Wednesday, July 04, 2018

Blind Items Revealed #32 - Mr. Hedge

February 16, 2018

It is said that history doesn’t repeat, but it often rhymes.  In over 100 years of Hollywood history, once every couple decades some person, or company, has been able to swindle enough cash from investors to even attempt this brazen scheme.

Almost every major studio has attempted some form of this scheme, on a smaller scale, at one time or another in its history.  The most recent example is back in the early 90's, when Sony paid through the nose for Columbia and TriStar Pictures.  Sony lost billions of dollars in the following years.  Each and every single time, the scheme has ended in miserable financial failure for the investors who were left holding the bag at the very end.  Many decades ago, RKO drove itself into receivership, and Warner Brothers almost went bust.

The scheme goes like this: Buy up as much talent in town, as quickly as possible, and it’ll all pay off later.  Doesn’t matter how much you have to pay.  Trust us, the financials will work out very nicely in the future.  Because we will simply chase everyone else out of the game.  Just give us a lot of money, so we can make sure that everyone else will go bust - before we do.  It will only take us a few short years to make that happen.  Then, we’ll be the only option in town.  We will control everything.  We will be able to squeeze the amount of money paid for talent back down, while charging our customers a ton of money.  We will be the last man standing, rolling in dough.

In recent years, an almost TV-network has made that age-old scheme the centerpiece of their corporate strategy.

This almost-TV network will pay at least twice what anyone else will for original content, whether you are selling a TV series, film – or even a stand-up comedy special.

The modern version of this scheme is enabled by a very unique form of accounting hocus-pocus, used by the almost-TV network.  This accounting magic allows the company to claim that it is generating a “profit”.  The reality is that this company burned through about $2 billion of cash last year, and will burn through another $3-4 billion in 2018.

This almost-TV network simply depreciates the value of all these films and shows over a far longer period of time than everyone else ever has.  The company claims that their definition is legit, because the content is in their own “library”.

This almost-TV network is the 1st to deliver its content in a unique way, using relatively new technology – they were the first company to do it this way on a large scale.  This means the Feds presently have no basis to challenge the almost TV-network on its suspect accounting, because the new “definition” has not been proven wrong.  Only the ultimate financial collapse of the company will do that.  In the meantime, the accountants and auditors go along for the ride and happily collect their fees, as they always do.

The almost-TV network tells its stockholders that it can taper down this spending spigot in the future, to generate actual cash.  This is an obvious lie, in 2 ways.

If the almost-TV network ever cut spending and new content, many subscribers would drop them like a hot potato.  Second, the company is making many big public commitments to spend money like drunken sailors, for several years into the future.  The huge deal they made this week – that is just to the head guy alone.  It doesn’t count a penny towards what it will cost to make his shows.

This almost-TV network also doubled down on a sequel for a very expensive recent film.  They literally doubled the bidding price for the original, which was a disaster.
Let’s call these Films A1 and A2.  A1 isn’t still worth most of its massive production cost, which is the value the almost-TV network uses for its accounting - just because A1 is part of their “library”.  Everyone knows A1 is worth pennies on the dollar.  The company claimed that millions of people watched A1.  Maybe, but A1 was so bad that many of them probably turned it off part-way through.  Most of those who watched the whole thing thought it was a lousy film - and won’t bother to watch A2.

Recently, the almost-TV network just bailed out a struggling once-major studio, and bought their awful film for big money.  Let’s call this Film #1.   Film #1 would have completely flopped at the box office, as the reviews were about as terrible as they can possibly get.  Critics have called Film #1 a total mess.  Film #1 is the 3rd film in a sci-fi series, but it is missing the main actors and director from the successful original film. 

Very recently, the almost-TV network bought yet another film, which a major film studio had put on the shelf - rather than bother losing even more money releasing it in theaters. This film stars the lead A-List actress from the original in Film #1’s series. Let’s call this film #2.

Stockholders in the almost-TV network are flying high right now.  In the next couple of years, they will see these heady gains evaporate.  This almost TV-network has a rapidly growing mountain of debt, which is getting much more expensive to finance.

Almost TV network -
Huge Deal This Week -
Film 1  / studio  / amount -
Film 2 -
Original to Film 1 -
Actress -
Film A1 / A2 -

Almost TV network: Netflix
Huge Deal This Week: Ryan Murphy
Film A1/A2: "Bright" and sequel
Film 1/studio/amount: The Cloverfield Paradox/Paramount/more than $50 million
Film 2: "Extinction"
Original to Film 1: Lizzy Caplan; Matt Reeves
Actress: Lizzy Caplan


S D said...

Dang these last few reveals have been as long as a chapter in a book! Mixing in a shorter one would be appreciated.. :-D

Thonker said...

I wonder if Mr gabe hedge is right about netflix and Tesla

sandybrook said...

