The Impact On Hollywood Of Putin’s War

It may not be apparent yet, but Putin’s war is going to have several impacts on Hollywood for years to come. Here are a few of the ones that occur to me:

1. We can definitely expect to see several different genres of films as a result of the war. For starters, Russia will move back to being the villain in the James Bond movies, rather than the amorphous non-entities in the films since the fall of the Soviet Union. We can expect a good spy thriller in the mold of Cold War era films. Another film sure to be produced is a 2500-year-later sequel to “300” based on the heroic stand at Mariupol. It is certainly worthy of Oliver Stone’s direction in the style of “Platoon.” And there will certainly be films with Putinesque evil dictators dragging their countries down. Think “Valkyrie,” but this time the assassination works.

2. Another impact on Hollywood is the self-imposed sanction of stopping the licensing of films to Russia. There will be a number of fallouts from this sanction, starting with breach of contract claims by licensees under existing contracts and output arrangements, coupled with defensive claims of impracticability or force majeure from licensors. And just as Russia has wiped out trademark protection for Western companies (permitting anyone in Russia to open a StarbucksSBUX
, for example), we should expect Russia to eliminate all copyright protection for Western films – that is, only if they pass new strict censorship rules. The net result will be a complete loss of revenue from Russia for films. While this is only about 5% of worldwide film revenue, studios will need to take it into account in their projections and film budgets.

3. A third impact will be the reverse issue of trying to get money out of Russia for films previously exhibited there, since mutual currency controls now make that impossible. In this case, the tables will be turned, with licensors bringing breach of contract claims and licensees defending on grounds of impracticability or force majeure. A secondary fallout from this issue that I have witnessed is lenders on individual films calling an event of default due to the anticipated default by a Russian distributor for that film. This has occurred even if (a) the producer is not in direct contractual privity with the Russian distributor, (b) there is no legal sanction preventing the license of the film to Russia, and (c) the Russian distributor is required to pay in U.S. dollars.

4. Another certainty from the war will be an increase in the cost of making films, since the film industry is not immune to the impact of inflation, which is going to accelerate due to the oil embargo, the increase in wheat and fertilizer prices, and dollar devaluation from the sheer size of military spending. Think of it as a war tax.