BusinessWeek previews MGM bidding

Bloomberg BusinessWeek is previewing the bidding for Metro-Goldwyn-Mayer Inc. Bids are due on Friday, Jan. 15. An excerpt:

Time Warner Inc. and Lions Gate Entertainment Corp. are among the likely bidders to rescue the famed yet perennially troubled Metro-Goldwyn-Mayer Inc., the studio whose lion roars before every movie.

The eventual winner would gain the right to make new James Bond movies, win half of the rights to the next two “Lord of the Rings” movies based on “The Hobbit” and snatch the studio from a possible bankruptcy filing. Nonbinding bids are due Friday.

A sale would be another win for Stephen Cooper, a restructuring expert who joined the company in August after stints reorganizing Krispy Kreme Doughnuts Inc. and Enron Corp. It would also mark the latest change in ownership for a company that has been bought and sold countless times since it was founded in 1924.

The story also explains how MGM got into trouble after its most recent sale, in 2005:

At the time, the private equity buyers, including Providence Equity Partners and Texas Pacific Group, were flush with cash and had easy access to credit, allowing investors to heavily borrow to complete the purchase. Comcast sought movies for its cable channels. Sony wanted to make new James Bond and Pink Panther movies and to create another supporter for its Blu-ray high-definition video format.

Although MGM got plenty of licensing fees and revenue from a library that includes 4,000 movie and TV titles, including such classics as “West Side Story” and “Rocky,” the studio failed to create a major new hit.

Once credit markets froze and DVD sales slowed, producing new movies and making interest payments became more difficult. With less money coming in for increasingly stale titles, the value of its library took a dive.

The big question is whether the bids will generate enough funds to pay off about $4 billion in debt, or whether MGM has to file for bankruptcy. Of course, for 007 fans, the real question is how this affects the future of the Bond film franchise, starting with Bond 23. To read the entire story, JUST CLICK HERE.