Film Studios Announce Cutbacks, Layoffs, Reorganizations
Metro-Goldwyn-Mayer sent minor tremors through the financial world on June 22 with its announcement of a probable $250 million loss for the second quarter of its current fiscal year. At least $140 million of the loss is due to canceled film projects. Some of them are completed but unreleased movies like Molly, starring Elisabeth Shue, of Leaving Las Vegas fame. Others are in various stages of development. MGM will cut about 45 members of its workforce in the reorganization.
The company expects to save about $11 million annually as a result. Part of the hefty write-down MGM will take this quarter stems from payouts to two departed executives: former Chairman Frank Mancuso and former Vice Chairman Robert Pisano, who will reportedly receive $10 million and $4 million, respectively. A third of the jobs lost will be in MGM's television-production division. The company has also pulled back from its tentative entry into movie-related merchandising, canceling a product-catalog project and scaling back to a simple licensing program instead.
MGM has withdrawn from its participation in United International Pictures, an overseas film-distribution cooperative it formed with two other studios, Universal and Paramount, and has signed a distribution deal with Fox Filmed Entertainment. Beginning in February, Fox will handle distribution of both theatrical releases and video products for MGM. In March, MGM paid $250 million to Time Warner to end its video-distribution agreement with Warner Home Video.
The June 25 edition of the Wall Street Journal reports that, despite a strong debut for its animated feature Tarzan ($34.1 million the first weekend, second only to The Lion King), Walt Disney Company is also launching a reorganization effort, with plans to "significantly reduce" its labor force. Cutbacks will affect from a "few dozen to as many as 200" jobs---most of them in Disney's international operations. Disney has "suffered an earnings slump," according to the report, and CEO Michael Eisner is performing the de rigueur cost-cutting ritual---an exercise he hopes will save Disney Studios up to $30 million a year. One effort will be to consolidate and streamline promotions for films in the domestic and foreign theatrical and video markets. Previously, separate marketing programs were developed for each. Eisner, incidentally, is among the top-earning executives in Hollywood. No mention was made of a reduction in his compensation package.
Meanwhile, DreamWorks SKG is hedging on building its proposed $250 million studio complex in the Playa Vista area of West Los Angeles. The almost-1100-acre stretch of grassy marshland south of Marina Del Rey and north of the L.A. airport is the last undeveloped site on the city's West Side. The studio complex has been a rallying point for L.A. environmentalists, despite DreamWorks' professed eco-friendly intentions for a dozen or more soundstages and production labs.
DreamWorks purchased 47 acres at Playa Vista in April for $20 million, but the project has been at a standstill since. Difficulty in reaching a "financial agreement that makes good business sense for the company" was the official reason given for the delay, but sources close to the deal say that DreamWorks has reassessed the project and believes it will cost closer to $300 million to complete. More environmental challenges may ensue, and the company can likely meet its needs by expanding its present facilities. In addition to a new animation "campus" in Glendale, DreamWorks has a music division in Beverly Hills, and shoots much of its live-action footage at rented space on the Universal Studios lot. DreamWorks principals Steven Spielberg, Jeffrey Katzenberg, and David Geffen hatched the controversial vision for Playa Vista shortly after they formed the company in 1994.