Hollywood goes to Bollywood for funding

And not just any Hollywood mogul either, but Steven-frickin-Spielberg himself. I guess China wasn’t an option since Spielberg pulled out of his advisory role at the Beijing Olympics.

LOS ANGELES, California (CNN) — Financing for DreamWorks Studios’ partnership with one of India’s richest men was finalized Monday, giving Steven Spielberg and partner Stacey Snider money to resume making movies.

The deal with Anil Ambani, chairman of India’s Reliance BIG Entertainment, provides Spielberg’s DreamWorks Studios with $875 million, coming from Ambani, the Walt Disney Co. and loans made by a syndicate of banks.

via CNN

So far so normal, studios have always formed international partnerships right?..not so fast, the reason Spielberg had to go to India was because no American investor could afford to back him.

But there was still an element of shock: Hollywood could not come up with a rich enough deal for Spielberg, the most bankable director in the business and a “national treasure”? His last movie alone, “Indiana Jones and the Kingdom of the Crystal Skull,” has sold $743 million in tickets and is still playing in theaters around the world.

For that matter, there wasn’t anybody on Wall Street willing to write a blank check for the guy with “Jaws” and “Jurassic Park” on his résumé?

The pending deal with Reliance underscores some realities about Spielberg – mainly that he has become so expensive that few public companies can afford him. Spielberg’s standard deal, on par with other blue-chip talent, is 20 percent of a movie’s gross from the first ticket sold.

As for Wall Street, the firm belief in Hollywood is that the arrival of Reliance marks the end of the private equity and hedge fund boom that has propped up the industry. With the capital markets in turmoil, terms have tightened substantially for movie deals. Investors are demanding faster payback schedules, better guarantees and even a say in how movies are made and marketed.

None of that is acceptable to the DreamWorks team. Spielberg, who has directed more than 50 films, also wants to control his own destiny. At this point in his career, say friends, his accomplishments have earned him the right to have 100 percent control over his movies.

via NYTimes

I can think of no better way of getting a movie to tank than to have its content dictated by hedge fund managers.

If your conditions for investing money are so tight that you can’t afford to give Spielberg some, then chances are you don’t have any money to invest.  Even though the man has directed some turds they have also been extremely profitable turds, investors would have almost certainly made their money back even with Spielberg’s cut.

So then you turn to outside investors. That means the Middle East, India, or China. China is not a realistic option, and I imagine Spielberg would have been a little hesitant to seek funding from Saudi Arabia. China’s movie industry is profitable but only through Television. China’s cinema distribution chains are also state-run which is probably enough to make any Hollywood producer nervous:

Pirating Hollywood blockbusters is “rampant and tolerated,” according to Xu.

“Piracy serves as a form of local protectionism,” he wrote, “preventing the flood of Hollywood films into Chinese theaters.”

But because most Chinese people prefer watching television programming for free, piracy of films has helped create “a strange yet functional symbiosis” between the Chinese film and television industries.

“Piracy makes most Chinese films unprofitable, but television series – soap operas, comedy sitcoms, martial arts melodramas, etc. – based on pirated films are immensely popular and profitable.”

So, Xu explained, a film director makes an excellent film, it is quickly pirated and “thus attracts no interest from state-controlled distribution chains.” He then makes an “eponymous” TV series based on the film and often using the same cast.

“The film has already served to advertise the TV series, TV stations purchase the series, and the director reaps healthy financial gain.”

via University of Illinois

Which leaves India, home to one of the largest film industries in the world.

China’s heavily regulated market makes India a better bet, with India’s entertainment and industry market revenues forecast to expand at an average rate of 18.5 per cent to more than $36 billion by 2012, PWC said

Wall Street and Hollywood, which already gets more than 60 percent of its revenue overseas, have taken notice: billionaire investor George Soros recently paid $100 million for 3 per cent of Reliance Entertainment, part of the Anil Dhirubhai Ambani Group.

via ExpressIndia

It also shows an interesting pattern emerging. China is taking over Japan’s role as a mass-manufacturing hub, and India is taking over the West’s more recent role in the world (e.g. services such as call centres, science/engineering research,and creative industries).

All of which begs the question, what exactly does the West do in this equation?

In the movie Black Rain(directed by another Hollywood God, Ridley Scott) one of the characters says the only thing America is good for is music and movies. Now it appears America doesn’t even do the latter…

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