Investors still on board despite summer slump
Hollywood hedged its bets this summer — all of Hollywood.Studios don’t tout it, but almost every pic slugging it out at the box office was co-financed by the myriad of private equity funds infiltrating the movie biz. List not only includes “Superman Returns” and “Poseidon,” but also “Talladega Nights: The Ballad of Ricky Bobby,” “X-Men 3″ and “Monster House.” At first glance, the honeymoon would seem to beover for the funds, thanks to high-profile disappointments “Poseidon,” “Lady in the Water” and “The Ant Bully.” And while pulling in a sizeable $375 million so far worldwide, “Superman” still fell below expectations. Virtual Studios co-financed “Poseidon”; Legendary, the rest. Both companies are based at Warner Bros. Are investors ready to throw in the towel? No, even if the summer has left them with a mild case of the jitters. There have been a number of quiet successes for other funds this summer (following similar hits in this past winter and spring). And last year, Legendary turned a nice profit on “Batman Begins.” “I think it’s been a rough summer,” one financial analyst says. “Across the board, profitability has been down. Budgets and advertising costs have skyrocketed. “But I don’t think these new investors are too nervous. U and Sony share the two Gun Hill Road funds. Gun Hill is likely to enjoy multimillion-dollar profits after funding half of Sony’s sleeper summer hit “Talladega Nights” and a slew of profitable U pics over the past year, including “The Inside Man,” “Nanny McPhee” and “The Fast and the Furious: Tokyo Drift.” At Par, the Melrose fund will see some sort of return on “Mission: Impossible III.” Same goes for Fox’s co-financing partner Dune Capital, which is financing 20%-25% of every Fox pic, including “X-Men 3.” Disney’s “Pirates of the Caribbean: Dead Man’s Curse” may be the only big pic this summer not financed to some degree by a private equity fund. Even Sony’s “The Da Vinci Code” is thought to have gotten some aid. By far, Warners and Legendary —- which considers itself a production company as well — have been the most open about their partnership, and which movies Legendary is co-financing. Why all the secrecy elsewhere? Directors and talent have sometimes taken it personally when a studio sloughs off some of the cost, fearful that it sends a message that the project is in trouble. But times have changed. Almost overnight, a movie costing more than $200 million to make doesn’t seem that unusual. At that pricetag, studios find themselves in a chokehold, especially when marketing costs are added in. A studio like Warners, a devotee of tentpoles, needs co-financing partners if it is to continue on the same course. Already, Legendary and Virtual have proven their worth in blunting the losses for Warner Bros. If Legendary is unnerved, it isn’t showing. Like Warners, Legendary insists it will turn a profit on “Superman Returns,” and has given all indications that it’s on deck to co-finance a sequel. Like Legendary, all the funds argue that they won’t be made, or broken, by just one pic. By investing in a slate of pics over the course of several years, they’re virtually guaranteed a return of 10%. Then again, this is the movie business.
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