"You can't succeed in Hollywood if you're discouraged by being told 'no' because regardless of the actual quality of your ideas, or even the quality of your track record, you'll get told 'no' all the time.  You must have the confidence to push forward."

Hollywood Producer Brian Grazer (Apollo 13, A Beautiful Mind), quoted from his recent book, A Curious Mind


Privos Entertainment:  Hollywood and Film Finance 2019

Privos Entertainment works with global family offices, their funds, and portfolio companies on a wide range of Hollywood investments in film finance, digital and social media, music, gaming, and entertainment.   In Los Angles, our entertainment and media business is booming.  As studio movies and network TV become even more powerful global businesses, our people and family office partners are participating in the incredible opportunities that are unique to Hollywood.  For instance, one of our LA family office partners is a world-famous Hollywood film producer whose movies have grossed over $7B ($2B last year alone).

Amid the chaos of the world, Hollywood and its global entertainment business continues to defy expectations as it turns out billions of global revenue and leads the world in the entertainment industry. 

Hollywood Explodes World-Wide

In 2019, Privos salutes the record-breakers at the box office: Marvel Studios’ Black Panther, which earned over $1.3 billion worldwide, made the film the highest grossing MCU film to date domestically and the third-highest worldwide, behind only the first two Avengers films. Other block buster films include (1) Avengers: Infinity War; (2) Incredible 2; (3) Jurassic World: Fallen Kingdom; (4) Deadpool 2; (5) Mission: Impossible - Fallout; (6) Ant-Man and the Wasp; (7) Solo: A Star Wars Story; (8) Venom; and (9) Dr. Suess’ The Grinch. Collectively, these films grossed billions and further cemented that Hollywood is one of the leading US exports.

In June, THR reported that Avengers: Endgame, directed by the Russo brothers, earned another $5.5 million domestically and $2.3 million overseas for a revised worldwide total of $2.76 billion. That's roughly $27 million shy of the $2.78 billion grossed by Avatar in its original run and subsequent rereleases. (Avatar is now part of the Mouse House because of the Disney-Fox merger.) . Box office insiders say it would be impossible for Endgame to earn another $27 million in the immediate future. For Marvel and Disney's part, catching up with Avatar wasn't the only reason for the quasi-rerelease (generally, rereleases happen months later). It was also a prime opportunity to piggyback on and promote Spider-Man: Far From Home, from Sony and Marvel Studios. The Avengers: Endgame rerelease even includes a promo for the newest Spider-Man installment, while Far From Home itself deals largely with the ramifications of Endgame, as Holland's Peter Parker (aka Spider-Man) and Samuel Jackson's Nick Fury adjust to a world without Iron Man and other key Avengers to defend it. When Avengers: Endgame opened in theaters in late April, Marvel and Disney's Captain Marvel — a character who likewise appears in Endgame — received a huge boost, even though that pic was well into its run. The final Avengers film has been an enormous box office success and is the No. 2 title of all time. Its domestic tally stands at $841.3 million, while it has grossed $1.92 billion overseas. While it won't catch up with Avatar anytime soon, Disney and Marvel could stage another rerelease later this year, or even next year. Avatar's global haul includes, for instance, more than $33 million in grosses earned when it was rereleased.

Last year, domestic box office hit an all-time high of $11.9 billion. The boom in the U.S. propelled worldwide box office revenue to a record $41.7 billion. Foreign revenue reached $29.8 billion, a gain of only 1 percent. Hollywood executives, under pressure from consolidation and facing competition from streaming services, aren't being trite when they say they delivered better movies in 2018. Attendance also rebounded, and was up 4 percent to 5 percent over a dismal 2017 (a final figure for 2018 will be released later in January). Hollywood broadened its reach by releasing a number of films appealing to an ethnically diverse audience, such as Black Panther and Crazy Rich Asians.

And while maverick movie subscription service MoviePass may have crashed and burned, it changed consumer habits and prompted major circuits AMC Theatres and Cinemark to launch their own bundled pricing plans that drive traffic to the multiplex and art house. (AMC's service now touts 600,000 members), according to Hollywood Reporter. Big tentpoles certainly dominated — including superhero pics, which took up six of the top 10 slots on the worldwide chart, an unprecedented showing — but midrange and smaller films, including Peter Rabbit ($351.3 million), A Quiet Place ($340.7 million), Crazy Rich Asians ($238 million) and Bohemian Rhapsody ($703.8 million), prospered at the worldwide box office, enjoying huge multiples. "There was a $100 million-plus movie domestically in almost every single month," says 20th Century Fox film distribution chief Chris Aronson, whose studio, which is about to be absorbed by Disney, released Bohemian Rhapsody. "It points to the power of the communal moviegoing experience."

