, but simply makes profits by making and distributing films. Movie products have not been spread and utilized in more channels, and it has not developed peripheral toys, theme parks and other related fields, so it naturally falls everywhere.
changes must start with internal adjustment. MGM in trouble not only needs funds, but also needs to pull the company into a mature business model. However, the heavy debts have scared away most of the interested parties.
Reform failed: M&A does not mean rebirth
The debt is as high as $4 billion, which makes many interested buyers discouraged. The key point is that these potential buyers have almost no intention to help MGM recover, and they want to buy only for their own temporary interests.
$1.5 billion, which is time warner Inc.'s bid for MGM. A year ago, hedge fund companies, including Anchorage Advisors and Highland Capital Management, bought MGM's debt at a price of 5 to 6 cents to 1 dollar, which means that creditors are unlikely to accept too much selling price below 2 billion. People familiar with the transaction said that hedge fund companies may want to acquire shares in MGM through debt-to-equity swaps, but they are generally skeptical about the potential capital. Therefore, the negotiations with time warner Inc. are doomed to be a seesaw battle. In fact, as early as 25, when Sony acquired MGM, time warner Inc. was a strong competitor. Later, facts proved that the $5 billion invested by Sony, private equity fund and Comcast, a cable film supplier, did not bring MGM vitality. Sony was fighting with Toshiba for Blu-ray and HD DVD at that time, eager to enrich its Blu-ray disc content, and it was the rich library of more than 4, classic MGM films that it took a fancy to. When Sony won and made full use of its inventory, the DVD market gradually slowed down, and the use value of MGM also declined.
Therefore, mergers and acquisitions are often not as gratifying as the seemingly huge figures. If MGM wants to find a buyer who can bring a win-win situation, it can refer to the examples of its peers in recent years: Paramount last stand, who was also struggling to be merged, bought DreamWorks in 25, obtained the ownership of 59 films from the other side, and successfully sold them to strategic partner companies for 9 million US dollars. Meanwhile, projects that DreamWorks needs a lot of money to start, such as Transformers, have also been implemented. At present, two series of box office sales have made both sides taste the sweetness. In 28, after Warner merged with the new line dragged down by the lawsuit, it drastically reorganized the leadership of the new line, laid off employees on a large scale, and strictly controlled the bidding projects. It seemed ruthless, but in fact it was a great advantage for the company to get back on track and develop healthily and rapidly.
No one wants MGM, an established company with luxurious inventory, 17 statuettes and attractive projects such as The Hobbit, to turn into the dust of history. In fact, before this crisis, MGM was also trying to cooperate with TV organizations, such as setting up a joint venture with CNBC Asia Pacific Company and launching a movie satellite channel. Although it was too late to enter the market, at least it showed its determination to keep pace with the times. There must be a strong consortium with foresight and tough style to save MGM in from the mire. Warner is interested in whether the current CEO—— of MGM-Krispy Kreme, who successfully reorganized the second largest doughnut chain in the United States, and Stephen Cooper, the reorganization expert of Enron, can seize the opportunity?
7 and waiting to start again, what he needs is not Aston Martin, but a real nirvana for MGM.