For every blockbuster this summer with Paramount's name attached — from Iron Man to Indy 4 to Kung Fu Panda — there's been a looming crisis to greet it at the studio gate. The latest wake-up call comes from Deutsche Bank, from whom we're learning the 'Mount split recently after the the studio balked at the conditions of a $450 million financing deal. This follows word that unhappy Wall Streeters wanted free-spender Brad Grey's head and that DreamWorks' Indian-funded defection was imminent. Mix The Love Guru in just for fun, and it's enough to almost make you forget Paramount is supposedly on a roll.
Or not, studio sources are eager to emphasize — it's business as usual on Melrose! We're not so sure, though, and neither are most of the other observers whose reactions we survey after the jump.
Most can agree that the culprit in the imploded Deutsche Bank deal is the same credit crunch that's overextended most other American industries. The Financial Times (which broke the story Monday) notes that equity and junior debt were covered, but the senior debt was too risky for anyone to bite without terms too steep for Paramount. Wall Street's caution is such that Deutsche Bank shuttered its entire film-financing unit for lack of investors; thus, for now, the 'Mount misses out on 25% production financing, up to $30 million per picture.
That's where the "experts" come in. Nikki Finke has the company line from sources at Paramount, one of whom says Viacom isn't the slightest bit peeved about the deal falling through. But the FT story adds that Viacom could be left holding the bag if other partners can't be found for the projects that are "likely to be released as scheduled." And in fact, that's the likeliest scenario when we consider Grey's rumored mishandling of Melrose Partners II and confirmed mishandling of DreamWorks, among other, smaller deals that proved Paramount as a bona-fide money loser for pretty much everyone but its talent.
David Poland has perhaps the cleanest analysis of how this dynamic would likely have played out between Deutsche Bank and Paramount:
In fact, just the four films mentioned as expected to be part of the deal - Transformers 2, Star Trek, Tropic Thunder, and Benjamin Button - would, under terms suggested in the FT story (25% of production), represent an investment of $150 million of the $450 total that claims to be intended to cover 30 films.
Considering that if these four films — expected hits — generated $1 billion worldwide, Paramount would have a float of about $100 million on distribution fees alone. That would mean that Deutsche Bank would still be about $100 million in the hole after theatrical while Paramount would be in profit, as a corporation.
And that is projecting 4 significant hits!
Then you have less than $10 million per film under the rest of this package, allegedly meaning that all the films together would average $40 million or less to produce.
- Paramount to shelve $450m film financing as crunch hits [Financial Times]