With the iconic Metro-Goldwyn-Mayer (MGM) film studio filing for bankruptcy protection at the beginning of November, many entertainment industry watchers are left wondering: Is nothing sacred? If the roaring lion can't make it in this ever-changing financial landscape, who can? (For a related reading, check out Celebrity Recession: Stars Who've Lost It All.)
Though MGM is one of the biggest and best known entertainment companies to file for bankruptcy, it's certainly not the first. Especially in this mutable media environment, there are many companies struggling to keep their heads above water. We'll look at some of history's big entertainment industry bankruptcy filings and see why this is not a new thing.
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This legendary film studio was founded in 1924, and is home to the James Bond franchise, "The Wizard of Oz," "Ben Hur" and countless other titles in the film canon. However, since 2005 the company has been struggling with ever increasing debt and on November 3, the film house officially filed Chapter 11. Formerly a public company, Bloomberg reported that MGM's woes were due to its piling on debt in order to go private in 2005. The company's debt finally proved too much, and with debtholder Carl Icahn's support, MGM put together a prepackaged bankruptcy plan so that it can stay somewhat active while the bankruptcy proceedings take place.
More Movie Misses
MGM is certainly one of the biggest film bankruptcy filings, but many smaller independent companies have fallen under heavy debt loads and were never able to emerge. MGM owns the rights to over 4,000 TV and film titles, but is still mired in debt. This is similar to Orion Pictures, which owned many contemporary classics yet still had to file for bankruptcy protection in December 1991. Orion was the film house that produced "Platoon," "RoboCop" and "Dances With Wolves," but the success of these films was not enough to make up for other film flops and mounting debts. After being bought by other companies, Orion finally came to rest in the arms of MGM in 1998. While no longer producing films, Orion's catalog from 1982 on is still around, bearing the MGM logo.
Similar to Orion's story is that of film house Carolco Pictures. Another independent, Carolco had smashing successes with James Cameron's "Terminator 2: Judgment Day," the Rambo series and "Total Recall." However, with many flops in 1995 - including one of the biggest flops of all time, "Cutthroat Island" - Carolco had to file for bankruptcy, selling most of its assets to 20th Century Fox. The Carolco titles are owned by many entertainment companies including Paramount Pictures and Sony Pictures.
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Record Company Conundrums
If the music industry doesn't do more to adapt to new forms of music consumption, record company bankruptcies may become an increasing trend in future years. Though there were rumors of EMI's financial troubles this past spring - rumors that CEO, Roger Faxon, has firmly denied - there have been other formerly-successful independent record companies that have filed Chapter 11 in the past 50 years.
TVT records started in New York City as a novelty label releasing albums full of TV show theme songs. The label gained prominence after putting out some successful albums by Nine Inch Nails, Lil Jon and Pitbull. Though the company was forward-thinking and adapted to the digital landscape, it wasn't enough to keep the label propped up and it filed for bankruptcy in 2008, after legal battles with Def Jam and Slip-N-Slide Records. The label's catalog and contracts were bought by a digital label, The Orchard.
And then there's controversy-plagued Death Row Records. At one point this label was a gangster rap powerhouse, but by 2006 it had filed Chapter 11. The remains of the company, with a catalog consisting of Snoop Dogg, Tupac Shakur and Dr. Dre, among others, were sold to WIDEawake Entertainment for $18 million in 2009. Many other independent labels have fallen throughout the years, like soul staple Stax. (For more, see Millionaires With The Most Bankruptcies.)
Video Games and Rentals
With the success seen in the video game industry these days, it's hard to imagine that some companies could fail, but it's happened. Midway Games, maker of "Mortal Kombat", "NBA Jam", "Tron" and more, filed for bankruptcy in 2009. Media conglomerate Warner Bros. bought most of its assets and the rights to much of its catalog.
Another recent entertainment bankruptcy filing is that of Blockbuster, which filed Chapter 11 in September. The heavily indebted company is currently trying to restructure and re-emerge, but it'll have to make some big changes to compete with Netflix and other new media rental companies.
The Bottom Line
The entertainment industry is constantly changing and evolving, and some companies either grow too fast and take on too much debt or don't react to the changing landscape, which leads to a decline in demand for their products. Still others fail because of faulty management or bad luck. Whatever the cause, with the face of entertainment media continuing to change, there will be even more bankruptcies and restructuring in the years ahead. (To learn more, check out 5 Lessons From The World's Biggest Bankruptcies.)
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