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Tuesday, May 15, 2012

CA supports extending film tax incentives. Fall network schedules unveiled at upfronts. Networks upset with Dish! Needed: a better way to measure TV. Men in Black gets ready to avenge.

Brad Pitt in "Moneyball"
 Photo: Brad Pitt in a scene from "Moneyball," which received a California film tax credit. Credit: Melinda Sue Gordon

From the LA Times Company Town Blog. Click here for the latest industry news.

The Skinny: Looks like upfront week will kick off with a humid and rainy day in New York. Monday's headlines include analysis of NBC's fall schedule, a look at how "The Avengers" dominated the weekend box office again, and the long, strange journey "Men in Black 3" took to get to the big screen.

California lawmakers moved a step closer to approving a five-year extension of the state's popular film tax credit program. The Assembly Revenue and Taxation Committee unanimously voted to support a bill that would give funding to California' s film tax credit -- which expires next year -- through July 1, 2018.

“I’m pleased my bill to extend the Film and Television Tax Credit Program has continued to move through the Assembly with another unanimous vote today,” said Assemblyman Felipe Fuentes (D-Sylmar), author of the bill, known as AB 2026.  “With our state facing a 12% unemployment rate, it’s critical to extend this program which is a demonstrated job and revenue generator.”

California sets aside $100 million annually for dozens of projects applying for credits between 20% and 25% of qualified production expenses for movies and TV shows.

Lawmakers first enacted the program in 2009 in an effort to compete with nearly 40 states that offer tax incentives and rebates to filmmakers.

The Assembly could vote on the bill this month, and the Senate is expected to take up a similar bill this summer.

Barry Sonnenfeld directs Will Smith on the set of "Men in Black 3." (Wilson Webb, Columbia Pictures / May 14, 2012) 

It's no slam dunk getting Men in Black 3 off to the launch pad. Often film sequels are slam dunks at the box office, a seamless continuation from where a previous hit left off.

But as the new installment of the 15-year-old franchise "Men in Black" proves, getting to the big screen isn't always a cakewalk.

One of the most troubled productions in recent Hollywood memory, Sony Pictures' latest movie in the Will Smith-Tommy Lee Jones sci-fi-comedy franchise encountered multiple script rewrites, a discontented star and a three-month production shutdown as writers and studio executives scrambled to fix a project that nearly fell apart.

By the time it was over, the studio had run up a tab of nearly $250 million — making "Men in Black 3" one of the most expensive releases of the summer.

Opening Memorial Day weekend, the film known as "MIB3" faces formidable marketing challenges given that the last sequel came out a decade ago. That means an entire generation of youngsters never saw an "MIB" in theaters, and the bar for summer event pictures has risen considerably by such high-octane spectacles as current mega-hit "The Avengers."

It was no small feat getting the latest "Men in Black" movie to the big screen.

NBC Broadcasting Chairman Ted HarbertWe need a better way to measure TV. NBC Broadcasting Chairman Ted Harbert told advertisers Monday that as more viewers watch programs on platforms other than television, the industry needs to come up with a better measurement system.

"The gifts technology gives us also presents several challenges," Harbert said during NBC's presentation of its fall schedule to media buyers at Radio City Music Hall. "If we're going to spend all this money on content, it has to be measured and monetized with a demonstrable return on investment for you folks paying the bills."

Harbert said it is crucial that networks be able to measure viewer behavior "no matter what screen they're in front of." He added that while such information didn't matter a few years ago because the number of people watching TV on computers and phones was minimal, he himself now watches TV on his iPhone. "But I'm drawing the line on my watch," Harbert joked.

NBC, Harbert said, is working on several initiatives to "crack the measurement code because we just can't wait and wait some more for Nielsen to do it."

Harbert also said it is time for advertisers to give a greater value to viewers who watch shows several days or even a week after their broadcast.

