There’s No Business Like Show Business – Part 3

Roosevelt Hotel

So, it looked to me that Hollywood could finance an asset (movie), by selling “options” (pre-sales), in a very specialized, over-the-counter market. That meant that the risk of a movie (like Lara Croft’s Tombraider) being a box-office disappointment was passed to third parties, in exchange for those guys getting the distribution rights in their respective territories.

My analysis also showed that the pricing mechanism was very inefficient, because it was not based on any analytical techniques, but on subjective opinions about the ‘hot’ stars, genres & directors of the moment. As an additional hurdle, Hollywood was subject to the capital constraints of their parent corporations, which are exposed to risks larger and diverse than those faced by their Hollywood branches.

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There’s No Business Like Show Business – Part 1

Hollywood

In 2006, my hedge fund advisory firm SAGA Capital was approached by a Hollywood actor-turned-independent-producer who had worked with John Travolta in one of his more notorious films.

He had also produced a moderately successful film that was acquired by Showtime. Let’s call him ‘Steve’. Steve was looking to finance a slate of 10 films, in which he had some actors committed, as well as some ‘pre-sales’ financing in place, decent screenplays (yes, I actually read them) by good writers for most of his films.

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