Finding funding Now

As Studios Cut Back, Investors See Opening

http://www.nytimes. com/2010/ 11/15/business/ media/15cash. html?_r=2& ref=movies

By MICHAEL CIEPLY NYT Nov 14 2010

LOS ANGELES — When Timmy Thompson, who made a lot of his money in oil
field services, took a close look at the movie business a couple of
years ago, he saw companies folding, credit collapsing and talent
knocked down a peg in the aftermath of a labor war.

In all, it looked like a pretty good place to invest.

“We’ve always made our living by buying when things are down,” said Mr.
Thompson, who spoke by telephone from Louisiana.

How down?

A few hours earlier, George Clooney
<http://topics. nytimes.com/ top/reference/ timestopics/ people/c/ george_clooney/ index.html? inline=nyt- per>
had appeared in Santa Monica, Calif., at the American Film Market, where
he joined operatives from Mr. Thompson’s newly established Cross Creek
Pictures and others in selling rights to “The Ides of March.” It is a
political morality tale that will be directed by Mr. Clooney, and will
feature him in a cast that includes Philip Seymour Hoffman
<http://topics. nytimes.com/ top/reference/ timestopics/ people/h/ philip_seymour_ hoffman/index. html?inline= nyt-per>,
Ryan Gosling
<http://movies. nytimes.com/ person/1548266/ Ryan-Gosling? inline=nyt- per>,
Paul Giamatti
<http://movies. nytimes.com/ person/26680/ Paul-Giamatti? inline=nyt- per>,
Marisa Tomei
<http://topics. nytimes.com/ top/reference/ timestopics/ people/t/ marisa_tomei/ index.html? inline=nyt- per>
and Evan Rachel Wood
<http://movies. nytimes.com/ person/235707/ Evan-Rachel- Wood?inline= nyt-per>.

All worked for union scale, with the expectation of a future payday if
the picture hits when Sony Pictures Entertainment releases it. (The
minimum payment on a feature film under the Screen Actors Guild
<http://topics. nytimes.com/ top/reference/ timestopics/ organizations/ s/screen_ actors_guild/ index.html? inline=nyt- org>
contract in the last few years has been about $65,000 plus food and
overtime.)

With studios financing fewer movies, a wave of equity investors stepped
up their presence in a Hollywood that suddenly made sense to hard-headed
business types who were more accustomed to bottom-fishing in the real
estate market or drilling for oil.

Snagging an added bonus from states like Louisiana and Michigan, which
offer generous subsidies for local film production, the new players —
who mind the old saw “cash is king” — are typically risking just a few
million dollars to get a substantial ownership position in films that
are cheap enough to yield a profit even in an era of diminished
home-video revenues.

“If you have capital, you’re positioned well,” said Brian Oliver, a
producer who joined Mr. Thompson and others in starting Cross Creek.
Among its first ventures, the company provided backing for “Black Swan,”
which is directed by Darren Aronofsky
<http://movies. nytimes.com/ person/235045/ Darren-Aronofsky ?inline=nyt- per> and
stars Natalie Portman
<http://topics. nytimes.com/ top/reference/ timestopics/ people/p/ natalie_portman/ index.html? inline=nyt- per>.
It will be released by Fox Searchlight Pictures on Dec. 3.

Hollywood has played host to a succession of outside investors, some of
whom fared better than others. Marvin Davis
<http://topics. nytimes.com/ top/reference/ timestopics/ people/d/ marvin_davis/ index.html? inline=nyt- per>,
the oil entrepreneur, made a tidy profit buying and then selling 20th
Century Fox, while Crédit Lyonnais, the French bank, became mired in
failed loans to a string of film companies. Waves of investment came
from doctors and lawyers who were dabbling with film partnerships,
Japanese conglomerates, the German stock market, Internet entrepreneurs
and cash-laden hedge funds.

Even a few years ago, the industry took a toll on investors as savvy as
the garment magnate Sidney Kimmel, whose long-established film company
was burned by disappointments like “Charlie Bartlett” and “Synecdoche,
New York.”

But only lately have falling salaries, rising subsidies and a thinning
of competition turned the financial equation in favor of the investor.

