Chapter 1928： Platter investment

For many years, the United States has been very cautious about foreign investment in the film and television production industry. It is precisely because the legend coincides with the downturn in performance that the country Z consortium has obtained the opportunity to buy and become the new owner of the legend.

According to the habit of Da Lao Wang, when he buys Legend, he certainly hopes not only to carry out capital operation, but to acquire IP in the country Z market to make money like the acquisition of Infront, Ironman and other sports companies.

In particular, the Monster Matrix under Legendary Films has a positive effect in this era of blockbuster film advocating big IP. Without this capital, Big Pharaoh wouldn't have taken a fancy to Legendary Films that had lost so much that his grandma didn't even know it.

Moreover, the country Z box office market is still growing, which often drives the price-earnings ratio of production listed companies to rise, turning IP into revenue, which is also a popular way in the capital market. This is also the price of the king who dares to drop tens of billions of soft sister coins. The legendary strength lies.

Not only that, the legendary film company is also worthy of its name, this company, its history is not as long as Universal, Fox, Paramount, maybe not everyone is familiar with it, but it is very special in Hollywood A studio, especially its mode of operation.

First of all, we must know, where does the money for making movies in Hollywood come from?

This is actually a few important turning points in the development of Hollywood.

The first was its own funds and bank loans. Needless to say, the investment of its own funds was that the film company made money from the box office and then invested in the reproduction of the film.

And the way of borrowing from banks has existed since Hollywood opened its doors. Since the era of Edison and Griffith, Hollywood has begun to borrow money from Wall Street bankers.

It is also very understandable to take the loan and take it to film, and to repay the principal and interest of the money earned.

But there are too many projects opened every year, and banks alone are far from enough. Therefore, in addition to banks, Hollywood will also look for other external capital. This practice has a long history.

Famous external investor cases include: newspaper king Hearst family, the famous Kennedy family, including the reality version of Iron Man Howard Hughes, and later Microsoft co-founder Paul Allen, etc., they have all invested in Hollywood, but Until the 1970s, external capital was only a small supplement to Hollywood.

In the 1970s, "Jaws" and "Star Wars" ushered in the era of Hollywood's super blockbusters. The cost of film investment rose rapidly, the operating risks of the film industry increased sharply, and the demand for financing also greatly increased.

Relying entirely on own funds and bank capital seems to be too difficult. After all, there was a background in the era when several major traditional film companies were acquired by comprehensive media groups, and the group headquarters did not attach importance to the film business, thus reducing the investment of its own funds. Moreover, the low risk tendency of commercial banks has been unable to meet the requirements of the Hollywood capital market.

At this time, the federal ZF introduced a tax discount policy for film investment, which greatly encouraged domestic and European private investors to enter the film capital market.

However, preferential tax policies cannot be eaten for a lifetime. Therefore, in the mid-1980s, Reagan ZF's major tax reform abolished the preferential policies for investment in movies. In addition, individual investors had inherent deficiencies in the scale of fundraising and risk resistance. Institutional investors quickly replaced these wealthy private individuals and became Hollywood’s external investment entities. Driven by institutional investors, a large number of insurance funds and retirement funds have also entered the film investment field.

So entering Hollywood in the 21st century, a proper term appeared-platter investment.

Of course, we must clarify a concept before that. Are Hollywood companies, especially the Big Six, really short of money? Is it really necessary to attract external funds?

In fact, the answer is between the two, but in comparison, making money with other people's money is the essence of investment.

In theory, of course, film companies can completely rely on their own funds to shoot movies, and since the 1990s, the huge profits of secondary recycling channels have been enough to support film companies to shoot super blockbusters with a scale of 100 million yuan, but without exception, all film companies still pay Seek investment abroad.

There are many reasons, such as sharing risks, increasing the number of jobs, crying poor to make stars and agents reduce the pay, etc., but the main reason is that the cooperation between film companies and external investors is a complete unequal treaty. Both parties invested equal funds, say 50/50, but the final profit of the film company was much more than that of external investors.

This is because, for a movie’s box office return, the distributor must first deduct 10-15% of the total box office distribution fees and other marketing expenses, and then share it equally with external investors. This of course seems fair It’s just that for film companies, simply collecting distribution fees to turn a risky event into a relatively dry and flooded income, coupled with various accounting strategies, in short, the introduction of external investors is a problem for Hollywood film companies. A beautiful thing that can make more money and reduce risk.

Why not do it?

Since film companies hope to find external capital, external capital is also looking for investment opportunities, the two sides naturally hit it off.

However, the managers of hedge funds basically do not have the professional knowledge of the film industry, and it is impossible to evaluate the profit prospects of each film project one by one. Isn't it inefficient to cooperate?

At this time, Paramount first found a very clever way.

Since it is too much trouble to evaluate one by one, why not make a package together?

So Paramount lobbied to the securities company and said: Our Paramount company's internal rate of return has stabilized at more than 15% over the years. Look at your hedge funds, the internal rate of return is almost 12- 18%, then our rate of return is about the same, we can work together.

Hedge funds such as the well-known Merrill Lynch Securities heard that this was really the case, so they did it, so they signed a contract with Paramount and decided to invest in Paramount’s 2004-2005 auctions that will be launched from 2004 to 2005 through an intermediary. Films, including the hot projects "War of the World" and "Mission Impossible 3", account for 18% of the investment and share 18% of the profits accordingly.

This agreement guarantees that Paramount will withdraw 10% of the total box office in North America as the issuance fee before the settlement with Merrill Lynch. This is actually the secret of Paramount’s high internal rate of return, so in fact, Merrill Lynch’s share is definitely not so much. Many, the fund raised by Merrill Lynch raised US$231 million, and finally accounted for 20% of the total equity, 2% higher than the original plan of 18%.

This is the so-called combined investment, which packs all your projects for a whole year or a period of time, and directly calculates the total income. It is convenient for Hollywood companies to do the accounting, and it is also convenient for financial companies to recover the principal and harvest profits with lower risks.

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