Netflix has about 120 million subscribers worldwide Hedge. More than probably own tvs in America alone. Plus Hedge, since these people are paying a monthly fee to watch it, they are dedicated viewers, like a Starz, Showtime or HBO viewer. They will at least sample a new show to see if they like it. So sorry you shorted this one too bloodsucker, lose your fucking ass in 2018!

Lexi said...

My first experice with Lizzy Caplan was on true blood and I like her a lot.

KittensRUs said...

Fact, I turned off Bright halfway through. Will Smith was funny as always but not enough reason to watch that entire clusterfuck. David Ayer gets confused a lot about how the regular movie-watching public thinks. He wanted to do an ending for Suicide Squad that would have made the movie a flop and fortunately WB put the kibosh on that after test screenings.

All of that said, Netflix will be fine. I'm addicted to so much shit on Netflix that I'd keep it if the price quadrupled and so would most people.

tinydancer61 said...

Most of the content on Netflix sucks imo. It's like they throw a bunch of spaghetti on a wall to see what sticks. I start quite a bit of shows and then stop because generally, it's so bad. I have yet to seen one Adam Sandler movie on Netflix that I can watch through in it's entirety. JUST AWFUL. But isn't he an investor or something? I know streaming is the way to watch TV now but damn! They really need to up their quality. I've considered cancelling so many times because Netflix feels like such a huge waste of money.

Sara, Making It Work said...

When's the shoe gonna drop for Ryan Murphy?

Ly said...


Cree said...

Idk... I've had netlix since it first started, seen all the changes and I'd still rather pay for it instead of tv. Feels like the money is better spent on it and I dont remember hearing bad things about cloverfield or bright from people. I dont put much stock into "critic" scores or websites ran by competitors.

Netflix does spend a lot of money, but everyone has it or knows someone who has it. Not even scratched the surface of watching all the movies and shows there.

I feel like they'll be just fine. More than happy with Netflix,hulu and youtube. I feel like the people of "TV land" are just scared because cable is dying.

Cail Corishev said...

Lots of customers isn't a good thing if you aren't making money on them. The streaming situation is starting to remind me of the years leading up to the video game crash of 1983. The business was booming in the early 80s, and people were buying home computers and consoles and whatever software they could find for them. The book Hackers chronicles how individual developers started out selling games through the mail from home, with an ad in a magazine, and within months they were living in mansions in California.

But by 83 there were too many different platforms on the market, none compatible with the others, too much crappy software, and consumers couldn't keep up with it all. Price wars started, and what had been a $3B/year business became a $100M/year business. That's what I'm reminded of when I hear people talking about how there's no way they're going to sign up for one more streaming service to get this or that show, how they're paying for too many already. Something's gonna give. And the other thing I keep hearing lately, from regular people, not insiders, is that Netflix's quality just isn't what it used to be, and their selection is actually thin when you get past the "original content" they're pushing.

A story from nerd-land: apparently Netflix was pissed because they paid a bunch of money for the non-US rights to Star Trek Discovery, and it's crap. They thought it was going to be a big deal -- first new Star Trek in a while, should be a winner, right? Well, no, most fans didn't think so, and as we've learned more, it seems that weird licensing issues between CBS and Paramount meant that neither company really needed the show to do great, so they were only too happy to dump it on Netflix for a big price tag. Caveat emptor -- Netflix should have known better. But it fits with the general impression of a company that's too focused on appearances to pay attention to what matters.

Justdanadane said...

Yet I can't get another season of Disjointed??

BRAD PITT said...

felt so sorry for her character in 'cloverfield'

Kevin said...

"This almost-TV network simply depreciates the value of all these films and shows over a far longer period of time than everyone else ever has"

That doesn't make sense. You depreciate an asset so that you can claim the depreciation on your taxes, increasing your net profits. Stringing it out over a longer period of time would result in lower net profits.

Brayson87 said...

Lizzy Caplan is pretty funny.

Movies are trash now, on demand episodes is where it's at, streaming is here to stay, basic cable is going away. Most movies are barely watchable, all the talent has gone to tv and streamers. And people would rather pay extra than watch all those sh!tty tv commercials.

Streaming is a hydra now, piss on Netflix all you want, chop it down and two more services will take its place.

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Kansa said...

What I don't like about Netflix is that I have an account I started when I lived Stateside. It's supposed to be that you have the content from wherever your account started at. However, since I live in Europe, I get approximately 1/4 of the content people in the States get, for the same amount of money. Those codes which the DM and other media keep touting, so that we can watch other programs? They don't work here. You only get the selection for your country and that's it. Even with a VPN. you can't get the US selection unless you are in the US. And yet, we were in Portugal a couple of months ago and guess what? At the Marriott, they got the UK selection. (The reason I don't like the selection for my particular country of residence is because I don't speak German and having a film in German with Dutch cc does not help me in the least. I can manage it with French audio and French subtitles, no problems with Spanish or Portuguese original language, or Italian. But Netflix leaves us non-Germanic language speakers out in the cold. I want what I want when I want it, and Netflix does not deliver on that.


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