Show goes on in Hollywood amid economy jitters

LOS ANGELES (Reuters) - Cameras are rolling and money is flowing, despite a few fears in Hollywood that the current global economic turmoil could cut TV advertising and dry up some film financing.

"It's not like people stop consuming entertainment. That's not happening. No individual is immune to a world financial crisis, but people are still watching TV and buying movies," said Michael Burns, vice chairman of Lions Gate Entertainment, who said DVD sales were strong and it was "business as usual" at the studio behind films like "Religulous" and "W".

Executives from two large Hollywood studios said their companies would cut down on travel and promotions due to market conditions. DreamWorks will delay pitching Wall Street for loans, and broadcasters are concerned that advertisers might buy fewer spots if fewer people are buying their wares.

Media stocks have slumped with the market collapse, mostly weighed down by fears about broadcast advertising.

But no studio said it would cut or delay film production, and many said they were not cutting costs like travel.

"We are always looking at our businesses and the best and most efficient ways to run them. At this point we are not doing anything differently," said Scott Rowe, a spokesman for Time Warner Inc's Warner Bros, which is proceeding with six films, including the next "Harry Potter" installment and the Clint Eastwood-directed "Human Factor."

In fact, billions of dollars in films are set to go ahead in coming months by Warner, Walt Disneu, Viacom Inc's Paramount, News Corp's Twentieth Century Fox and General Electric's Universal, after the industry put much output on hold since late June amid fears of a strike by the Screen Actors Guild (SAG).

SAG and the studios are locked in a three-month-old battle over payments for work delivered online on the heels of a 14-week walkout by screenwriters that ended in February.

While many studio executives believe the deteriorating economy will discourage actors from striking, saber rattling continued this week with SAG saying it was confident its members will support authorizing a strike against studios.

Despite the gloomy economy and strike threat, the prospect of not having films to show audiences is even scarier to studios, which is why they are now shooting films slated for 2010 and 2011.

FILM FINANCING CONTINUES DESPITE WALL STREET CHAOS

Several film-related finance deals have closed in recent weeks even as the chaos on Wall Street has unfolded like an epic disaster flick.

JPMorgan, considered the entertainment industry's top banker, is involved in three recently announced film-related deals, including India's Reliance ADA Group's venture with Steven Spielberg's DreamWorks SKG.

JPMorgan, which is putting up about $125 million for DreamWorks, hopes to raise about $600 million more from other lenders, but has delayed that pitch due to the market, a person briefed on the matter said. The person said delaying the request for funds was simply the prudent thing to do.

JPMorgan also closed a $350 million credit facility for studio Media Rights Capital, maker of a new Cameron Diaz film, and led a long-sought $1 billion multi-studio deal to finance the digital upgrade of 20,000 U.S. and Canadian cinema screens, so that theaters can show more 3-D films for higher prices.

Like every sector, Hollywood began taking a hit from the credit crunch months ago with the retreat of hedge funds that had poured $15 billion into film deals over three years.

But deals like the DreamWorks venture with India's Reliance and growing investment from oil-rich Abu Dhabi reflect the enduring and powerful appeal of Hollywood.

"There will always be another source of investment in Hollywood," David Maisel, chairman of Marvel Studios, the studio behind the hit "Iron Man," when asked how he thought the current economic climate would affect Hollywood.

Bankers and studio executives say film financing will continue but at stringent terms.

"You'll see more film financing, but the terms will be different. The leverage will go more toward the people on the other side of the table. Studios will have to give up more," said Maisel, speaking at a media conference in Los Angeles.

A source familiar with the new DreamWorks film studio said the company will delay pitching Wall Street on a bank loan package for about one month due to the market turmoil.

Reliance is providing $550 million for a stake in the new company, but DreamWorks banker JPMorgan now hopes to secure pledges from other lenders in January, a month later than initially targeted.

TROUBLE DOWN THE ROAD

Some observers, like Eduardo Martinez, economist with the Los Angeles County Economic Development Corp (LAEDC), are not so sure a happy Hollywood ending is in sight.

"The entertainment industry is about as speculative as you can get. If we do have a deep and protracted downturn in the U.S. and the rest of the world, it would be hard to see how the film companies would be immune from pressures facing all large corporations," he said. Many longer-term projects now being conceptualized may face tougher financing, Martinez said.

(Editing by Gary Hill)