For best performance in the face of a total disaster, the nominees are…
The twin faces of America’s global economic power stared into the abyss Tuesday morning. Profound fears about the possibility of a U.S. recession dovetailed with unfolding internal crises in the American financial and entertainment sectors, casting doubt on the status of each as dominant global industry players.
In Los Angeles, concern over the ongoing Writers Guild of America (WGA) strike overshadowed the normally festive Oscar nomination ceremony. The potential cancellation of the Academy Awards broadcast in February has cast a pall over the American film business since the WGA went on strike November 5. For industry insiders, one nightmare has already come to pass. Earlier this month, the Golden Globes awards ceremony was reduced to a press conference when actors and actresses refused to cross the WGA picket line.
"I could never cross a picket line. I think there's a lot of people who feel that way," Tony Gilroy told the Associated Press. Gilroy was nominated for Best Director for his work on the film Michael Clayton, starring George Clooney.
The Oscars are often the second-most-watched television program of the year following the Super Bowl. The film industry sees these broadcasts as more than an opportunity to promote individual films – they are commercials for the Hollywood brand name. According to the Motion Picture Association of America, worldwide box office receipts reached $25.82 billion in 2006, an all-time high. The big film studios see the loss of the awards season showcases as damaging to more than just the short-term bottom line.
Potential competitors could conceivably take advantage of this moment of weakness in Hollywood. In 2006, India's film industry had gross revenues topping $2 billion worldwide. But not everyone is convinced that the time is right for Bollywood to make a power move.
“There is a reason that Hollywood movies travel so well all around the world,” Dan Petrie, Jr., one time president of the WGA told me last week. “The best people – the writers, the directors, the actors – come to Hollywood to work. Any labor dislocation would have to go on so long that international talent would decide to stay at home.”
And how long would that be? The last writer’s strike, in 1988, lasted 5 months, costing the industry $500 million in lost revenue. But in Hollywood, hope springs eternal as nowhere else. News that talks between the WGA and the Alliance of Motion Picture and Television Producers would resume on Tuesday cheered Academy president Sid Ganis. “[The February 24th Academy Awards show] will be a night to remember!” he pronounced.
Meanwhile, three thousand miles away, the other pillar of U.S. soft power was threatening to come unmoored. Wall Street market traders, fed watchers and financial professionals watched from the sidelines Monday as news of massive stock market sell-offs in international markets trickled in. Triggered by a 5.6 percent plunge of the Tokyo Stock Exchange, the threat of global economic recession moved quickly westward across the globe. Equity valuations fell like dominoes in Hong Kong, Seoul, Mumbai, Frankfurt, Paris and London. U.S. markets, closed for the Martin Luther King, Jr. holiday, were temporarily spared.
The worldwide market tumble grew out of concerns that the ongoing housing downturn and credit crunch could lead to recession in the U.S.. Overnight, central bankers and Ministers of Finance around the world struggled to enact emergency policy measures. In an early morning statement designed to cushion the impact on U.S. markets, the Federal Reserve announced it would slash interest rates by 75 basis points to 3.50 percent. This was the largest single rate cut in the U.S. since 1982.
The Federal Open Market Committee, the Fed’s monetary policy brain trust, released a statement explaining the historic move: “The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth.” Like Sid Ganis, Treasury Secretary Henry Paulson put on a brave face during a morning press conference. “This [rate cut] shows the world that our central bank is nimble and able to move quickly to respond to market conditions. That should be a confidence builder,” he said.
But reactions to the rate cut were mixed. The Dow Jones Industrial Average fell 400 points after the opening bell. London’s FTSE 100 eked out a positive performance while Asian markets trended downward for the second straight day. The VIX, the Chicago Board Options Exchange Volatility index, often referred to as the “fear index,” rose to its highest level since 2002.
“The Fed has been lagging the curve in cutting rates up until now. This borders on panic,” David Jones, President and CEO of DMJ Advisors told Bloomberg Radio.
And whether in Hollywood or on Wall Street, panic is not a word that markets like to hear. Indeed, there has been considerable recent speculation – some would call it panic – that the world center of global finance could be shifting away from New York. For twenty years, London has been prepping for a return to international glory as the world’s money capital. Hedge funds and financial services firms have clustered in its city center. The London Stock Exchange has benefited from companies seeking to avoid onerous U.S. regulatory statutes, such as the Sarbanes-Oxley legislation, when listing their initial public offerings. The British capital also derives an advantage from its relative proximity to the emerging markets of Asia and Russia.
"New York is in danger of becoming a secondary city instead of the world capital it deserves to remain," said Dan Doctoroff, New York Mayor Michael Bloomberg’s Deputy for Economic Development, in 2007.
Recent news does not bode well for the continued global dominance of the U.S. film and financial industries. The risks to both are mounting by the day. If the Fed hopes its interest rate cut will stave off more than a damaging short-term recession, it would be well advised to keep its word by continuing to “act in a timely manner as needed to address those risks.” Otherwise, in New York and Los Angeles, there will be blood.
