v2 Chapter 644： Investment from the opposite bank

Germany stipulates that investment in the film industry can obtain tax deductions, and does not require film projects to be produced locally or hire local creative personnel, and the tax deductions can also be retained.

This tax loophole was quickly exploited by German investors and Hollywood. Hollywood studios could sell the copyright of the movie to a German company, and then “rent” the movie back at a price about 10% lower than the selling price. Both can benefit from tax incentives.

But after the new century, the overseas pre-sale market began to decline. In the 1990s, Hollywood film projects could get as much as 60% of the budget through overseas pre-sales, and in 2005, they could only get 30% or less. In addition, the tax loopholes in Germany have been filled, and Hollywood's financing has begun to encounter some difficulties, and new sources of funding are urgently needed.

At this time, because of the downturn in the stock market and the low interest rates of banks, Wall Street has ample funds, and some super private equity funds with a fundraising scale of more than 10 billion U.S. dollars have even appeared. Wall Street's financial capital urgently needs to seek new profit points. .

Hollywood, which has a stable market performance, entered their sights. They found that the prospects of Hollywood movies are good. Between 1990 and 2000, the total box office in the United States increased by nearly 60%, and the overseas market experienced a terrible explosion." Growth, and with the development of technology, Hollywood movies have a wide range of income sources and can have a considerable return on investment.

In addition, a kind of analysis method based on probability and statistics theory, "Monte Carlo simulation method", began to be believed in 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 "complex investment" project for Hollywood movies came into being.

Two companies are the most typical.

One is Paramount Pictures, which is the notorious ‘Melrose’ platter plan.

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

But Hollywood companies have a lot of methods to deal with foreign capital, and this platter plan Paramount succeeded. It also failed.

Paramount used a variety of operating methods within the industry to smooth out most of the profits of the investment projects planned for the platter, which directly led to the breakdown of cooperation. Many Wall Street investors, including Merrill Lynch, also launched Paramount Pictures this year. When the lawsuit reaches the Delaware Chancery Court, the lawsuit will inevitably drag on for a long time.

Although in the short term, Paramount has made a lot of profits and is the winner, he has lost an important source of funding. This can also be said to be a turning point for Paramount Pictures from its prosperity.

The other is the Theory of Relativity Company.

In 2004, young Wall Street investor Ryan Kavalaug established the Theory of Relativity Management Company, dedicated to providing a channel for Wall Street funds to enter Hollywood.

He constructed a set of models to predict the film’s market success probability based on the film’s director, starring, genre, release date and other factors. From 2005 to the present, the Relativity Management Company has raised more than US$2 billion in funding to invest in Warner, Sony and The platter investment projects of major studios such as Universal have pushed Hollywood’s platter investment to a climax.

A major source of funding for "Transformers" is the Theory of Relativity Company. Duke also met with Ryan Kavalaug, who had flown to Los Angeles. The other party's investment in this project may be as high as $100 million.

When the film earns income. Warner Bros. first deducts about 10% of distribution agency fees, and then deducts copy and advertising and marketing expenses, Duke’s share and Hasbro’s profits, and the remaining income will be split with the fund in proportion to the investment ratio .

According to the agreement between the two parties, the income distributed will not be limited to box office income, but also include the income of the film from audio and video distribution, television distribution, new media copyright and even franchising.

However, because the fund generally has a limited duration, it takes five or even ten years for a Hollywood film to complete the release cycle. Therefore, both parties will not wait until all income has been accounted for before distributing.

After the film "Transformers" is released, Shuangyi will estimate the income of other profit channels based on the box office revenue, and then allocate it based on the estimated number.

In order to retain the ownership of the copyright of the film and to ensure the timely withdrawal of investment funds, major studios like Warner Bros. will use the future income of the film as a guarantee. The loan obtained from the bank is paid to the management agency of the investment fund, and the management agency will draw a certain dividend from it, and then distribute the benefits to investors.

Although the investment involved is more troublesome, with Duke's current position, the leadership of the entire project is firmly held in hand.

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

Duke's purpose in establishing this foundation is not to invest directly in movies, but to become a fan.

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 revealed signs.

This storm will deeply affect Hollywood and the platter plan mainly composed of Wall Street funds.

In this era, Duke has already gained a bit of status in the crew on the other side, and his gaze has also risen, paying attention to this aspect.

After the 2008 financial turmoil, Wall Street’s investment in Hollywood was in crisis. In addition, Hollywood’s companies did not pay much attention to foreign investors. Wall Street Capital gradually moved away from Hollywood, and Spielberg even appeared for the DreamWorks Two More than 100 million US dollars of capital injection plan, several times to find Indians.

And those investment banks have sold their shares in the film investment plan at three to five percent off, and even gave birth to several companies that specialize in acquiring such assets.

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

He asked people to investigate this information. Among the films funded through the Platter Project, there are many prestigious projects.

For example, in the twentieth century Fox and Dune Capital's platter plan, there are "Avatar" and "New X-Men".

Among Walt Disney's projects, there are "Alice in Wonderland" and "Pirates of the Caribbean 4".

If the financial turmoil breaks out, his foundation can acquire those shares of Wall Street funds at a discount of three to five percent, and the number of profits 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 important figures in large film companies themselves. It is not that simple for Hollywood to deal with him in a way that deals with Wall Street.

Moreover, none of the items Duke is aiming at is a combination of box office revenue sharing.

As early as 2005, Warner Bros. had calculated that the box office revenue of the movies produced and distributed under its umbrella was less than 15% of their total income, but they came from home entertainment projects such as TV, cable TV, DVD, and video, and The money earned from various peripheral products accounted for 85 percent 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". In essence, it has become a kind of service organization-a clearing house based on copyright and money.

Duke has been keeping people's eyes on this, he knows that opportunities are fleeting.

After the economic crisis passes, it will not be long before capital from emerging markets such as India, the UAE, and the other side of the Pacific will turn their sights on Hollywood, and Hollywood investment projects will begin to increase again.

In fact, funds from across the Pacific have been targeted at Duke's new project. After all, his films are almost guaranteed to be super-selling over there.

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

In the "Transformers" studio just set up by Warner Studios, Jamie Johnson introduced to Duke, "I visited Warner Studios with a group last year."

"Hello, Director Rosenberg."

The other party took the initiative to stretch out his hand, and Duke shook his hand with no weight, and said, "Hello, Mr. Wang, just sit down."

This is his director's office, which is piled up with various materials related to Transformers, which is a bit messy.

An assistant quickly cleaned up, and when Duke and the three were sitting on the sofa, they brought coffee again.

"On behalf of the China Film Group, I would like to congratulate Director Rosenberg. The global box office of "The Dark Knight" has exceeded $1.1 billion."

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

Duke smiled politely, "Thank you."

As he said, his eyes turned to Jamie Johnson, he wouldn't be so stupid to believe that the other party came to Los Angeles just to say a few words of congratulations, expressing the love of China Film Group and the fans of the other side.

It seems that Mr. Wang still wants to say a few words around the circle. Duke is not used to this way of discussing business, but he can't say much. After all, every country and region always has its own characteristics.

Jamie Johnson understood Duke’s work habits and proactively said, “The China Film Group represented by Mr. Wang is interested in investing in Transformers.”

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

There was a slight smile on the face of that Mr. Wang, and he had obviously reached a basic consensus with Warner Bros., but if Duke didn't nod his head, this investment would definitely generate a lot of uncertainty.

He glanced at Jamie Johnson, and then said, "China Film Group wants to cooperate more with Director Rosenberg..." (To be continued...)

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