The Mega-Deal That Wasn’t

MGM is on the block, but nobody seems to care

In Hot Tub Time Machine, a group of sad-sack pals are transported back to what ought to have been their heyday, with a chance to set things right and rewrite the future. It’s a goofy theme that must have had resonance with the folks trying to sell Metro-Goldwyn-Mayer, the once-storied movie studio behind Machine. A few years ago, the sale of MGM would have generated a lot of heat—indeed, that was exactly the case when the studio was sold to a group of private-equity firms and corporate bigs such as Sony and Comcast in 2004. But if there was ever a sign of how times have changed in the movie business, the big story about MGM for weeks now is about who was dropping out of the bidding or how little those who remained are willing to pay for it.

On March 22, final bids were submitted by Time Warner, a Russian investor and Lionsgate. The top bid was expected to be about $1.5 billion, a far cry from the $5 billion MGM sold for several years ago, and not brilliant for a company carrying $3.7 billion in debt.

The story line here is that normally deal-crazy Hollywood has replaced its mojo with an uncomfortable new wariness. It doesn’t help that MGM has been a husk of its once-mighty self for a long while, the consequence of being sold and resold (often to or by Kirk Kerkorian), and the fact that Ted Turner years ago hived off the best parts of its huge catalog of old movies. And MGM still had a perfectly decent business peddling its library of 4,000-odd films, as well as a lucrative association with the James Bond franchise.

MGM embodies a bigger issue vexing Hollywood—that no one knows how much of what’s happening today is due to permanent tectonic changes wrought by the move away from physical to digital copies, and how much is just due to a really crappy recession. Thus, the idea of “once-in-a-lifetime” assets coming on the market doesn’t hold the appeal it once did.

To its credit, MGM did attract Len Blavatnik, the Russian billionaire, as a potential bidder, which at least proves again that there is always a new swimmer willing to dip into the Hollywood shark pond. Lionsgate’s presence in the process is curious, given that the company has its own challenges and is actually smaller than MGM. Plus, Carl Icahn last week made a hostile offer for Lionsgate. No one is interpreting Icahn’s designs on the studio as a sign that investor excitement in Hollywood is about to come screaming back. Icahn is a singular force in business, but his best-known media investment was in Blockbuster, which last week warned it may file for bankruptcy protection. In a gigantic industry built on making stuff up, there’s just no faking it anymore.