Every week, without fail, another billion dollars or so in equity funding descends upon the movie industry, and another new entity announces its willingness to spend it.
It seems appropriate to ask, where does all this largesse come from? Why are so many wealthy people apparently so eager to lose so much money?
Having studied recent announcements, I’ve concluded that the source of this funding can be broken down to the following categories:
- People who have made so much money from esoteric new sectors of the economy (health care, technology, etc.) that they don’t really give a damn about risk. In fact, they’re grateful for the opportunity to lose money as a means of assuaging their guilt.
- People of bizarre nationalities or combinations thereof (Russo-Kurds, Serbo-Albanians) who have happened upon billions in funny money from munitions or natural gas and would like to meet girls in Hollywood.
- Money managers who have long since run out of new ideas on how to move the billions at their disposal, so they’ve decided out of sheer boredom to find a new playpen. After all, the amount of money controlled by hedge funds worldwide has soared from $600 billion in 2003 to more than $2 trillion.
There are, to be sure, some legitimate (and semi-legitimate) operators who truly believe they have discovered a formula for making profits in Hollywood. Their pitches are varied: Finance slates of films, not individual projects; self-distribute the films, thus avoiding studio distribution fees; rely solely on projects built around big-name stars or, conversely, focus on micro-budget films with no recognizable names and no gross payouts.
The reality, of course, is that funding movies is akin to entering a lottery. Now and then someone inevitably draws the right number.
The problem is that the sheer quantity of projects resulting from this influx of big bucks mitigates against the chances for ultimate reward. With six to eight movies colliding at the multiplexes each weekend, audiences are understandably perplexed. Why gamble your 10 bucks on “The Exterminating Angels” or “Red Road” when you’ve already sampled an earlier “Pirates” or “Shrek” and know what you’re in for?
In the short term, of course, Hollywood benefits richly from the flood of new money: Teamsters have more cars to drive, craft services has more doughnuts to dispense, stars whose names we’ve long since forgotten suddenly are emblazoned above titles, as though their careers had been magically rediscovered.
The studio apparatchiks, understandably, are confounded by all this and have judiciously started reducing their own slates. On the other hand, they grudgingly admit that they welcome the opportunity to lay off the risk on some of their chancier movies, especially when the tabs for non-eventful “event” pictures start clambering past $200 million. They like to complain about the newcomers, but readily participate in the fleecing.
So the good news is that more actors are acting, more directors are directing and more Russo-Kurds are meeting girls. The party rages on — indeed it grows ever bigger and more inclusive.
And when the bubble finally bursts, everything will quickly go back to normal. And you remember how boring that was!
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