Wednesday, 7 March 2012
Money maketh the Movie
The risks associated with investing in films are too numerous to mention. The most intimidating aspect is that great amounts of money get used up within a short period of time. The eventual product will then either make or break in the first weekend of release: all that time and money having only a small window of opportunity to sink or swim.
The moneymen involved in film investment need to be tough figures. They also need to be extremely wealthy. Film investment is a rich man's game; best suited to those with more cash than sense, people for whom losing millions over a weekend is merely a round of drinks.
But let's be honest, not even the very richest in society is comfortable investing in unsafe investments. And if we're being totally truthful, contemporary cinema is simply too damn expensive for only a few rich people to invest in. Therefore, the huge Hollywood tentpole movies are derived from big corporate conglomerate investments and faceless financial institutions wanting to spread out their investment options.
Ever since 1948 when United States Supreme Court forced the Hollywood studios to sell off self-owned theatre chains and abolish antitrust monopolies, corporate conglomerates have been big players in Hollywood. For conglomerates, the risk-sharing nature of film investment seems palatable. For example, should any of the pricy films put out by Sony Pictures this summer flop, the balance sheets can be offset by its music, videogame and electronics divisions. But in this era of austerity, the big conglomerates are demanding more reliable profits from its film sectors. As a result the Hollywood studios are increasingly putting out more franchise films: brands that lend themselves to sequels, reboots, merchandise and spinoffs. The risk-averse nature of Hollywood means that this year will see familiar reboots (The Amazing Spider-Man), branded concepts (Battleship), spinoffs (The Bourne Legacy), sequels (Men in Black III), remakes (Total Recall) and television serial adaptations (Dark Shadows).
What you'll hardly get in 2012A.D. are Hollywood studios releasing original film stories. The conglomerates have increased their involvement in the filmmaking process and that means certain films are no longer viable for investment. What this boils down to is movies need to make money, and that means studios are reluctant to produce original material.
The last year has seen high-minded films like The Grey, Hugo, Shame, The Descendants and The Tree of Life released in multiplexes. None of these films was entirely funded by studios. Rather more, they were financed through equity funding partners and then optioned by studios for distribution in selected territories.
Back in the 1970s, when Hollywood hadn't fully come to terms with the full impact of television as the dominant form of entertainment in America, studios were more willing to option, develop, produce and distribute riskier projects. Very rarely did producers need to engage in outside equity funding to get their films made. As a result, the '70s saw films like The Exorcist, The Devils, A Clockwork Orange, Godfather, Apocalypse Now, Chinatown, Deer Hunter et al come to fruition; movies that now probably would be produced independently and then picked up as negative acquisitions by studios for distribution. What this proves is that the studios still want original movies to fill in their distribution pipeline, but they don't want to take the risk of having to develop and produce such projects.
This situation has given birth to the new generation of Hollywood bankrollers to step in and finance films the studios haven't got the courage to make on their own. But what is most remarkable about this new dawn of film investment is how involved in the creative process the current crop of investors is. Unlike previous film investors who basically were silent partners underwriting cheques and then turning up to the film premiere, the new Young Turks are savvier and smarter partners, fully engaged in the development and production processes that comes with film production. Not only that, these guys are putting out surprisingly quality movies, made all the better because of their vision and entrepreneurial spirit.
The most beguiling of these new producers is David and Megan Ellison, the offspring of Oracle's billionaire chief Larry Ellison. Still only in their twenties, these Trustatafarians have taken their inherited fortunes and teamed up with Paramount Pictures to make blockbusters like Mission: Impossible: Ghost Protocol and successful prestige pictures such as True Grit. Megan Ellison has also raised $35 million for Paul Thomas Anderson's The Master, a drama starring Philip Seymour Hoffman that loosely depicts the origins of scientology, a premise so controversial it caused original backers Universal Pictures to bail on the project in fear of vitriolic reactions from the religious cult.