The current crop of equity investors includes Joe Ricketts, the Chicago
Cubs co-owner whose American Film Company recently backed “The
Conspirator, ” directed by Robert Redford
<http://topics. nytimes.com/ top/reference/ timestopics/ people/r/ robert_redford/ index.html? inline=nyt- per>;
Steven M. Rales, who is chairman of the Danaher Corporation
<http://topics. nytimes.com/ top/news/ business/ companies/ danaher_corporat ion/index. html?inline= nyt-org>,
and whose Indian Paintbrush company was a co-financier of “The Fantastic
Mr. Fox,” directed by Wes Anderson
<http://topics. nytimes.com/ top/reference/ timestopics/ people/a/ wes_anderson/ index.html? inline=nyt- per>;
and Sarah Siegel-Magness and Gary Magness, the Colorado investors whose
Smokewood Entertainment Group backed “Precious: Based on the Novel
‘Push’ by Sapphire
<http://movies. nytimes.com/ person/552583/ Sapphire? inline=nyt- per>,”
which had six Oscar nominations, winning two, this year.

Among those who seek to build a large-scale enterprise is Tim
Headington, the oil entrepreneur based in Dallas who recently joined the
producer Graham King
<http://movies. nytimes.com/ person/222072/ Graham-King? inline=nyt- per> in
starting FilmDistrict, a company that plans to distribute as many as
eight films a year, in an alliance with Sony Pictures Entertainment.

“We’re taking advantage of the extra capacity at Sony
<http://topics. nytimes.com/ top/news/ business/ companies/ sony_corporation /index.html? inline=nyt- org>,
to bring them theatrical product,” Peter Schlessel, FilmDistrict’ s chief
executive, said of a situation in which Sony has the ability to put more
films in theaters and into home entertainment outlets than it currently
chooses to finance.

More often, however, Hollywood’s newer investors resemble Michael
Benaroya, a 29-year-old whose family built a real estate fortune in
Seattle. “So far, we’ve been doing very well,” said Mr. Benaroya, who
spoke by telephone last week from the American Film Market, where he,
like many of his peers, were courting foreign buyers.

Benaroya Pictures is currently offering rights to “Margin Call,” a film
about 24 hours among a group of investment bank employees during the
2008 financial crisis, with performances by Kevin Spacey
<http://topics. nytimes.com/ top/reference/ timestopics/ people/s/ kevin_spacey/ index.html? inline=nyt- per>,
Demi Moore
<http://topics. nytimes.com/ top/reference/ timestopics/ people/m/ demi_moore/ index.html? inline=nyt- per>,
Stanley Tucci
<http://movies. nytimes.com/ person/72023/ Stanley-Tucci? inline=nyt- per>,
Paul Bettany
<http://movies. nytimes.com/ person/235402/ Paul-Bettany? inline=nyt- per>
and Jeremy Irons
<http://topics. nytimes.com/ top/reference/ timestopics/ people/i/ jeremy_irons/ index.html? inline=nyt- per>,
among others.

The budget, said Mr. Benaroya, was less than $4 million, only about a
quarter of which was paid to the cast. The film was shot in New York,
where government incentives help cover the cost — so even modest sales
in video, foreign or theatrical markets assure a profit.

Alcon
<http://topics. nytimes.com/ top/news/ business/ companies/ alcon-inc/ index.html? inline=nyt- org>
Entertainment, which has been in the business since 1997, had a major
hit in “The Blind Side,” which took in about $256 million at the
domestic box office and had a budget of only about $35 million. The
State of Georgia covered $5.5 million of that cost, and Sandra Bullock
<http://movies. nytimes.com/ person/9472/ Sandra-Bullock? inline=nyt- per>,
the film’s star, in keeping with the new economics, worked for a sharply
reduced upfront salary.

“It has been great,” said Andrew Kosove, who joined Broderick Johnson in
starting Alcon with backing from the FedEx
<http://topics. nytimes.com/ top/news/ business/ companies/ fedex_corporatio n/index.html? inline=nyt- org>
founder, Frederick W. Smith. “But if you had asked me that question not
long ago, the response would have been more measured,” he added.

A flood of new investors, cautions Mr. Kosove, might easily expand the
number of films being made, once again pushing up costs and making it
difficult to find distributors. For the moment, however, “it’s a great
time” for those with ready capital, said Rick Schwartz, a producer who
has been aligned with Alan Bernon, a Texas dairy executive and investor.

Among their projects is “Machete,” an over-the-top action caper that was
directed by Robert Rodriguez
<http://movies. nytimes.com/ person/151002/ Robert-Rodriguez ?inline=nyt- per> and
Ethan Maniquis, and took in about $26.6 million at the domestic box
office after 20th Century Fox released it in September.

Mr. Schwartz reckons that the film cost $10.5 million, after some help
from a Texas subsidy program. Domestic rights went to Fox for about $9
million, and foreign rights, he said, brought nearly $12 million — so
the film’s revenue to the producer and partners was roughly double its
cost.

And that, he said, “is a pretty good model.”

Advertisements
This entry was posted in the Industry. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s