Saudi Debacle Exposes Hollywood's Long Love Affair With Shady Money

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Endeavor's Ari Emanuel has exited an investment pact with Saudi Crown Prince Mohammed bin Salman.

Ari Emanuel's Endeavor is giving back a $400 million investment after an outcry over a missing journalist as others are "trying to figure out what makes sense" in an entertainment industry quick to take cash from dubious sources.

On Oct. 11, nine days after Washington Post columnist Jamal Khashoggi went missing, Endeavor CEO Ari Emanuel had made up his mind. As news reports implicated the Saudi government in the disappearance and likely murder of the U.S. resident, Emanuel began exploring the company’s options for extricating itself from a $400 million investment made in March by the Saudi Public Investment Fund, overseen by Saudi Crown Prince Mohammed bin Salman. The only problem: The deal had funded, and finding an out wouldn’t be simple.

Four days later, Emanuel said during a keynote session at the MIPCOM conference in Cannes that he was “monitoring” the situation and the events were “very, very concerning” and “upsetting,” as the deal unwinding continued behind the scenes.

Endeavor found its out, and the $400 million, which was to be used to grow the talent-entertainment-sports firm, will be returned, sources tell The Hollywood Reporter. For its part, Endeavor declined comment and at press time had yet to make any public acknowledgment that the deal is off. In a sign of how delicate and dangerous the Saudi situation is, Emanuel was seen leaving his hotel in France with bodyguards hours after THR reported that Endeavor was pulling out.

Though a source says Endeavor would have exited the Saudi pact regardless, clients of its WME agency had begun lobbying Emanuel to cut ties (and at least one high-profile agent at a rival agency was using the Saudi situation to attempt to poach talent). WME reps a number of visible and vocal journalists including Ronan Farrow, Mika Brzezinski, Chris Matthews and Scott Pelley. Had Endeavor kept the money, it likely would have led to departures. On Oct. 14, client John Oliver took a shot at World Wrestling Entertainment for staying noncommittal about its relationship with the Saudis on his HBO show. It was only a matter of time before Oliver took aim at his own agency. “This was absolutely the right thing to do and I’m glad Ari Emanuel addressed it quickly,” Farrow tweeted Oct. 16.

As a result, Endeavor became the first Hollywood entity with real money at stake to take a stand on Khashoggi’s disappearance. After all, it’s relatively painless to pull out of a conference like Viacom’s Bob Bakish, Uber’s Dara Khosrowshahi, STX’s Bob Simonds and Los Angeles Times owner Patrick Soon-Shiong did with regard to the Future Investment Initiative, scheduled to take place Oct. 23-25 in Riyadh. But it’s another matter for those with hundreds of millions at stake to sever ties with the cash-flush kingdom.

The question now looms as to whether others will follow Endeavor’s lead, and if the scandal will cause Hollywood companies to think twice about their historical willingness to accept money from dubious sources. Earlier this year, the Saudi government announced that it was opening up the country to theatrical film releases — a move expected to spur about $1 billion per year in box-office revenue (in comparison, China generates about $8 billion annually) — and hosted a premiere of Disney’s Black Panther at AMC’s first site in Riyadh.

For a major studio, operating in Saudi Arabia likely would mean more than $100 million per year added to the balance sheet.

The MPAA declined comment, but a well-placed source says the group’s studio members are monitoring the situation. Complicating matters for the majors is the fact that all but Sony are part of media companies that also own news divisions, and those divisions — be it CNN (AT&T’s WarnerMedia) or ABC News (Disney) — are said to be applying pressure to put any Saudi dealings on ice. How hard the movie divisions push back remains to be seen. “Any pressure that the news divisions might feel inside the media conglomerate structure from sibling movie studios is absolutely overwhelmed by the pressure they would feel to display solidarity with a presumably murdered journalist,” says media analyst Andrew Tyndall.

Khashoggi hasn’t been seen since entering the Saudi consulate in Istanbul on Oct. 2. Turkish authorities have accused Saudi Arabia of killing and dismembering the journalist, a critic of bin Salman (known as “MBS”), and they claim to have proof. Still, it appears unlikely that the Trump administration will impose sanctions given the president has said he doesn’t want to imperil U.S. jobs (he also floated the idea of “rogue killers” as being behind Khashoggi’s disappearance). But entertainment and media companies must balance more sensitive stakeholders. “I imagine there is a lot of evaluating going on right now [by the studios],” says analyst Eric Handler of MKM Partners. “I would think the companies are speaking with U.S. government officials and trying to figure out what makes sense on both a near-term and long-term basis.”

AMC, Imax, WWE and Cirque du Soleil all have made inroads in Saudi Arabia in recent months. AMC pledged to build theaters in the desert country, but it is unclear how much money it has invested at this juncture (most of the capital had come from AMC’s Saudi partner). AMC declined comment, and the other companies either refused to comment on the Khashoggi situation or issued statements that they are “monitoring the situation.”

Some say the Saudi predicament is another example of Hollywood being too quick to embrace a country with a dismal human rights record. China has poured billions into U.S. entertainment companies despite the regime’s history of abuse and aggression toward its people. Miramax was purchased in 2016 by the BeIN Media Group, a sports and media company with ties to Qatar, which has been accused of sponsoring terrorism. (Miramax's former chairman, Trump friend Tom Barrack of Colony Capital, has extensive ties to Saudis.) In 2012, producer Peter Chernin closed a deal for about $100 million from Qatar Holding LLC, an offshoot of the Qatari government.

Saudi Arabia has long been labeled a brutal, repressive regime. But MBS, 33, went on a media tour earlier this year promising to be a young reformer after coming to power in 2017 (as part of the PR push, he appeared on the cover of Time and in a largely positive profile on CBS’ 60 Minutes). In April, MBS visited Los Angeles on his U.S. tour and received a red-carpet welcome from showbiz royalty, with everyone from Disney’s Bob Iger to Universal film chair Jeff Shell to Dwayne Johnson lining up to enjoy face time with the monarch at a dinner party hosted by Rupert Murdoch at his Bel Air estate.

Yet even as the Hollywood romance blossomed, disturbing news continued to come out of the country. Prince Alwaleed bin Talal, a prominent investor in such companies as 21st Century Fox, was part of a group detained for months in an “anti-corruption crackdown” by Saudi officials in the Ritz-Carlton hotel in Riyadh. Human rights activist Samar Badawi, a recipient of the U.S. International Women of Courage Award, was detained in August — a move that incurred Canada’s criticism. “The journalists, studios and Endeavor folks are ignorant of or do not care about the history of this region and are essentially being hypocritical,” snipes one Wall Street analyst of the current finger-wagging.

That point is echoed by Joel Simon of the Committee to Protect Journalists. “Everyone who had investments or relationships with Saudi Arabia knew their human rights record,” says Simon. “They knew about the war in Yemen. They knew about the treatment of women in the kingdom. They know it’s an absolute monarchy, and they have the death penalty for blasphemy and public beheadings. Even with all that, what is alleged here represents a new level of depravity and an utter and complete violation of the norms that regulate the relationship between sovereign powers.”

This story first appears in the Oct. 17 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.