'Perfect storm' drenches film funding

Financial crisis hits during tough times for movies

NEW YORK -- The film financing sector has a dark cloud hovering overhead, experts in the sector said Tuesday at the Media and Money Conference in New York, but not one without some silver lining.

Well before the global financial crisis came to a head in recent weeks, market conditions had been brutal for financing movies. Panelists ticked off a litany of problems that are seeing outside investment dry up, including piracy, increasing debt and a supply-demand imbalance between films and distribution.

"What we're going through in this space is effectively a perfect storm," Benjamin Waisbren, president and CEO of Continental Entertainment Capital told moderator Georg Szalai, New York bureau chief and business editor at The Hollywood Reporter.

"You're unlikely to see the go-go years of film financing of the last four or five years which effectively ended last summer," said Tuna Amobi, senior equity analyst of the media and entertainment group at Standard & Poor's Equity Research. "It seems to be now we're at the cusp of a new paradigm."

Citing recent conversations he's had with money men at studio-owning conglomerates, Amobi described a "hunkered down" mentality on seeking investment due to Wall Street's woes. That said, he also noted studios have parent companies with pockets deep enough to fund films without external backing.

"It's really a very gloomy environment so to speak, but they do have the cash despite the credit crunch," said Amobi, who warned any self-financing could put a crimp on dividend payouts.

The real test could come as soon as late 2009, according to Amobi, when many of the current slates peter out and studios will have to make decisions. "As you see these film slate deals unwind, there's going to have to be more creative ways to financing these deals," he said.

The panelists agreed that the multi-picture slate deals of recent years are likely a thing of the past, but single-picture deals will still find traction.

Hanson believes that single-picture deals will likely only increase with overseas backers, noting that his firm obtained financing for new film "W." from British, Chinese and Swiss investors. However, he noted that didn't mean that American investors weren't interested, too. "The first group in our syndicate of potential investors who happened to raise their hands happened to be offshore," Hanson said.

However, Amobi noted that the advantage much of the global enjoys over the American dollar in currency is starting to evaporate, too. "My sense is that sourcing money from those regions is going to get increasingly difficult," he said.

But the panel was not entirely bleak. Waisbren noted the very volatility of the sector presents opportunity for investment, particularly among the technologies poised to grow into film distribution platforms in the long term.

"It's not all doom and gloom," Waisbren said. "You have to be patient, you can't be a one-year investor."

Amobi noted Tuesday's announcement of a $250 billion financial rescue package for banks will help the industry as well. "These are the same banks that Hollywood is primarily looking to," he said.