hollywood billionaire

Chapter 67 Dangerous Game
Investing directly in a movie sounds like a lucrative, but also a good story that, as a rich man, you can get a show off in front of your friends.But in reality, it could be a desperately complex and dangerous adventure.

Finding a suitable cast, managing production costs, and engaging efficient distributors are just a few of the less troublesome practical obstacles that film and television investors need to face together with the producers during the production process.These difficulties can be effectively resolved if you have sufficient industry experience or can hire professionals with rich experience to control risks.

The real success or failure of a movie sometimes does not depend on material conditions.No matter how powerful the lineup is, no matter how sophisticated the production is, it may become a commercial bomb like "Nine".Because the most difficult thing to measure and define in this world is the unpredictable viewing preferences of theater audiences and the noisy noise of film critics.

After all, tastes are fickle, and a story with broad appeal in one decade could be flat in the next.

If commercially successful, studios can not only turn a film into a trilogy, series, or even a cinematic universe, but also benefit from international sales, home entertainment, pay-TV, free-to-air TV, video streaming, merchandise, and even It's a huge fortune in theme park licensing fees.But if the movie flops at the box office, it also has the potential to inflict a lot of casualties.

What casualties?
Of course, the careers of everyone from the studio behind the scenes, to producers and directors, to screenwriters and leading actors.

Most people only see the feats of Avatar, Titanic, Avengers and Jurassic World.The global box office of tens of billions of dollars, as well as the equally considerable amount of post-release income, can generate a single-film gross profit that is beyond the reach of many Nasdaq-listed companies.

To make the simplest cross-border comparison, Meritor Investment Bank, the direct negotiating opponent of Han Yi's acquisition of UTA, had a gross profit of US$2015 million for the entire company in 5.52.

And what about Jurassic World's worldwide gross? $16.72 billion!
After deducting all the production costs, publicity costs, actors' share, and theater and streaming media accounts, what can finally fall into the hands of the film crew still has a net profit of 4.74 million US dollars - net profit!

This is the glamor that Hollywood presents to the outside world.Institutional investors and individual investors, watching the Marvel universe harvest the global ticket warehouse year after year, are envious and jealous.

This eagerness to get a piece of the lucrative business is the same as fund managers who see Taylor Swift's new album and world tour bringing huge profits to Universal Music Group.

But they have forgotten the most fatal point, whether it is the film and television industry or the music industry, it is a wild jungle where the winner is king.The spotlight of the media will always only be on the big winners.Wherever the camera goes, the focus shifts. In this way, people naturally ignore the mountains of defeated wreckage in the corner.

We mentioned the one-to-nine rule in the music industry, but in the film and television industry, this ratio is not much better, and it can even be said to be worse.

Hollywood has negotiated peace with capital for decades. Up to now, there are at least tens of thousands of film drafts accumulated on the tables of major film and television companies, 90% of which have been killed, and nearly a thousand projects are being prepared at the same time.About 60-70% of these projects can be finally completed, which means that every year, Hollywood alone will send 600-700 films to the global film market.

Two new films a day, no matter how big a theater chain is, can't handle such a number of screenings.Therefore, among the hundreds of films, less than one-third of the films can actually get a good schedule, distribution matrix and publicity exposure.

In other words, Hollywood has already eliminated 98% of the projects and 98% of the project investors before reaching the stage of realization.

Take the real estate industry as an example. If a real estate company spends $1000 million to develop a high-end residential project in Beverly Hills, then its expectation may be to obtain a 50% gross profit rate, that is, to sell the completed house at a price of $1500 million. Prices are sold to consumers.If this goal can be achieved, the real estate company will think that it has achieved the expected revenue goal.

Old school, classic, and safe.

But on the side of the film company, it is also a movie that cost 1000 million US dollars to produce. If there is a distributor who is willing to pay an advance payment at the same price for channel distribution, it is already a great event worthy of the producer's congratulations. up.Because this means that they have at least got rid of the loss situation, and whether they will make money or not in the future, they are already the 2% stage winners.

That's the cold reality of Hollywood, whether it's movies, music, or even TV shows.Only by taking piles of bones can a general full of glory be piled up.That's why Hollywood has only six major film studios, three major music distribution groups, and three major public television networks.

In an industry where profits are as unpredictable as gambling, capital hot money will of course quickly gather in the safest place.

Huddle together to keep warm, so that you won't freeze to death alone in the snowstorm where you can't see the direction clearly.

However, even so, the operations of the six major film industries are always in a difficult situation of walking on eggshells.Sony Pictures Entertainment Group, the parent company of Columbia Pictures, is an ongoing tragedy. Hacking, box office failure, and WikiLeaks leaked confidential documents. In less than a year, the Lone Star Fund and Citigroup quickly abandoned it. Sony Pictures, which has been plagued by negative news, has prompted the latter to fall into a deeper financial crisis.