91sth Academy Awards - February 24, 2019

On February 24, in Hollywood's biggest day of the year, Universal's Green Book won the best picture Oscar at the 91st Academy Awards ceremony. 20th Century Fox's Bohemian Rhapsody won four honors while Green Book, Roma, and Black Panther earned three apiece.  In the top categories, Alfonso Cuaron nabbed a win for best director fo Roma. Olivia Colman earned the best actress award for The Favourite, Rami Malek won the best actor honor for Bohemian Rhapsody, Regina King claimed the best supporting actress honor for If Beale Street Could Talk, Mahershala Ali won best supporting actor for Green Book. Spike Lee won best adapted screenplay for BlacKkKlansman, while Nick Vallelonga, Brian Hayes Currie and Peter Farrelly claimed best original screenplay for Green Book.  

For a full list of the winners of this years Oscar’s, please see the bottom of this webpage for the entire list.

Hollywood Current Numbers

Earlier this year, the numbers came in as follows; Hollywood and theater owners got an early Christmas present on Sunday when 2018's domestic box office revenue surpassed the record set in 2016, with this year's lucrative Christmas-New Year corridor still to come, according to Hollywood Reporter. An early read shows that combined ticket sales for the year have hit $11.383 billion, compared to $11.392 billion for all of 2016. A crop of new year-end movies opening over the weekend, including AquamanMary Poppins Returns and Bumblebee, aided in closing the gap. At this pace, there's a good chance 2018 domestic revenue could hit $11.8 billion by the end of New Year's Eve. Attendance is also up year-over-year by between 5 percent and 7 percent.

Disney once again led all studios and on Sunday celebrated its own milestone: Its 2018 slate, led by Black PantherAvengers: Infinity War and Incredibles 2, has generated north of $3 billion domestically to top the industry mark Disney set in 2016 when it hit $3 billion, a first for any distributor. Overall, a well-received crop of tentpoles and other event pics appealing to a diverse audience helped to fuel the boom.

Following Black Panther ($700 million), Avengers: Infinity War ($678.8 million) and Incredibles 2 ($608.6 million), the No. 4 and No. 5 top-grossing domestic titles to date are Universal's Jurassic World: Fallen Kingdom ($416.8 million) and Fox's Deadpool 2 ($318.5 million). Disney, which is on the verge of acquiring 20th Century Fox, commands an unprecedented 27 percent of domestic market share. Put another way, Disney is more than $1 billion ahead of the next nearest studio, Universal, in North America. And its global ticket sales have already crossed $7 billion for the year, only the second time that any studio has done so (Disney was the first). There's no stats yet for the 2018 international box office, but overseas revenue is running about 5 percent ahead of last year. Part of the reason is foreign currency fluctuations. In recent years, offshore ticket sales have usually driven the growth at the worldwide box office. This year is the rare exception.

Two years ago, the 86th Annual Academy Awards generated nearly $100 million in ad revenue with buyers spending close to $2 million for a 30-second spot watched by 43.7 million viewers. 12 Years a Slave, distributed by Fox Searchlight, won the best picture, the first time that Hollywood conferred its top honor to the work of a black director.  Cate Blanchette won the best actress award for Blue Jasmine; and Dallas Buyers Club Matthew McConaughey took the best actor award along with Jaret Leto who won best supporting actor for his work in the film.  Gravity took home seven awards, the most of any film.  Last year, the following films received critical acclaim, including, Man of Steel sequel, The Book ThiefHerInside Llewyn DavisSaving Mr. Banks,  RushGravityAll is Lost, Don JonCaptain PhillipsPrisonersBlue Jasmine, and Lone Survivor.  In addition, Frozen, Hunger Games, Thor: The Dark World, and Gravity are racking up impressive numbers.  Today, YouTube has replaced MTV as the primary outlet for music videos and so-called "Lyric Videos" are the hottest marketing tools online, with the infamous trailer for the Amazing Spider-Man 2 is witnessing nearly 20 million weekly views.


CBS' primetime coverage of the 2019 American Football AFC Championship averaged 53.9 million viewers, making it the most-watched conference title game in five years. That's up 27 percent from the 42.3 million who watched the 2018 NFC Championship in primetime on Fox. (The two networks rotate the primetime slot each year. The earlier game on Fox, a 26-23 victory for the Los Angeles Rams over the New Orleans Saints in the NFC Championship, averaged 44.08 million viewers, even with the early-window tilt. Coverage on Fox Deportes and the Fox Sports app pushed the total audience for the NFC game to 45.04 million viewers.

