Breaking Down MGM’s Costly ‘No Time to Die’ Dilemma
In early October, with cases of COVID-19 rising in Europe, Metro-Goldwyn-Mayer decided to pull the plug on its plans to release “No Time to Die” at Thanksgiving.
The studio had made a similar decision last March as coronavirus first gripped the world, pushing the release of the 25th James Bond adventure back by eight months only to discover that it hadn’t run far enough ahead of a worsening public health catastrophe. The move was financially painful, given that the studio had already spent $66 million in marketing costs. Bringing “No Time to Die” to the screen was already a pricey proposition — the film, which marks Daniel Craig’s final turn as 007, carried a $301 million net budget. Plus, Craig and producers Barbara Broccoli and Michael G. Wilson, who control the rights to the series, have generous backend and profit participation deals, limiting the amount of money MGM is able to make on the movie.
MGM was in a bind, and it was a dilemma that could soon be shared by other smaller and mid-size studios such as Lionsgate and STXEros, as they try to wait out the pandemic. Delaying “No Time to Die” until April 2021, as MGM ultimately opted to do, meant that the studio had to reportedly carry an additional $1 million in interest charges per month. And few people in the industry think that “No Time to Die” is done moving. Public health officials indicate that a vaccine is unlikely to be widely available by the spring and since the audience for the film skews older, Bond fans are more vulnerable to coronavirus.
Prior to moving “No Time to Die,” MGM Chairman Kevin Ulrich went on a fishing expedition, letting deep-pocketed streaming services know he might be open to licensing the movie to them exclusively for a year or even selling it outright. Netflix and Apple engaged in some exploratory talks, but never made a formal offer or even drafted the kind of financial analysis that usually accompanies such a sale. That was partly because MGM and the parties remained very far apart. MGM was hoping for an offer of between $600 million to $850 million, which might have been an impressive enough number to convince Broccoli and Wilson to forgo a theatrical release. Instead, the streamers indicated that they wouldn’t top $400 million, which was more than MGM had already spent making the movie when Craig and the producers’ backends were taken into account (Universal, which oversees foreign distribution, also needed to be compensated).
A spokesperson for MGM said the studio would not comment on rumors, but all slated films were moved in an effort to preserve the theatrical experience.
Numerous competitors pointed out that MGM’s Bond predicament would’ve been less complex had the company chosen a major studio partner in 2017 as a distributor. MGM entered a joint venture with Annapurna Pictures, which was eventually branded United Artists Releasing, almost four years ago after turning down bids from majors including Warner Bros. and Paramount Pictures. While other insiders insist UAR has cash on hand to release both “No Time to Die” and a sequel to MGM’s Alicia Vikander-led “Tomb Raider,” many agreed a media giant would be better suited to weather this particular storm. An MGM spokesperson disputed an auction for Bond rights, and reaffirmed the studio’s commitment to UAR saying, “we have tremendous confidence in the UAR team, which is led by veterans of this industry who have worked on several Bond films over the course of their careers.”
The failed deal for Bond took place at a time when streaming services have been aggressively snapping up major movies from traditional studios. In recent months, Amazon has spent hundreds of millions to buy “Without Remorse” and “Coming 2 America” from Paramount, Apple swept in and captured “Greyhound” from Sony, and Netflix snapped up “Trial of the Chicago 7” from Paramount. It wasn’t the first time that MGM had received incoming offers from streaming services on its films that it had been forced to delay. The studio had numerous requests to off-load “Candyman” to a Netflix, Amazon or Apple, but producer Jordan Peele insisted on a theatrical release for the horror remake.
This week, MGM opted to move another high-profile film, “Respect,” into 2021. The drama, which features Jennifer Hudson as Aretha Franklin, was seen as an awards season contender. However, MGM felt that with rising cases of COVID-19 around the globe, a release was improbable if not dangerous. Its decision to push the movie led to speculation that the studio might be feeling financial pressures.
That doesn’t appear to be true…yet. MGM had $790 million in cash and cash equivalents on its balance sheet as of its most recent financial disclosure. It’s unclear if the pandemic has forced it to eat into cash reserves. However, a spokesperson for MGM said the studio has a “liquidity profile” north of $1 billion, with $700 million in operating cash.
But MGM has other issues to contend with in the coming months. EPIX, the company’s cable channel, has proven to be a costly drain and could be unusually vulnerable to cord-cutting. The premium channel has yet to land a breakout hit. The company has also been spending heavily on its film slate. Last winter, MGM brought in Oscar-nominated producer Michael De Luca to oversee its motion picture group with a mandate of finding splashy projects. He delivered, lining up films from the likes of Thomas Kail, George Miller, Joe Wright, Kenya Barris, Ridley Scott, and Paul Thomas Anderson. The activity made a statement to the industry that MGM was getting ambitious.
However, De Luca also wrote big checks to land the films. Anderson’s untitled coming-of-age drama cost $40 million, which is roughly $10 million more than other bidders were willing to spend on a project with limited commercial potential. Likewise, De Luca was said to have far outspent other bidders to nab Scott’s film, “Gucci,” and wrote a check for $3 million for the rights to “Project Hail Mary,” a sci-fi film set to star Ryan Gosling. Many of these films could ultimately pay off, but they were developed with an eye towards an extended theatrical release. Given the pandemic, it’s unclear when that kind of distribution strategy will even by viable again.
An MGM spokesperson pushed back at any suggestion that De Luca was being profligate, arguing that 2021 will be one of the company’s biggest years when it comes to new movies.
“The studio committed to, and has built, a robust theatrical slate. MGM has multiple high-profile projects that have been brought to the studio in the short time De Luca has been at the helm of the film division,” the company official said.
Once again, however, MGM’s relatively small size means that slate De Luca has built has to deliver commercially. Unlike larger studios, such as Warner Bros. and Disney, MGM lacks an in-house streaming service like HBOMax or Disney Plus, where it can place films that face an indefinite theatrical release, allowing them to at least monetize content instead of accruing interest payments. It also doesn’t have the luxury of being part of a sprawling conglomerate that could enable it to better weather a protected theatrical shutdown.
Before COVID-19 upended the movie business, the smart money was that MGM was looking to sell to another studio or streaming service. Ulrich, insiders say, was hoping to land a deal in the $8 billion range for the company. That’s a princely sum, and while it’s true that MGM controls a library of 4,000 titles that includes everything from “The Silence of the Lambs” to “Rocky,” it has also heavily exploited much of that intellectual property. MGM’s most prized possession, and the reason an Apple or a Netflix would even contemplate shelling out billions to buy it, is Bond.
During coronavirus, however, “No Time to Die” isn’t proving to be the financial lifeline that the studio needs. Instead, every delay only costs more money and leads to more chatter that MGM is starting to feel the heat.