The two major investors withdrew collectively, the liquidity of Sony Pictures was almost exhausted, and the cash reserves of the parent company Sony Entertainment, including the parent company Sony America, and ultimately the big boss Japan Sony Group also happened to be at historically low levels.As of March 2016, 3, Sony Group's total cash reserves were only US$31 billion, a year-on-year decrease of 160%.It is worth noting that as of March 6.67, 2015, cash reserves had already decreased by 3% year-on-year.

For a titan of this level, $160 billion is actually almost the same as the $160 banknotes of ordinary people.

Under such circumstances, it is naturally impossible for the higher-level group to allocate sufficient funds in the short term to help Sony Pictures tide over the difficulties.To make matters worse, in the 2010s, foreign pre-sales became more and more unstable, and many production companies that relied on advances from overseas distributors to advance the production process, such as Weinstein Films, fell into deep financial crisis among.

Although in addition to overseas pre-sales, film and television companies can also obtain funds through gap financing or super gap financing, but this is a more risky path than taking their own cash, especially when the company has lost liquidity. case.

Gap financing is essentially a form of mezzanine debt financing, which uses unsold overseas exhibition rights and other rights as collateral to complete the film's financing plan.The advantage of this is that you can get a life-saving money without going through a lot of trouble to actually sell the distribution rights.

But the disadvantages are also obvious. If the film’s box office suffers from Waterloo, and the income from overseas regions cannot repay the gap financing loan, then the producer will trap itself into a deeper debt trap.

The one with interest.

Life-saving money can become a life-saving debt at any time.

Therefore, in the current Hollywood financing market, private equity has become almost the only option for large film companies when they are short on cash, and this is what Sony Pictures, whose bank account is about to bottom out, urgently needs to do.

They have to find new investors as quickly as possible, plug the holes in under-appreciated film and television projects, and then pray that popular projects, such as "Spider-Man: Homecoming" and "Passenger in Space", can be a big success in the commercial market. Help Sony out of the rock bottom.

But investors are not fools, especially film and television investors who have been fooled by Hollywood for decades.How could Sony Pictures and Columbia Pictures not be optimistic about projects that they could find successors easily?
Therefore, when Han Yi appeared and Yu Wei, who bought the United Artists Agency with 1.9 million U.S. dollars, proposed to Sony Pictures through Kevin Hart the intention to invest in "Game of the Brave", Sony Pictures' production department, financial department and business Colleagues in the development department were almost overjoyed.

What's Sony's internal take on this remake of a 1981 children's fantasy book whose entire story line is tied to a board game and whose original star died less than two years ago?
In the words of Sony Pictures Chairman and CEO Tom Rothman:
Jumanji is not Jurassic.

"Jumanji, not Jurassic Park."

Han Yi repeated Christopher Chasen's words, chewing carefully.

"So what do they mean?"

"Sony's idea is to see if you are willing to do a slate deal." Christopher opened his mouth, as if he was thinking about how to say the next sentence as softly as possible without offending Han Yi.But no matter how hard he tried, he couldn't find a better way to say it bluntly, "$3 million, 30 movies, 5-year term, 25% share."

"3 million dollars?" Han Yi thought he had heard wrong.

"Yes, 3 billion."

"The other conditions are the same as those of Lone Star and Citigroup?"

"Yes."

"They know me... know the details of the previous transaction, right?" Han Yi crossed his arms with some amusement, "They didn't keep the last transaction as a secret, and the specific figures are everywhere on the Internet."

"Of course I know." Christopher spread his hands and pursed his lips helplessly, "But this is still the initial condition proposed by Sony. I asked about investing in a single movie...but they are smart and do not accept the investment in a single movie in principle. Investment in the film. Even if we want to invest, it is in the form of bridge funds, short-term borrowing. After three to six months, the full amount will be returned, calculated at a higher interest rate than the bank. This may not mean much to us. "

"I see." Han Yi glanced at Jordan Bromley, "It looks like we have to talk to them face to face."

"There is no doubt that it is."

Jordan nodded slightly and said.

"But when we meet, we should hide our true purpose as much as possible."

"Correct, that's exactly what I thought."

There was a hint of surprise in Han Yi's eyes. Even though he had known Jordan Bromley's sharp mind for a long time, the latter still surprised him from time to time.

"It was through Kevin that I learned about the "Jumanji" project." Han Yi described to Kevin Hart the excuse he would start when he met with Sony Pictures, "My purpose is to talk to Kevin Hart. -The two big stars Hart and Dwayne Johnson hooked up to help them successfully complete this project so that they can better carry out other investment cooperation... As for the film itself, I don’t know if it will make money, and I don’t care.”

"In this day and age, who wants to play board games?" Kevin, who is extremely intelligent, also understood Han Yi's meaning immediately. He shrugged and joked humorously.

"Yeah, who the hell plays tabletop games. None of us have ever been to Comic-Con."

