Chapter 644 Investment from the other side

Germany provides tax breaks for investment in the film industry, and does not require film projects to be produced locally or hire local creatives, and tax breaks can be held.

This tax loophole was quickly exploited by German investors and Hollywood, where studios could sell the rights to a film to a German company and then lease the film back for about 10 percent less than the sale price. benefit from tax benefits.

But after the new century, the overseas pre-sale market began to decline. In the 1990s, Hollywood movie projects could get as much as 60% of their budget through overseas pre-sale. By 2005, they could only get 30% or less. , and Germany's tax loopholes were filled, Hollywood's financing began to encounter some difficulties, and new sources of funding were urgently needed.

At this time, due to the sluggish stock market and low bank interest rates, Wall Street has abundant funds, and even some super private funds with a fundraising scale of more than 10 billion US dollars have emerged. Wall Street financial capital urgently needs to seek new profit points .

Hollywood, which has a stable market performance, came into their sight. They found that the prospects of Hollywood movies were good. From 1990 to 2000, the total box office in the United States increased by nearly 60%, and overseas markets experienced terrifying explosive growth. And with the development of technology, Hollywood movies have a wide range of revenue sources and can have a considerable return on investment.

Coupled with an analysis method based on probability and statistical theory, 'Monte Carlo simulation method' began to be believed and widely adopted by investment institutions. They found that the portfolio theory applicable in the stock market can also be used in the film industry. When the investment in film projects reaches 20 to 25, the volatility of investment income is relatively small.

As a result, Wall Street capital's plattery investment project in Hollywood movies came into being.

The most typical of them are two companies.

One is Paramount Pictures, the infamous 'Melrose' platter project.

Year 2003. Under the leadership of Paramount's vice president of commercial operations, Isaac Palmer, Merrill Lynch and others reached a partnership with Paramount to establish a private equity fund called 'Melrose', which plans to provide Paramount's 2004 and 2005 annual plans A huge amount of money is invested in the production of the film.

But Hollywood companies have a lot of ways to deal with foreign capital, and Paramount's plan has been successful. But also failed.

Paramount used a variety of operating methods in the industry to wipe out most of the profits of the investment projects of the platter plan, which directly led to the breakdown of cooperation. Many Wall Street investors, including Merrill Lynch, also joined Paramount Pictures this year. In Delaware Chancery Court, the lawsuit is bound to drag on for a long time.

Although in the short term, Paramount has made a lot of profits. It is the winning party, but he lost an important source of financing, which can also be said to be the turning point of Paramount Pictures from prosperity to decline.

The other is Relativity Corporation.

In 2004, young Wall Street investor Ryan Kavallaug founded Relativity Management Company, which is dedicated to providing a channel for Wall Street funds to enter Hollywood.

He constructed a set of models. Based on the film's director, starring, genre, release date and other factors to predict the film's chances of market success, from 2005 to the present, Relativity Management has raised more than $2 billion to invest in major studios such as Warner, Sony and Universal. In the platter investment project, the platter investment in Hollywood has been pushed to a climax.

A major source of funding for Transformers. Relativity company, Duke also met with Ryan Kavallaug who flew to Los Angeles. The other party's investment in this project may be as high as 100 million US dollars.

When the film receives revenue, Warner Bros. will first deduct about 10% of the distribution agency fee, and then deduct the copy and advertising marketing expenses, as well as Duke's share and the profit shared by Hasbro, and the rest of the income will be shared with the company. The fund is divided according to the investment ratio.

according to the agreement of both parties. The distributed income will not be limited to box office income, but also includes the film's income from audio-visual distribution, TV distribution, new media rights and even franchising.

However, since the fund generally has a limited duration, and it takes five or even ten years for a Hollywood movie to complete the release cycle, the two parties will not wait until all the income is accounted for before distribution.

When Transformers completes the release of the film, the two parties will estimate the income of other subsequent profit channels according to the box office revenue, and then distribute them based on the estimated figures.

In order to retain the ownership of the film copyright and ensure the timely withdrawal of the investment fund, major studios like Warner Bros. will use the future income of the film as a guarantee to obtain a loan from the bank and pay it to the management agency of the investment fund, and the management agency A certain amount of dividends will be drawn from it, and the benefits will be distributed to investors.

Although the investment involved is more troublesome, with Duke's current status, the dominance of the entire project is firmly in his hands.

