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Variety’s Business Managers Elite Breakfast Focuses on Megaproducers as Brands

The changing world of content finance and production was the focus of “Megaproducers and the New Hollywood,” a panel at Variety’s Business Managers Elite breakfast, which took place before an audience of nearly 200 at the Montage hotel in Beverly Hills on Wednesday.

The session targeted the way shifting technology, an emerging global marketplace, and the entrance of new players into the content business are all radically altering the traditional system in which studios have been Hollywood’s gatekeepers.

One of the most explosive developments in recent years — highlighted most recently by AT&T’s bid to acquire Time Warner — is companies entering the content marketplace and selling product at a price point of their choice as a way to enhance their primary business, said Cliff Gilbert-Lurie, senior partner at law firm Ziffren Brittenham.

In the case of Amazon, he pointed out, the company’s content play via Amazon Studios is a way to bolster its mammoth online retail operations. Similarly, Verizon and AT&T, primarily carriers, can use their potential content partners to create synergistic initiatives that could enhance their primary business — and even create an “emotional connection” between customer and seller.

Gilbert-Lurie believes that highly visible creative talent and producers, such as J.J. Abrams, Dick Wolf, and Shonda Rhimes, have the opportunity to become brands unto themselves, outside of the studios. Using high-speed broadband technology, they can launch content on the strength of just their names and quickly reach audiences worldwide. “They ARE the studio, renting the servers,” he said. “That’s where Netflix gets some serious competition.”

The opportunities are there, added Alan Epstein, partner at law firm Venable LLP. “There’s lots of capital chasing content, and lots of cash available right now. A market is developing right under our feet that has no real precedents, letting us add value for our clients.”

Yet not all producers will find it easy to wean themselves away from cushy studio deals, said Epstein. “Going directly the consumer route is a huge leap.”

All the panelists consider film a higher-risk proposition than television. “TV is largely pre-sold today,” said Bill Hageman, managing director of investment bank RBC Capital Markets. “Film has more inherent volatility.”

Hageman sees two types of consolidation in today’s business: horizontal integration, whereby producers and production companies are merging, especially in television; and vertical integration, in which distributors are buying rights to digital content and acquiring content businesses.

Doug Belgrad, founder of 2.0 Entertainment, a new shingle that co-finances pictures in addition to developing them internally, thinks that film and television are not as far apart from each other as they once were. “Individual films are really risky,” he said. “Slates are less so.” He added that the gradual convergence, as evidenced by TV’s new “golden age,” and the consumption of content on large home screens, whatever its origin, can lead to “new opportunities for producers with access to capital and talent. “

In many of the new deals being made today, talent and producers are forfeiting some of their back-end participation in exchange for creative freedom and hefty up-front remuneration. But then what will happen when one of these projects becomes so successful that the players realize they would have been better off doing a more traditional deal, asked moderator Andrew Wallenstein, Variety’s co-editor-in-chief.

“That’s what keeps me up at night,” replied Gilbert-Lurie.

Russell Goldsmith, chairman and CEO of City National Bank, kicked off the morning with some comments about the powerful role of entertainment in California’s economy. In the past “our politicians took the industry for granted,” he said, and states such as Georgia and New York lured production away.

In 2014, with the extension of California’s annual allocation for production tax rebates from $100 million to $330 million, the tide has turned. “The expanded program shows that government tax policies can make a difference in our economy,” Goldsmith said.

After Goldsmith’s remarks, Eric G. Wasserman, managing partner and co-founder of business management firm WG&S, received Variety‘s Business Managers Elite Award, in part for his significant charitable work on behalf of Children’s Hospital Los Angeles.

Wasserman said that since the honor was announced he was able to raise an additional $100,000 for the nonprofit from the business management community.

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