Monday, November 9, 2009

Better buzz on film funding - Lending universe will expand for industry


While Hollywood's prospects for foreign financing is downbeat, the situation should slowly brighten, according to film biz honchos at the American Film Market on Friday.

"A year ago, lenders were sitting on their hands," said Jason Sklar, VP of the entertainment industries group at J.P. Morgan. "The lender universe will expand in the next year or two." But, he admitted, "It's going to take some time. There are other opportunities for investors that have a higher yield for less work."

Sklar made the remarks as part of a panel at the Fairmont Hotel on financial markets and liquidity issues, sources of equity investment, tax incentives and foreign investment. About 800 attended the session, sponsored by KPMG and moderated by KPMG managing director Benson R. Berro.

His fellow panelists said the $825 million investment by India's Reliance into DreamWorks is a strong signal of the direction of investments into the U.S. film business.

"For the time being, the equity will come from emerging markets," said Emmanuel (Manny) Nunez, motion picture agent at CAA.

Nunez also noted it's unlikely that any hedge fund money will return to Hollywood any time soon, pointing out that the "perfect storm" that attracted the funds -- huge amounts of money looking for investments in an industry hungry for funds -- won't take place again.

Instead, foreign investors will have far more strategic goals, according to Adam Leipzig, president of National Geographic Films. "Non-U.S. investment is smart money, not dumb money, that's looking for companies that have a track record," he added.

Hyde Park Entertainment topper Ashok Amritraj -- who signed a $250 million deal with Abu Dhabi's production banner Imagenation last year to develop and distrib up 20 feature films over seven years -- noted that Hollywood has a poor image in terms of how it treats investors. He urged attendees to be more attentive to those bringing the funding.

"If the first one works out, that's so important, because then there's more to come," Amritraj added.

Nunez also warned that more consolidation will likely come among the Hollywood majors, pointing to declines in DVD revenues. "That's a lot of dollars that have been taken away from the bottom line," he added.

The panelists agreed that use of government incentives remains essential in financing, with Leipzig saying that's the key reason he's shot only three of his 28 films in the Los Angeles area.

Amritraj noted that incentives in Louisiana, Michigan and North Carolina were a key reason why recent Hyde Park pics have been shot in those states. And he asserted that despite budgetary pressures on governments, it's unlikely incentive programs will disappear.