Two big stories raced through Hollywood yesterday (though one was less discussed than you’d think). First, Sony Pictures Entertainment paid $65 million for a social networking site called Grouper. Second, Paramount ended its deal with Cruise/Wagner Productions. Neither of these things will likely affect you as you go about your daily business, but they’re fascinating to people like me.
The Grouper thing? Well, Sony had a few choices there. They could have built something for a lot less. A lot less. The technology is cheap and the video sharing market is wide open. Do not believe the hype about YouTube ruling the world. There is plenty of room for competition. You need to recall that YouTube is only now approaching its first birthday.
In essence, Sony paid the $65 mil for the site’s user base. Only time will tell if that’s a good investment. Grouper’s inherent design — desktop installation — could be a huge stumbling block for the Bored At Work Network. Corporations are tightening the screws there; while college kids are a massive audience, you need a wide open platform to capture the largest number of eyeballs.
Now to Cruise/Wagner. Last night, I heard a talking head suggest that this was a surprise to a lot of people. Uh huh. Only if you’ve been on another planet. The Cruise/Wagner deal was expensive for Paramount — in addition to funding the production company, Cruise/Wagner gets a cushy participation in their movies, and Tom Cruise earns a nice paycheck for his onscreen work. Then there’s the fact that Cruise has been on top for a long time. Sheer logic tells you that he’s not going to be there forever.
While Sumner Redstone cited Cruise’s exuberant behavior as a factor, going to so far as to suggest that it cost Paramount money (note: it’s not the movie, ever), the truth is that Hollywood is tightening its collective belt. Production costs have spiraled out of control, revenues haven’t.
Personally, I think all of this “blame the talent” activity is just a smokescreen. It’s easier to blame out-of-control costs than to accept that business-as-usual isn’t working the way it used to.
Thus we have one studio probably overpaying for technology that could have been developed in-house — and I fully acknowledge that had that happened, it would have been a branding disaster because that’s simply how corporations work — while another sheds a mega-bucks deal. I don’t see either move as evidence of a new Hollywood. If anything, it tells me that there’s still a lot of soul-searching to be done in H-Wood. And that’s going to be painful.
Not only could Sony have built their own video sharing site for less, they could have probably bought another video sharing site for less. Preferably one that doesn’t require users to install special software, and works with a Mac.