Like $200 Million In Invesment Money Is Going To Make A Difference In Hollywood?
from the it'll-make-one-crappy-movie dept
We've discussed in the past the idea that Wall Street might start investing directly in movies, hoping that if that happened it would help kick the studios into realizing that their old model of doing things wasn't working out so well. With that in mind, it's not too surprising to hear that JPMorgan is planning to start investing in Hollywood, hiring some former Hollywood bigshots as advisors and setting aside $200 million for investments. Wait... $200 million? Isn't that what Hollywood insiders falsely insist a good movie has to cost to make these days? In other words, isn't that pocket change? It's hard to see how that kind of money makes any difference at all in Hollywood unless JPMorgan is really planning to embrace the Silicon Valley model of making films, where less money is put to more efficient work. Hopefully, that's where it's heading (though, hiring those bigshots suggests otherwise). If it's simply going to throw that money into the traditional Hollywood machine, it seems quite unlikely that it will last very long or go very far.
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They've already been doing this for ages...
... two of my friends are investment bankers for major firms and specialize in movie/entertainment financing and have been doing this for at least 10 years. It's usually mezzanine financing against future earnings, which is very similar to what VC's do, but with different terminology and much larger amounts.
There's even a Wikipedia page about how it typically works:
http://en.wikipedia.org/wiki/Film_finance
And it's not just for films, a lot of musicians have mezzanine-style financing against future royalties. David Bowie pioneered this approach almost 20 years ago.
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i already own stock
http://www.hsx.com
i've made millions!
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Not everyone will lose
JP Morgan will certainly make out on their fees. Everyone else will be handing their money over to the studios without even getting a free ticket for their efforts. Most people don't understand how Hollywood accounting works. Forrest Gump showed a net loss.
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Mortgages
Let me get this straight - the guys who were too stupid to understand mortgage backed securities now think they are smarter than the guys who have been making movies for over a hundred years.
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Re: Mortgages
A century of experience + All the King's Men + ? = Profit!
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Re: i already own stock
I've always wanted starlet futures. Bet on who's gonna survive puberty and end up a hot property.
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Investing
200 million sounds like they are just testing the waters with that amount. They weren't too stupid to understand mortgage securities, just greedy. The root of that problem was (and still is) giving the brokers their commissions upfront instead of over the life of the loan like with say, merchant accounts which pay residuals. Too many brokers talked too many people into bad loans to get paid right away, and none cared if customer could actually afford it. If their fee was paid over the life of the loan it would be in their interest to get a customer into a loan that they can pay off.
I personally wouldn't invest in a movie production, too risky in a business that says they have to make back three times the investment in gross ticket sales (to pay the theaters and promotional costs) before they break even. Look at last weekend, movie receipts are half of the same time last year.
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