David Ellison's production company, Skydance, oversees a $350 million fund to co-finance films with Paramount, getting first look at the studio's projects through a four-year deal. His sister, Megan Ellison's Annapurna Pictures, invested $20 million to land rights to the Terminator franchise. Because of her ready made fortunes, Megan is also the sweetheart of indie filmmakers like Doug Wick, Spike Jonze, Kathryn Bigelow, Andrew Dominik and Gore Verbinski, for all of whom she has agreed to bankroll upcoming projects.
Also on the scene is Thomas Tull's Legendary Entertainment. Even before forming Legendary Entertainment and co-financing Warner Bros. bigger tentpole hits, Tull was always a well-heeled fanboy with a penchant for comicbooks, toys and videogames. Added to this is the reality he co-owns the Pittsburgh Steelers, meaning he strongly believes that to truly show one's love for things they enjoy, there is a need to buy it. Tull's fanboy interests means it's no surprise that Legendary has established itself as a key banner behind the upgraded Batman and Superman movies. He has also invested in the giant robots-vs.-monster epic Pacific Rim, as well as fantasy properties Seventh Son, Paradise Lost and Jack the Giant Killer. The nerdish Tull has also optioned the movie rights to Godzilla, World of Warcraft and Mass Effect.
The people mentioned above are clever but, and more importantly, they are loaded. Tull's Legendary launched with a $500 million fund in 2004, and raised a credit line of about $700 million last year. This will ensure that Legendary Entertainment will remain a major producer through to 2016, even after its seven year pact to co-finance and produce films with Warner Bros. ends in 2013.
The need for vast money in Hollywood is further exemplified by Timmy, Tommy, Todd, Tyler and Bobby Thompson, who bought their way into Hollywood with $40 million through their Cross Creek Pictures banner and produced 2010's Black Swan for $13 million and recouped $329 million in worldwide box-office. Similar to the Ellison siblings, the five Thompson brothers are from a rich family (Louisiana oil-and-gas ownership), meaning they've had no problems in raising another $260 million for future film financing endeavours.
It's not just American rich kids getting in on the action. India's Reliance Group's Amit Khanna was a player in Bollywood prior to backing DreamWorks with $325 million, essentially giving the American studio a second life. Khanna is so committed to currying the favour of Hollywood stars, he's invested heavily in projects developed by shingles run by Tom Hanks, Brad Pitt, Nicolas Cage, George Clooney, Jim Carrey, Jay Roach, Chris Columbus and Brett Ratner to name a few.
The independent film financing field has become a smaller terrain, populated by a small number of extremely rich young people coming from heinously wealthy backgrounds. Players like Tim Headington― who co-founded FilmDistrict and produced Hugo and Rango―is a Texas oil and real estate baron. Jordan Schur and David Mimran who produced the Academy Award nominated Warrior made their millions running record labels and a Monaco-based food processing firm. What all this goes to show is that the days of ordinary guys from humble origins wanting to become movie producers seem pretty much over.
As much as it may seem unfair that rich kids are taking over Hollywood, actor Brad Pitt (a producer himself and a good one at that) recently told Variety: "There are a few very strong independent financiers that are more interested in content than profit. These guys like Bill Pohlad, who did Tree of Life and Tim Headington and Megan Ellison are so important to what we do in the structure we are in right now. [Without them] harder-sell risk-taking films might not make it to the screen."
So the new era of film producing is no longer just an anonymous affair run by antiquated institutions like JPMorgan Chase, Merrill Lynch and Bank of America. The new investors are people who are changing the way filmmakers go about sourcing money for movie projects and are infusing their own personality on many of the films they are involved in. There is the thought that these new gurus may even have plans on usurping the established studio hegemony that has shaped the Hollywood landscape for the last 100 years. Thomas Tull is making moves to turn Legendary into a full-fledged studio, self-financing more films in the US rather than as co-productions with Warner Bros.
The studios are downright envious of the power wielded by these young independent financial players, but if the end result makes for more interesting and edgier movies, then that can only be a good thing, right?
Well maybe so, but David Ellison's decision to invest in the new G.I. Joe sequel, a reimagining of the Jack Ryan series, zombie epic World War Z and a planned reboot of Top Gun means that perhaps these new moneymen are set to repeat the mistakes that got the old Hollywood studios in the mess they're in.