And he is also following suit and established a film foundation through the Cayman Islands. The difference is that this film foundation has not invested in any films so far.

The purpose of Duke's establishment of this foundation is not to directly invest in movies, but to be a successor.

For people at Duke's level, coupled with some preconceived views, although it is impossible to guess the specific time of the outbreak, it is not difficult to find that the financial turmoil has already shown signs.

The storm will have a profound impact on Hollywood and a platter consisting mostly of Wall Street money.

In this era, Duke had already gained a bit of status in the crew on the other side, and his eyes were also raised, paying attention to this aspect.

After the financial turmoil in 2008, Wall Street’s investment in Hollywood fell into crisis. Coupled with the fact that Hollywood companies did not pay much attention to foreign investors, Wall Street capital gradually moved away from Hollywood, and even Spielberg appeared for DreamWorks two. More than 100 million US dollars of capital injection plan, several times to find the situation of Indians.

And those investment banks have sold their stakes in movie investment plans at 30 to 50 percent, and even spawned several companies that specialize in acquiring such assets.

That's what Duke's foundation is going to do.

He asked people to specifically investigate this information, and there are many famous projects in the movies that have been funded through the platter plan.

For example, in the platter plan between 20th Century Fox and Dune Capital, there are Avatar and New X-Men.

Walt Disney's projects include Alice in Wonderland and Pirates of the Caribbean 4.

If the financial turmoil breaks out, his foundation can buy the shares of Wall Street funds at a discount of 30 to 50%, and the profit figures it can bring can be imagined.

Of course, Duke and his team have worked hard in Hollywood for more than fifteen years, and they are also important figures in large film companies. It is not so simple for Hollywood to deal with him in the same way as it deals with Wall Street.

And none of the projects Duke is aiming for is a platter plan that only has a share of box office revenue.

As early as 2005, Warner Bros. had statistics that the box office revenue of its production and distribution films was less than 15% of their total revenue, but they were derived from TV, cable, DVD, video and other home entertainment projects as well. The money earned from various peripheral products accounted for 85% of the total revenue.

It has long been a consensus in the industry that Hollywood does not rely on box office to make money. Today's Hollywood is no longer a dream factory, but has essentially become a service organization - an exchange based on copyright and money.

Duke has been keeping people on the lookout for this, and he knows the opportunity is fleeting.

After the economic crisis passes, it will not be long before capital from emerging markets such as India, the United Arab Emirates, and the other side of the Pacific Ocean will turn their attention to Hollywood, and Hollywood investment projects will begin to increase.

In fact, funds from across the Pacific are already aimed at Duke's new project, after all, his films are almost guaranteed to be a super hit there.

Duke, this is Mr. Wang from China Film Group.

In the Transformers studio just established by Warner Studios, Jamie Johnson introduced to Duke, I visited Warner Studios with a delegation last year.

Hello, Director Rosenberg.

The other party took the initiative to stretch out his hand, Duke shook his hand lightly and not heavy, and greeted, Hello, Mr. Wang, sit down as you like.

This is his director's office, where all kinds of information related to Transformers are piled up, which looks a little messy.

An assistant quickly tidied up, and when Duke sat on the sofa, he brought another coffee.

First of all, on behalf of China Film Group, I would like to congratulate Director Rosenberg. The global box office of The Dark Knight has exceeded 1.1 billion US dollars.

The middle-aged man surnamed Wang looked at this side and said in relatively fluent English, The Dark Knight also has a very good domestic box office, reaching 385 million RMB. You are the most popular director.

Duke smiled politely, Thank you.

As he spoke, his eyes turned to Jamie Johnson. He would not be foolish enough to believe that the other party came to Los Angeles to say a few words of congratulations to express the love of China Film Group and the fans on the other side of him.

Mr. Wang seemed to want to go around and say a few words. Duke was not used to this way of talking about business, but he didn't say much. After all, every country and region always has its own characteristics.

Jamie Johnson understood Duke's work habits and took the initiative to say, The China Film Group represented by Mr. Wang intends to invest in Transformers.

I have no opinion. Duke himself did not participate in the investment in the film, so he said, This aspect is still based on your opinion.

There was a smile on Mr. Wang's face. Obviously, he had reached a basic consensus with Warner Bros., but if Duke didn't nod his head, the investment would definitely cause great uncertainty.

He glanced at Jamie Johnson and said, China Film Group would like to have more cooperation with Director Rosenberg... (To be continued ~^~)

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