Data, biz models bringing Wall St. to H'wood's door

Panel expects relationship to flourish

The transparency of available data and a surge in solid business models is fueling a growing desire by Wall Street to invest in the movie industry, a packed conference room heard at the American Film Market.

A heavyweight panel on Friday told AFM Finance conference attendees that it is imperative that big-time banking not be put off by scary stories about the movie business being too frothy.

Laura Fazio, media sector chief at investment bank Dresdner Kleinwort, told the audience that the transparency of data from big hitting producers and the studios alike was a huge bonus. "It gives investors comfort in the analysis of any investment going forward," Fazio said.
Former Universal chief Tom Pollock, who now produces films through his Montecito Picture Co., said Wall Street was a destination for investment as large corporations began to look for partners to help finance big-budget movies.

"The reason is that the corporate HQ people (at News Corp. or General Electric or Viacom) are saying we need your movies to drive our other divisions but we don't want to give you the capital to do it," Pollock said.

He said that movie slate deals with Wall Street investment partners with names such as Melrose II, Gun Hill I and II and Legendary, have been born out of a diverse range of movies being assembled to attract such investment and filmmakers becoming much more business savvy.

"I was lucky enough to have run a studio for several years and I know just how much time is spent conducting business," Pollock said.

Added Salter Group principal Roy Salter: "You don't want Wall Street reading your script and, frankly, they don't want to. I've never read a script in my life and I have no skill in judging that."
Fazio said the large investment institutions are looking to partner with studios more than ever before. "There is always going to be a need for more films to be made," she said, adding that studios are becoming more aware of the need to be "good risk managers."

Said Yari Film Group's Bob Yari: "The benefit of slate investment is you are approaching a probability model that enables you to predict a favorable outcome better. If you throw dice once looking for a double six, the probability against getting it is huge. Throw those dice 36 times and the probability of getting a double six goes up and you can begin to predict just how many times it might come up."

Salter predicts that the next trend in capital investment will likely see the arrival of public listings rather than the situation now, which is dominated by private funds, be they hedge or private equity vehicles.

The panel, titled "New Sources of Equity for Financing Film: Wall Street Develops a Taste for Hollywood," was moderated by Akin Gump Strauss Hauer & Feld partner John Burke.