"When you consider the fact that over one-third of all prime-time programs have at least 40% of their weekly viewing time shifted, it's time to consider moving to a C7 metric," he said. The phrase C7 refers to viewers who watch shows within seven days of their initial broadcast.

Daily Dose: Once touted as the successor to "Desperate Housewives," ABC's hour-long comedy "GCB," about out-of-control Dallas divas, didn't make the cut for the fall schedule. While its ratings weren't the greatest, shows that have smaller audiences are returning. So why aren't the girls of "GCB" coming back? Ask Madison Avenue. Originally called "Good Christian Bitches" and then "Good Christian Belles," the show's name didn't charm advertisers, who weren't fooled by the acronym. The show proved to be a hot potato for ABC's sales department even without a B or C word in the title. But not all Bs are created equal: The network's "Don't Trust the B in Apartment 23" is still on the schedule.

Peacock strut. NBC unveiled a fall schedule that features comedies on four nights, including Friday, which will host returning sitcoms "Community" and "Whitney." Among the highly anticipated new shows are sitcoms starring former "Friends" star Matthew Perry and a new drama about firefighters from "Law & Order" creator Dick Wolf. The network will now also air fall and spring versions of its musical talent show "The Voice." Analysis of NBC's new schedule from the Los Angeles Times, USA Today, Vulture, Variety, Hollywood Reporter and Deadline Hollywood. Also, the Wall Street Journal profiles Linda Yaccarino, NBC's head of cable ad sales, and New York Times columnist David Carr looks at the challenges the TV industry faces in trying to rope in today's tech-savvy viewer.

Who has the best shrimp? This week, the broadcast networks present their fall schedules to advertisers in what's known as the upfront. It's called that because after the presentations advertisers buy commercial inventory ahead of the new season. You can generally tell how a network is doing based on what kind of beer and food they have at their party. And if they aren't having a party, well then it's time to advertise on a different network. An overview of the week's festivities from the New York Times.

Add Fox Networks Group Chairman Peter Rice to the growing list of television executives upset about satellite broadcaster Dish Network's new Auto Hop commercial-skipping feature.
"It seems a strange thing to do," Rice said about Dish's new feature, which allows users to literally black out commercials from shows that are broadcast on ABC, NBC, CBS and Fox and then watched at least one day after their original airing.

Peter RiceWhile consumers with digital video recorders can fast-forward through commercials of recorded shows, the Auto Hop takes it a step further. The screen goes black when a commercial break appears and a few seconds later, the program returns. The service can't be used on live programming, such as a sporting event, that has been recorded.

With more than 14 million subscribers, Dish Network Corp.'s new technology is of great concern to the networks and advertisers.

Rice, who was speaking with reporters on a conference call Monday to announce Fox's fall schedule, noted that broadcast networks such as Fox are the largest content providers to pay-TV distributors such as Dish, and wondered why Dish would risk alienating that relationship. As for whether the network will consider some sort of legal action to try to derail Dish's new commercial-zapping offering, Rice said Fox is "still evaluating it."

On Sunday, NBC Broadcasting Chairman Ted Harbert also expressed frustration over Dish's Auto Hop, calling it "an attack on our ecosystem."

The NBC executive took it a step further Monday during the network's presentation of its fall schedule to advertisers at Radio City Music Hall. After talking in great detail about the billions NBC and its parent company Comcast Corp. have spent on sports programming, such as the National Football League and the Olympics, as well as hundreds of millions on comedies and dramas, Harbert called the Auto Hop an "insult" to that investment.

"Just because technology gives you the ability to do something, does that mean you should?  Not always," Harbert said.

Dish's new technology, which was announced last week, is only offered for use on broadcast programming, not shows from cable networks. A Dish spokesman said there was no technological reason that Auto Hop wouldn't work on cable but that it was being offered for use only on broadcast shows because those are most popular with Dish customers.

This is not the first time such a technology has been launched. Several years ago, a service called Replay did virtually the same thing. The broadcast networks sued and won on copyright infringement grounds.

