Will Hollywood be the Next Bailout Candidate?

The banking collapse of recent weeks has brought many questions to people’s minds. How can an industry with no apparent self control or desire to self-regulate, lose billions in an orgy of greed and opulence, making bad decision after terrible decision with no consequences? The lessons of the late 1920’s seem not to have been heeded.

The American auto industry has appeared similarly insular. Year after year it has churned out large and poorly performing vehicles, aspiring only to the style de-jour. Heavy cars that are cheaply constructed in many cases, and with poor performance in comparison to similar vehicles from foreign car companies. If all else failed, there was the inevitable appeal to ego, pointing out that American cars and trucks are bigger than the competition, with an attitude of ‘bigger is better’. However, their refusal to adopt modern technology has created vehicles that handle poorly, and are more prone to breakdowns. US Congressman Gary Ackerman (D-NY 5th) understands this well, he’s had problems with his Caddy, while his wife’s non-US car has had better service.

Both industries have been before the US congress, asking for help because of their poor financial status. The questions people are asking now are: Who is next to beg for a billion dollar bailout? Ackerman also acknowledged this, saying “Somebody heard that we’re giving out free money in Washington. They’re showing up from all over the place.” What industry has ruined itself by excessive greed and refusal to adopt new technologies? Could it be Hollywood, or perhaps the music labels?

The excesses of the movie industry are well known. Brad Pitt and others regularly command eight-figure fees, which quickly add up. There seems to be an increasing reliance on special effects and big names to carry films, rather than writing and acting talent. While this might increase the short-term draw at the box office, it is more than countered by a loss in repeated watchability, which cuts into later profits. A big name in a bad film is still going to be a bad film (BattleField Earth or Gigli), while an unknown in a good film, will be a good film, if the acting and production is up to it.

Of course, bad decision making is only part of the problem. Resistance to changing technology is another. The film industry famously resisted the VCR, claiming it would devastate their industry. The case went all the way to the US Supreme Court, where they narrowly affirmed the legality of home recording. Today, despite their resistance, the majority of income from a film is from pre-recorded content which is played on similar machines.

The music industry has also resisted technology, opposing innovations such as player-pianos, through commercial radio and file-sharing technology. Between discs infested with DRM, through stage-managed raids with convenient media coverage, to suing and threatening to sue ten-of-thousands of their best customers, they’ve shown not only their dislike of technology, but also bad decision-making.

Meanwhile, both the music and movie industry have been pleading poverty and blaming piracy. The infamous LEK study where piracy was blamed for everything was nothing more than a subtle attempt to quantify a theoretical loss. With no science or methodology behind it, it’s hard to take it seriously, but some congressional members have done just that. Now, as well as trying to push draconian anti-consumer legislation through congress, it could work to their advantage if they were to go cap-in-hand to politicians and say “we’re really hurting, and we could really do with some financial help.”

But will this happen? Just a year or two ago, some said that it seemed unlikely that the financial industry would take this path, so the film and music industries following this same road should come as no surprise. The trail has been blazed by others, and now they may find themselves following the advice of Dire Straits.