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Shortly after hitting send on this week’s newsletter, in which I wondered whether our current economic situation is similar to 2008, I came across this Reuters article by Joshua L. Weinstein, which wonders pretty much the same thing. Both he and I riff off this week’s Dow roller coaster ride, and while the Friday close was more optimistic than might have been expected on Tuesday, the macro challenges facing both the investment community and consumers remain. Hence, a potentially rocky road ahead.

From Weinstein:

But Hal Vogel, of Vogel Capital Management and the author of Entertainment Industry Economics: A Guide for Financial Analysis, takes a much darker view of the economy’s well-being, and what that portends for Hollywood. He told TheWrap that the industry should prepare for a year or two of difficult times.

Maybe longer.

“It’s not good,” he said. “You know what happened with the indies last time — ’07, ’08? They got pretty much smashed. Blown away. The point here is, it’s dependent on capital, and the capital is going to be tougher to get and it’ll be more expensive.”

He said that when the market plummets, investors get conservative.

“If you think that moviemaking was a risky proposition before, it now looks even riskier,” he said.

On top of that, Vogel said, “when you get to the other end of the food chain, consumers are not going to have the funds to buy as much, whether it’s at the box office or streaming or DVDs.”

An independent producer shared Vogel’s gloomy outlook, predicting that the stock market’s troubles are going to continue, making institutional and individual investors less likely to finance movies.

He predicted that money invested in “affinity-driven projects, like your kid is going to direct something,” will “dry up or at least drop significantly” while larger, private-equity financed companies will rethink how they finance.

For those of you who don’t get our newsletter, here’s my piece. (And if you don’t, why not sign up? It’s free, and each week I try to write something that’s at least a little bit thought out and which is not usually posted to the blog. The newsletter also contains our movie picks of the week, festival deadlines and more. You can subscribe here.)

We are in a moment.

The stock market has plummeted. (It’s up today, but it will probably be down again tomorrow.) S&P lowered the U.S.’s credit rating, and the ripple effect is suddenly roiling other countries around the world. (France?!?) There are riots in England, and I’ve heard the possibility of class inequality and unemployment causing similar events in the U.S. discussed at least three times this week in the mainstream media.

Whether such dire expressions of economic malaise occur, the political and market action of the last week dictates that there will be turbulence ahead. A CNBC talking head asked, is this 2008 all over again?

Do you remember 2008? For independent filmmakers, 2008 didn’t begin with the fall of Lehman in September but the implosion of Axium payroll in January, the closings of Paramount Vantage, Picturehouse and Warner Independent just a few months later, and the fraud charges leveled at David Bergstein, the owner of the beleaguered THINKfilm, who several independent filmmakers were suing, in early September. That same year also featured mainstream media coverage — including an influential Wall St. Journal article — about the money-losing ways of independent film. In June, former Warner Independent Head Mark Gill captured the moment at the Los Angeles Film Festival in a keynote address. He declared, “Yes, the Sky is Falling,” citing an end to bloated old-school models of indie financing and calling for more well produced mid-budget indies. (The big irony, of course, is that the ensuing credit crunch and market collapse created conditions leading to the demise of Gill’s own company, Film Department, which was based on financial models no longer viable in a post-Lehman economy.)

Do you remember 2008? With 24/7 media, Twitter streams, and Facebook updates all creating for us a perpetual present, it can be hard to place ourselves in the past. I saw Laurie Anderson perform last night. The years are hard to tell apart, she said in one song. 1997 looks a lot like 1998.

As independent filmmakers we are necessarily post-2008 people because we are operating under the economies produced by that crisis. Companies and filmmakers able to map the post-2008 world, to work within its shrunken system, have done well while others, weighed down by debt and waiting for a return to the normal, have limped along — if they haven’t already gone under.

Today’s historical moment is not exactly the same as that of three years ago. If the Fall, 2008 economic collapse was due to toxic subprime assets, crumbling bank balance sheets, and a liquidity crisis, this one (depending on who you talk to) is about sovereign debt, the Eurozone, low (and no) growth, continued deleveraging and the political and social perils of austerity. We don’t yet know how bad things will get. Regardless, though, we may be watching our independent economy reset itself once again.

Do you remember 2008? Mark Suster does, and he has written about it at TechCrunch. Suster is a venture capitalist at GRP Partners, and his article is a fascinating look at the business decisions he and his partners at the time made during and after the crisis. Are we in a similar moment? “I’ll tell you what worries me: Jobs, growth and political malaise,” he writes. “And don’t think tech will remain immune.” But still he sees opportunities. He says he’s bullish on companies that can figure out how to get through these tough times and understand change. What’s the first change Suster identifies? “Television will be consumed dramatically differently in 10 years from now than it is today. Creative destruction will continue to create opportunities for people who understand the deflationary economics of the Internet. I’m long.”

For content creators, even more deflationary economics. Hang on to your hats. And figure out your next move.

See you next week.


Scott Macaulay

P.S. – for more thoughts on what might be needed to build a future independent film infrastructure, read this good post by Ted Hope.

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