A Dish spokesman said the satellite broadcaster "believes that consumers deserve a choice when it comes to television viewing and Dish’s Auto Hop feature is all about choice. Viewers have been skipping commercials since the advent of the remote control; we are simply making it easier.”

FOX NEWSCORP BUYS INTO CHINESE STUDIO. Twentieth Century Fox parent News Corp. has agreed to acquire a 19.9% stake in Beijing-based Bona Film Group, the latest attempt by Hollywood to cash in on Asia’s biggest movie boom. It also signals the global aspirations of China’s second-largest independent movie production and distribution firm.

News Corp’s investment comes after a 30% jump in China’s box office sales last year to $2.1 billion. In the first quarter, China passed Japan as the largest overseas theatrical market for Hollywood films. Government forecasts show it should catch up with the U.S. box office by 2015.

Bona’s 2011 3-D release “Flying Swords of Dragon Gate,” took in $68.9 million in China, ranking fifth ahead of “Harry Potter and the Deathly Harrows -- Part 2.” The martial arts epic directed by Tsui Hark and starring Jet Li will get a limited North American release in IMAX theaters in September.
“We are committed to bringing the best quality Chinese films to broad audiences around the world,”

Yu Dong, Bona’s chief executive said in a statement. “News Corporation's extensive global reach, investment and distribution will help accelerate our strategy to expand our global footprint.”

The investment by News Corp. was seen by industry observers as Chief Executive Rupert Murdoch’s latest in a long string of attempts to crack China’s strictly regulated media and entertainment market. In the past, he complained about the country's thicket of opaque regulations, refocusing the company’s Star TV unit on India in 2009.

Murdoch's film studio 20th Century Fox, like all its Hollywood rivals, faces a high barrier to entry in China, where the government bars imports from taking home more than 25% of sales. The number of annual film imports China allows to share in ticket sales rose to 34 from 20 earlier this year. Fox is currently enjoying the spotlight here with the 3-D release of James Cameron’s 1997 blockbuster "Titanic,” which has grossed more than $100 million for state-run distributor China Film Group, the country’s sole licensed importer.

One way around the China Film Group bottleneck is to co-produce films that are not limited in number nor are as severely restricted in how much money they can repatriate. Fox International Productions already has made a few Chinese-language co-productions with modest success.

"One of Bona's unique advantages is its vertically-integrated business model, which differentiates the company from other film distributors in China," Jack Gao, News Corp’s chief executive for China investments, said in the statement from Bona.

A News Corp. spokesperson who asked not to be named when reached by phone on Monday said: “All our affiliates, including 20th Century Fox, from time to time work with local partners. There will be collaboration opportunities but we have nothing concrete planned yet.”

Hollywood’s dealings in China recently came under scrutiny when the U.S. Securities and Exchange Commission sent letters of inquiry to several studios, including Fox, asking about their business practices here.

David Wolf, an independent Beijing-based media analyst, said the investment in Bona looked like News Corp. playing “catch up” after a raft of recent pan-Pacific tie-ups, such as one between Hollywood’s Legendary Pictures and Orange Sky Golden Harvest of Hong Kong and Beijing; DreamWorks Animation’s plans to work with the Shanghai Media Group and two other state-run partners to build a studio in Shanghai; and the Walt Disney Co.’s plans to work with the Ministry of Culture and Tencent, China’s largest Internet company, to develop animation in China.

“What we are seeing is a new willingness by the big Hollywood studios to come into China with a minority stake hoping to gain a foothold and leverage up over time,” said Wolf, who added that it was difficult to put a value on the News Corp. investment in Bona.

China is also looking to expand its presence in North America. The Wanda Group, the largest theater operator in China, is in talks to acquire part or all of AMC Entertainment, the second-largest cinema circuit in the U.S. and Canada.

