Hollywood has some new money making waves in film financing.
The pandemic has put studios in a bind. They need money to make movies, but their budgets keep getting larger and larger. Insurance against coronavirus is pricey, and to cover those kinds of costs, Hollywood is taking on new investors.
These are people who can put up the cash to finish certain projects and, in return, receive a percentage of the profits and producing credit.
Who are these people?
People like Brian Oliver, a now Academy Award-nominated producer who just struck a $200-million deal with Paramount Pictures to fund up to a quarter of the budget on 10 movies, including Top Gun: Maverick. In exchange for him being the money man, he will share in any profits or losses from the movies.
He is also paying for Coming to America 2 and the Mission: Impossible sequels.
He has now founded a company called New Republic Pictures, to oversee these films.
“I don’t think we would have this deal with Paramount if the pandemic didn’t happen,” said Oliver. “The longer the theatrical market is inhibited by the pandemic the more you are going to see studios seeking out other financing.”
“The pandemic and its negative impact on theatrical exhibition has certainly shifted the studio film financing marketplace,” said Ken Deutsch, partner at Latham Watkins, who advised New Republic on its new slate deal. “A brand new set of risks has been introduced into the system — production delays, lack of insurance coverage, cost increases, theatre shutdowns, etc. And those risks impact all films, including what would have previously been considered ‘sure bet’ franchises. These risks have created new investment opportunities that were previously unavailable and are attracting new players.”
So, if you have a few hundred million lying around, this might be the business venture for you.
These opportunities were not around in recent years, so people are pouncing on them now. But these slate deals can be tricky. You're using private funding and you don't want too much input on the stories.
But those are small issues, the money is the most important part.
You need to get your movies shot, so productions are moving all over the world to make it happen. Productions can lessen risks on shoots by filming in states and countries where the pandemic has been contained, such as in Australia, New Zealand, and in certain parts of Scandinavia.
Those extra costs of shooting abroad now have someone to foot the bill. And they kind of have the studios over the barrel. They can ask for higher interest paid for financing films or TV shows and can charge three to four times what banks would normally earn for financing productions.
“If the current pace continues through the fourth quarter, this will be my busiest year in 10 years,” said Lindsay Conner, who heads the film, television, and digital content practice at law firm Manatt, Phelps & Phillips.
“There are smart folks who recognize that the risks may be greater but the rewards are greater also,” he said. “Production budgets have increased, and that has provided opportunities to investors who might not otherwise have been called upon.”
So if you have the cash, the time is now for investing in film and TV.