Han Yi smiled and agreed.In business negotiations, to gain the upper hand is not to compete with the loudest roar at the poker table, but to compete with the more lifelike mask worn.Only by understanding the other party's intentions as detailed and accurately as possible, and being extremely careful not to reveal your true thoughts to the other party, can the transaction proceed on the established track you imagined.

Since Sony themselves are skeptical of "Jumanji", they don't need to know that they are optimistic about this film.

The lower the estimated value of the project, the more shares the owner is willing to sell.

"But if you do it like that, you might have to eat some shit, Yi," Jordan Bromley added. "You know it...as a disguise."

“Maybe, but I think we should be able to keep the package deal around five films instead of [-]. They want to share the risk, and we don’t want to do it for them.”

Han Yi thought for a while before continuing.

"I want to make sure, Jordan... slate deals can't just be between movies, right? As long as they are under the same group, movies, TV dramas, and even reality shows can all be bundled into one agreement?"

"Of course, there are no two identical financing agreements in this world." Jordan Bromley nodded and asked, "Which TV series under Sony are you interested in? Or a reality show?"

"I don't have any specific ideas yet, so I need your help to communicate." Han Yi drew a circle on the table with his fingertips, "If we want to meet with people from Sony Pictures, I hope they can choose some ideas before the meeting." The materials of the film and television projects that are being produced. We will select the scope of the final slate deal based on the materials they submit.”

"I will handle it."

"We have almost talked on Sony's side. I think we have to wait until we meet before we can continue to decide on the next step."

Having said that, Han Yi turned his attention back to Kevin Hart.

"And before the army goes out, we must first sort out the internal affairs, don't we?"

"Hmm." Kevin Hart put his right hand on the cheek that has become more and more plump since his debut, and kept moving his head up and down, "Training the Macedonian phalanx well is the secret of Alexander's victories in every battle."

"Then, let's talk about our Macedonian phalanx... Thank you, Thalia." Han Yi looked up at Thalia, who was presenting him the first appetizer, egg caviar, and showed a Polite smile.After Thalia prepared meals for the four of them and introduced them softly, Han Yi spoke again the moment she turned to leave.

"Just now I briefly communicated with Jordan about the specific plan for investing in Hartbeat and "James of the Brave."

"The idea I put forward is that I will use the entertainment investment fund jointly established with the Carlyle Group to undertake 80% of the open investment share of "Game of the Brave". In addition, I hope to invest 2500 yuan in Hartbeat in the form of capital increase and share expansion. million in exchange for 25% of the shares.”

Han Yi does not intend to withdraw the money from the Carlyle Group, and then inject funds into "Game of the Brave" in the name of individual investors. The reason is actually very simple.In terms of corporate size and commercial influence, no matter how much Sony Pictures has, they have to put it in their stomachs obediently when facing the Carlyle Group.

In addition, Carlyle has the most experienced and capable due diligence team and project governance team on the planet, from collateral analysis, to review of financing and channel distribution agreements, to ongoing film production monitoring and tax compliance It is much more cost-effective and more reassuring to let Carlyle's professional team take care of all the details after film and television investment than to hire temporary employees.

It is still the same idea as that of Parkway Capital, first let the experts stand on top, and the team formed by yourself will follow behind them and study with great concentration.

Goldman Sachs, Royal Bank of Scotland, Merrill Lynch, and Carlyle, these Wall Street giants, provided Hollywood with a financing line of up to US$2005 billion in just three years from 2008 to 140.Among them, hedge funds contributed 40 billion, while private equity contributed the remaining 80 billion besides special funds and mezzanine financing. The ultimate professionalism piled up with 140 billion US dollars is naturally trustworthy.

"I hope that most of the investment into Hartbeat can be used as the other 20% of the investment in "Game of the Brave". You can freely distribute the remaining funds. Whether it is for the management team or for yourself, Anyway, it is distributed to the founding team as an incentive bonus.”

"That is to say, if the production cost of "James of the Brave" is not overrun, it is exactly 9000 million U.S. dollars, and 100% is open to us for investment, then I will invest 7200 million U.S. dollars separately in the name of the Carlyle Group Investment Fund, Then reinvest the remaining $1800 million through Hartbeat. This means that you and your team can get a one-time incentive bonus of $700 million.”

"In addition, in this way, you, and I, can act as co-producers and put our names on the production list. At the same time, you can also get the due rewards according to your share in Hartbeat...except you Apart from your own remuneration and the share of the starring role, that part of the income belongs entirely to you."

As Han Yi spoke, he scooped out a spoonful of black pearl-like sturgeon caviar from the eggshell, and gave Kevin Hart a nod.

"Kevin, this is my 'caviar' for you."

"What do you think about this proposal?"

　It is really impossible to omit or skip these contents... It is very important to understand the protagonist's operation, Sony's counterattack, and the series of business games that follow.I'll say it again!Absolutely no copy and paste Baidu google!I typed it out word by word based on Han Yi's investment in film and television! !

　　
　
(End of this chapter)