News Corp. purchased its stake in Bona directly from Yu, who, according to the company's statement, recently bought 1.5 million ordinary Bona shares from the Sequoia Funds and 1 million shares from both SIG China Investments One and Matrix Partners China Funds at an average of $11.40 per share, or $5.70 per American Depositary Share (ADS). The restructuring reduced Yu’s stake in Bona to 27% from 37.2%.

Analyst Dick Wei, J.P. Morgan Chase's head of Asia Internet and new media research in Hong Kong, said in a research note that it was “positive” for Bona, a client, to move away from venture capital partners and take on strategic investors who could bring “long term value for the business.”

In the note, Wei added, “The transaction should lift Bona’s brand image in global movie industry. We expect News Corp (Fox) to bring U.S. production expertise to Bona, creating more opportunities on high-quality joint-productions. In addition, News Corp will help Bona build up a global presence to distribute its own domestic productions in international market."

Chinese law classifies film and television as “restricted” industries and there is little or no clear precedent for successful foreign direct investment in these sectors.  An attempt by Warner Bros. to break into China’s cinema business ended in 2006 when the studio pulled out after three years following a change in rules by the Chinese government that barred majority ownership. Warner’s cinemas in China were ceded to the CFG.

Neither Bona nor News Corp. responded to multiple phone calls and emailed requests for further information on Monday.

Bona, which is China's only U.S. listed film studio, last week posted first quarter net income of $2.3 million, up 3.4% from the same period a year earlier. First quarter net revenues rose 126.8% to $43.7 million.

Bona shares, first listed on the Nasdaq in 2010, have risen 10.74% over the last year and closed on Friday in New York at $5.98 each, near the upper end of a 52-week range that topped out at $6.30.

The Avengers showed little sign of slowing down 
 Photo: "The Avengers." Credit: Zade Rosethal / Disney.

Still a lot to avenge for. "The Avengers" continued to rule the box office, taking in a $103.2 million in its second weekend. That figure is more than any film has ever made in its second weekend in release. That may be, but I still think "The Hunger Games" was better. The staying power of "The Avengers" was enough to soften the bite of Johnny Depp's "Dark Shadows," his latest collaboration with director Tim Burton. The "Dark Shadows" debut took in $28.8 million. Box office coverage from the Los Angeles Times and Movie City News.

Goal! Walt Disney Co.'s ESPN, looking to build on its international presence, is expected to aggressively bid for soccer rights in Britain. Up for grabs is the Premier Soccer League, at a price tag  north of $3 billion, according to the Wall Street Journal. ESPN will have to try to take the ball away from British satellite broadcaster BSkyB, which currently has the rights. Well, if ESPN wins, maybe BSkyB can come here and bid on the NFL. Details from the Wall Street Journal.

Ticking clock? As John Malone's Liberty Media continues to gobble up more stock in satellite radio broadcaster Sirius XM, things may get tough for Chief Executive Mel Karmazin. Liberty currently owns 46% of Sirius, and while the Federal Communications Commission initially rebuffed its application to take control of the company, if it keeps buying stock it seems only a matter of time. Karmazin, who has been trying to resist Malone's aggressive moves, has indicated in the past he's not looking to be a No. 2 executive again. The Street anticipates what may happen next.

Barry's bet. New York magazine takes a look at Barry Diller's plans to revolutionize how the TV signals of the broadcast networks are delivered to the home. The only problem is the broadcast networks don't want this revolution to be televised.

Pour me a stiff one! For decades, advertising for hard liquor was taboo on television. Then cable networks started to carry commercials and now it appears the broadcasters are also loosening up. Advertising Age notes that both ABC and NBC are carrying commercials for the hard stuff in late-night. Frankly, given that the drinking age for beer and liquor is now 21 everywhere, it doesn't seem to make sense that one can advertise all over the place without raising an eyebrow while the other has to hide in the shadows of late-night.

— Joe Flint
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From the LA Times Company Town Blog. Click here for the latest industry news.

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