The twin faces of America’s global economic power stared into the abyss Tuesday morning. Profound fears about the possibility of a U.S. recession dovetailed with unfolding internal crises in the American financial and entertainment sectors, casting doubt on the status of each as dominant global industry players.
In Los Angeles, concern over the ongoing Writers Guild of America (WGA) strike overshadowed the normally festive Oscar nomination ceremony. The potential cancellation of the Academy Awards broadcast in February has cast a pall over the American film business since the WGA went on strike November 5. For industry insiders, one nightmare has already come to pass. Earlier this month, the Golden Globes awards ceremony was reduced to a press conference when actors and actresses refused to cross the WGA picket line.
"I could never cross a picket line. I think there's a lot of people who feel that way," Tony Gilroy told the Associated Press. Gilroy was nominated for Best Director for his work on the film Michael Clayton, starring George Clooney.
The Oscars are often the second-most-watched television program of the year following the Super Bowl. The film industry sees these broadcasts as more than an opportunity to promote individual films – they are commercials for the Hollywood brand name. According to the Motion Picture Association of America, worldwide box office receipts reached $25.82 billion in 2006, an all-time high. The big film studios see the loss of the awards season showcases as damaging to more than just the short-term bottom line.
Potential competitors could conceivably take advantage of this moment of weakness in Hollywood. In 2006, India's film industry had gross revenues topping $2 billion worldwide. But not everyone is convinced that the time is right for Bollywood to make a power move.
“There is a reason that Hollywood movies travel so well all around the world,” Dan Petrie, Jr., one time president of the WGA told me last week. “The best people – the writers, the directors, the actors – come to Hollywood to work. Any labor dislocation would have to go on so long that international talent would decide to stay at home.”
And how long would that be? The last writer’s strike, in 1988, lasted 5 months, costing the industry $500 million in lost revenue. But in Hollywood, hope springs eternal as nowhere else. News that talks between the WGA and the Alliance of Motion Picture and Television Producers would resume on Tuesday cheered Academy president Sid Ganis. “[The February 24th Academy Awards show] will be a night to remember!” he pronounced.
Meanwhile, three thousand miles away, the other pillar of U.S. soft power was threatening to come unmoored. Wall Street market traders, fed watchers and financial professionals watched from the sidelines Monday as news of massive stock market sell-offs in international markets trickled in. Triggered by a 5.6 percent plunge of the Tokyo Stock Exchange, the threat of global economic recession moved quickly westward across the globe. Equity valuations fell like dominoes in Hong Kong, Seoul, Mumbai, Frankfurt, Paris and London. U.S. markets, closed for the Martin Luther King, Jr. holiday, were temporarily spared.
The worldwide market tumble grew out of concerns that the ongoing housing downturn and credit crunch could lead to recession in the U.S.. Overnight, central bankers and Ministers of Finance around the world struggled to enact emergency policy measures. In an early morning statement designed to cushion the impact on U.S. markets, the Federal Reserve announced it would slash interest rates by 75 basis points to 3.50 percent. This was the largest single rate cut in the U.S. since 1982.
The Federal Open Market Committee, the Fed’s monetary policy brain trust, released a statement explaining the historic move: “The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth.” Like Sid Ganis, Treasury Secretary Henry Paulson put on a brave face during a morning press conference. “This [rate cut] shows the world that our central bank is nimble and able to move quickly to respond to market conditions. That should be a confidence builder,” he said.
But reactions to the rate cut were mixed. The Dow Jones Industrial Average fell 400 points after the opening bell. London’s FTSE 100 eked out a positive performance while Asian markets trended downward for the second straight day. The VIX, the Chicago Board Options Exchange Volatility index, often referred to as the “fear index,” rose to its highest level since 2002.
“The Fed has been lagging the curve in cutting rates up until now. This borders on panic,” David Jones, President and CEO of DMJ Advisors told Bloomberg Radio.
And whether in Hollywood or on Wall Street, panic is not a word that markets like to hear. Indeed, there has been considerable recent speculation – some would call it panic – that the world center of global finance could be shifting away from New York. For twenty years, London has been prepping for a return to international glory as the world’s money capital. Hedge funds and financial services firms have clustered in its city center. The London Stock Exchange has benefited from companies seeking to avoid onerous U.S. regulatory statutes, such as the Sarbanes-Oxley legislation, when listing their initial public offerings. The British capital also derives an advantage from its relative proximity to the emerging markets of Asia and Russia.
"New York is in danger of becoming a secondary city instead of the world capital it deserves to remain," said Dan Doctoroff, New York Mayor Michael Bloomberg’s Deputy for Economic Development, in 2007.
Recent news does not bode well for the continued global dominance of the U.S. film and financial industries. The risks to both are mounting by the day. If the Fed hopes its interest rate cut will stave off more than a damaging short-term recession, it would be well advised to keep its word by continuing to “act in a timely manner as needed to address those risks.” Otherwise, in New York and Los Angeles, there will be blood.
cc photo by jasonepink
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