Global Streaming Revenue: The Netflix Effect

Global revenues from subscription streaming video services will overtake the total worldwide box office next year, a study published Monday by Ampere Analysis forecasts. Global subscription revenue is expected to top $46 billion, compared with just under $40 billion in worldwide theatrical revenue, it predicts.

Revenue from subscription VOD services in the U.S. already outpaced the domestic box office take in 2017, and the U.K. market is expected to follow suit by the end of this year. China, the world's second-largest theatrical market, will see the SVOD business blow by the box office in 2019, the study finds. SVOD services, led by Netflix and Amazon Prime, are exploding across Western Europe, while local box office remains stagnant. 

Ampere's study suggests that one of the reasons behind the shift may be that movie tickets are too expensive, especially when compared to readily available, low-cost monthly SVOD services.

Across the 15 markets surveyed in the report, Ampere found that the more expensive cinema tickets are, the lower the cinema attendance, and vice versa. Mexico, where the average movie ticket costs just $2.50, averages 3.3 cinema admissions per capita per year. In pricey Scandinavia, where a single cinema ticket costs $13 or more per visit, the average is less than one movie visit per person per year. Cinema-loving France is somewhere in the middle, with French respondents reporting an average of 1.5 movie visits per year, at a cost of just under $8 per ticket.

Comparing the cost of going out to the movies with staying home to “Netflix and chill,” the study found that in nine out of 15 markets, including in the U.S., U.K., Germany and Japan, the average price of a cinema ticket is higher than a one-month subscription to an SVOD service. The gap was even bigger in the two markets with the lowest cinema attendance: In Japan the average cinema ticket cost almost double that of the average monthly SVOD subscription. In Germany, it is around 50 percent more expensive. In Mexico, in contrast, the average monthly price of an SVOD service is almost twice as high as the price of a cinema admission.

Toby Holleran, a senior analyst at Ampere, noted that in all the markets surveyed, streaming video subscribers were more avid cinema-goers than non-SVOD users. In Japan, SVOD subscribers report going to the cinema more than three times as often as their non-SVOD counterparts.

"There's clearly an appetite for content among some consumers whether that be on the big screen, or a smaller one," Holleran said. "The key for cinema is to understand that while SVOD subscribers are more avid cinema-goers, this may not always be the case. Therefore, the shared experience of watching a film on the big screen must remain an enticing — and realistically priced — one,” as reported by our favorite Hollywood new source, the Hollywood Reporter.

Separately, Netflix is quietly moving into Broadway. The firm landed Broadway’s American Son, starring Kerry Washington. Rather than taping one of the final performances — the play wraps its Broadway run Sunday — Netflix will film the cast, director and producers and tape the production without an audience present.

Star Wars:  The Last Jedi Global Take More Than $1 billion

Stars Wars:  Last year, the Last Jedi was the number one movie of 2018.   We mention this fact to highlight the returns film investors can make betting on the right entertainment horse.  The latest installment in Disney’s intergalactic saga took in a better-than-expected $68.4 million to close 2017, according to estimates from measurement firm ComScore. The haul helped the film to ring in the new year in full force, swooping past“Beauty and the Beast” as the highest-grossing movie of 2017, raising “The Last Jedi” total for the U.S. and Canada to $533 million and pushing its global take to more than $1 billion as of December 30, 2017.

According to the LA Times, the franchise’s big showing has become a holiday tradition. Last year “Rogue One: A Star Wars Story” was the top film of the final weekend of 2016, with $64.3 million. In 2015, Disney debuted “Star Wars: The Force Awakens” in mid-December and recorded the biggest opening of all time, grossing $248 million. That film did boffo box office through the holidays, taking in $34.5 million on New Year’s Day 2016.  Not quite able to jungle cruise past the cute porg critters of “The Last Jedi” — though it was close— was Sony’s “Jumanji: Welcome to the Jungle,” which finished second for the weekend with a four-day haul of $66.5 million. Starring Dwayne Johnson and Kevin Hart, the reboot of the 1995 adventure film raised its domestic total to $185.8 million.

Business Insider reports that with a couple more big releases on the horizon (“Jumanji” and “The Greatest Showman”) and “Star Wars: The Last Jedi” now in theaters, the movie industry might cross the $11 billion mark for the end of 2017, making it three straight years the industry has hit that milestone.  Regardless, though, there were some major performers, including three very different kinds of movies crossing the $1 billion worldwide mark — and a Stephen King adaptation performing beyond anyone’s expectations.  Thanks to Marvel hits (“Guardians of the Galaxy Vol. 2,” “Thor: Ragnarok”) and a live-action “Beauty and the Beast,” Disney passed the $5 billion total ticket sale mark for the third year in a row. Warner Bros. with “Justice League,” “It,” and “Wonder Woman” also hit the mark for the second time in its history.

