It's a theory that veteran investor Mario Gabelli told Barron's magazine recently. Gabelli, it seems, expects a wave of consolidation in the industry over the next few months.
Gabelli told Barron's magazine that he expects Paramount Pictures to soon merge with Sony Pictures, Universal Pictures or another studio as a way to cut costs.
"Today there are seven or eight motion-picture studios. A round of consolidation will occur in the next six to 12 months because of the costs of financing, prints and advertising, the benefits of globalization and such," said Gabelli. "We hear talk of something going on."
It seems perhaps counter-intuitive with some of the current tentpoles seemingly making money hand over fist, plus record annual profits for studios. But if you stop to consider the enormous up-front risks, preposterously high marketing budgets (sometimes as costly as the films themselves), empowerment of independent filmmakers thanks to advancing technology, and lost revenue due to challenges from other forms of media, such a move might make sense from a corporate perspective.
Moreover, with vertical integration and corporate ownership of major studios (Universal Studios owned by GE, Warner Bros Pictures owned by Time Warner, etc.) — and the current economic downturn — corporate owned studios are being left with dwindling advertising budgets.
Quite frankly, this doesn't sound like a good thing to us. Many believe that corporate ownership of the studios has stifled overall creativity as continued emphasis is placed on the reworking of owned properties and FX-driven "event films," which nonetheless offer several irresistible lures for corporate management, including increased profitability from marketing and merchandising tie-ins.
Somewhere along the way, the studios seem to have largely forgotten that at the end of the day, it's all about the story.
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