With the nation on the brink of economic collapse, the Wall Street panic at an all-time high, and hedge funds and financial institutions disintegrating, New York-based Elliott Associates has parked an additional $1 billion at Relativity Media’s Ryan Kavanaugh, who will finance a huge slate of Universal Pictures movies for years to come.
And the question remains “why?” in the current economic crisis, as well as the recent withdrawal of billions of dollars in institutional capital from studios.
No matter how bad things are in the world, people need to be entertained. And while there is the mass panic mentality in the US financial markets, abroad, properly structured commercial films generate more revenue that adds to the purchases of larger distributors with the Euro vs. American dollar.
In addition to Elliott Associates, other investors, including billionaires, family offices from Wall Street to Silicon Valley, from the Middle East to Russia, have been pouring their money into Hollywood.
Larry Ellison of Oracle, Paul Allen of Microsoft, Steven Rales, Fred Smith of Federal Express, Norman Waitt, the co-founder of Gateway Computers, Jeff Skoll of Ebay, Marc Turtletaub of The Money Store, Roger Marino of EMC Corp, Sidney Kimmel De Jones Apparel Group, Minnesota Twins owner Bill Pohlad; Property developers Tom Rosenberg and Bob Yari, and financiers Sheikh Waleed Al Ibrahim, Michel Litvak and Philip Anschutz are behind the financing of many films ranging from blockbusters to Academy Award winners.
While the glamor of the movie business may appeal to most, at the end of the day, it is still an unknown business that many try to gamble on, with only a few coming out as winners. The real key is to minimize risk, maximize profit, and offer a steadier stream of income than alternative investments like real estate, oil and gas, commodities, hedge funds, or virtually any other investment on the market can offer. current.
Rather than dazzle investors with smoke-and-mirror Monte Carlo simulation models that offer various IRRs and scenarios based on unpredictable movie revenue streams, the key is to deliver an absolute return on investment using international public tax incentives and Americans who, in certain cases, can guarantee 100%. or more of the invested capital before income by leveraging equity positions with non-recourse debt.
Investors who want to take a 100% federal deduction under Section 181 or the “American Job Creation Act” against their ordinary income, get an additional 20-40% in tradable and monetized state tax credits or cash back , have revenue coverage from a list of films, as well as stimulate local and international economic development and create jobs, including for women and minorities.
It sounds too good to be true?
Not many other alternative investments can offer tax breaks, multiple exit strategies, the potential to guarantee 100% equity, give back to the American economy and jobs, while engaging in the movie making process that would also add to the long list of recent film funds that have been structured with numerous hedge funds, private equity investors, corporate tax credit buyers and institutions.
In today’s unstable financial markets, not many businesses can be started that can have almost predictable ROI before operations and profits.