Today, Disney-Pixar's superhero sequel "Incredibles 2" has hit the $1 billion mark globally, making it the seventh animated title and only the 36th film ever to reach that milestone.

Women in Hollywood:  Opportunities Increasing

Our firm has experienced increasing investment opportunities when it comes to women in Hollywood.  Most recently this shift has been seen in the #TimesUp and #MeToo movements.  Actresses have been stepping forward and shedding light on the sexual harassment within the entertainment industry.  The promotion of the movement has flooded social media and is represented on the red carpet by actresses wearing black in solidarity with victims of sexual harassment.  Speaking out against producers and directors has the potential to destroy careers, but for the first time the women of Hollywood are fearlessly putting their jobs on the line in favor of change.  This behavior has been going on for too long, but the tide is turning in Hollywood and the women of the industry are not afraid to make waves.

In 2017 Patty Jenkin’s Wonder Woman became the biggest blockbuster ever to be directed by a woman, breaking the domestic box office record for women directors.  Additionally, Wonder Woman is the most successful superhero movie starring a female hero.  For years producers have said that a superhero movie starring a woman could not be successful whenever the public has asked why none of the female heroes had a movie. This prediction did not stop Patty Jenkins and Wonder Woman from excelling at the box office and proving them all wrong.   

The 2018 Oscars featured some leading female driven movies such as I, Tonya, Lady Bird, and The Shape of Water.  One of the nominees for best actress, Saoirse Ronan, is a prime example of a young actress making her way in Hollywood, breaking the mold, and forging a new way.  In the entertainment world it had been established that in order for a woman to be a successful actress she had to be willing to exploit her body. Ronan has been nominated for an Oscar three times now and she did it without a sex scandal or leaked nudes.  We believe Ronan's experience is how, in part, the #MeToo movement will shape the investment opportunities in film and new media.

88th Academy Awards

On February 28, 2018, the 88th annual Academy Awards named Spotlight the best picture of the year and best original screenplay, a film which recounts journalistic efforts to expose child abuse in the Catholic Church.  Separately, George Miller’s apocalyptic Mad Max: Fury Road swept through the crafts categories, winning six awards; The Revenant, Alejandro G. Inarritu’s cinematically stunning survival tale, then moved to the fore, claiming the awards for best cinematography, directing and actor, which went to Leonardo DiCaprio who spoke passionately during his acceptance speech about the environment noting that 2015 was the hottest year in recorded history.  

We are impressed that DiCaprio took the opportunity during his acceptance speech to discuss the themes that we have witnessed at COP21.  DiCaprio stated, “Climate change is real,” said DiCaprio. “It is happening right now. It is the most urgent threat facing our entire species, and we need to work collectively together and stop procrastinating. We need to support leaders around the world who do not speak for the big polluters or the big corporations, but who speak for all of humanity, for the indigenous people of the world, for the billions and billions of underprivileged people who will be most affected by this, for our children’s children, and for those people out there whose voices have been drowned out by the politics of greed. I thank you all for this amazing award tonight. Let us not take this planet for granted. I do not take tonight for granted. Thank you so very much.”

The $2 Billion Star Wars Effect:  Why Global Family Offices Are Investing In Entertainment

Separately, reflecting on the 88th Academy Awards, Privos, as a global business, has witnessed the explosion of Hollywood and increased escapism, as more people temporarily depart their day-to-day reality by simply going to the movies.  In December 2015, Hollywood made history with the release of Star Wars: The Force Awakens, J.J. Abrams' block buster.  Star Wars beat all records hauling in $238 million in North American, with a global launch of $517 million in the first weekend release of the movie.  Today, in March of this year, the film, with a $200MM production budget, will return gross sales in excess of two billion dollars, if you can fathom that success.  Thus, despite the chaos and uncertainty in the world, people spent a half a billion dollars seeing the Star Wars movie in the first weekend of its release, which is a testament to the staying power and creativity of Hollywood and the world's thirst for entertainment and new media.  Privos Entertainment, based in Los Angeles, is enjoying the global success of Hollywood and new media with our international family office partners who allocate to entertainment, film, gaming, music, and new media.

Yet, under the red carpet lights and behind scenes, Hollywood is still reeling from the carnage and stress of the bankruptcy of Relativity Media, watching Ryan Kavanaugh attempt to steer his company out of Chapter 11 with the hiring of Kevin Spacey as the chairman of Relativity Studios and producer Dana Brunetti as president.  

The success of our entertainment and media business is being fueled by the international reach of Hollywood, which you can see manifested in the incredible growth of Los Angeles.  In LA, new high profile skyscrapers are transforming the skyline of the city, including Grand Tower being built by the South Korean shipping corporation Hanging Group.  Orange blossoms are in bloom, writers are commanding huge fees, block parties and restaurants from Century City to Malibu, off the PCH, are booked to capacity, and our partners are enjoying ski weekends in Tahoe and winter weekend retreats in Palm Springs.  Even the new iPhone means increased profits for the entertainment business - from film to music - as Apple’s greater penetration in overseas markets results in more deals being inked in Los Angeles  

In addition to Hollywood’s addiction to the red-carpet drama and all its associated buzz, Los Angeles is the global center of all things cultural – from music to movies to a golden age of television.  In addition, there is a revival of the arts, with MOCA’s new director and a string of new exhibitions.

International Markets

With much of Hollywood’s fortune and success coming from international markets, particularly China, South Korea, the Middle East, Latin America, and Southeast Asia, international family offices are turning to Privos for help in navigating all aspects of international entertainment and media investments.  Global business is driving Hollywood’s success, and the results are impressive; for example, the international revenue from Disney/Marvel’s Iron Man 3 was $805.7 million, double the U.S. domestic revenue.  International gaming sales topped $3.5 billion last year alone. 

In international markets, Hollywood is talking about China’s new plans to support its movie and entertainment business.  In 2013, China added over 5,000 movie screens, brining its total to nearly 18,200 (compared to about 40,000 in the U.S.). Chinese President Xi Jinping has called the film business a “pillar industry” in China.  His government is encouraging the construction of even more theaters, offering tax incentives for real estate developers who put movie theaters in shopping centers particularly in small cities in the country.  China is also looking to turn its movie theaters into multi-media cultural centers, offering sporting events and music concerts.  China is also expanding its entertainment footprint into the States with China’s Wanda acquiring U.S. AMC theater chain.  China’s Bison Capital has taken a stake in Hollywood’s talent agency Resolution.

J.J. Abrams' Star Wars: The Force Awakens, made history with a late 2015 release date, shattering numerous box-office records by grossing $238 million in north American - the biggest opening of all time, for a global launch of $517 million.  The previous biggest U.S. domestic opening was during the summer of 2015 with Jurassic World with $208.8 million and a global launch of $524.0, which has the advantage of opening day-and-date in China.  In March of this year, The Force Awakens will pass gross sales in excess of $2B mark, a truly astonishing accomplishment.

Further, Gucci just opened their new 22,000 square feet Rodeo Drive flagship boutique for the 10,000 employee company that has been in Hollywood dressing celebrities for the past 40 years, including Elizabeth Taylor who carried a Gucci Bamboo bag.  The new store, one of three Gucci locations in Los Angeles, features a glam new silver facade gives the Italian fashion house a new crown jewel to boast among Rodeo Drive’s venerable lineup of luxury labels.  China and Asia accounts for a third of the company’s worldwide sales, and it will use the upcoming launch of Gucci Beauty to tie Hollywood with China and other emerging markets.

China and Entertainment

In international markets, Hollywood is talking about China’s new plans to support its movie and entertainment business.  In 2013, China added over 5,000 movie screens, brining its total to nearly 18,200 (compared to about 40,000 in the U.S.). Chinese President Xi Jinping has called the film business a “pillar industry” in China.  His government is encouraging the construction of even more theaters, offering tax incentives for real estate developers who put movie theaters in shopping centers particularly in small cities in the country.  China is also looking to turn its movie theaters into multi-media cultural centers, offering sporting events and music concerts.  China is also expanding its entertainment footprint into the States with China’s Wanda acquiring U.S. AMC theater chain.  China’s Bison Capital has taken a stake in Hollywood’s talent agency Resolution.

Yet underneath the glitz of Hollywood, there is real difficulties financing movies outside of the major studios; Harvey Weinstein discussed this hard reality in his recent keynote speech at the UCLA Entertainment Symposium.  Common complaints include a glut of sequels, prequels, and reboots; some reboots like Dark Knight  have been successful others less so. 

Hollywood:  A Global Search for Capital

Despite all the success and glitz, under the surface in Hollywood there are fundamental problems today securing capital for just about everyone participating in the entertainment and media food chain.  Money is truly hard to find and the studios are balking at the chance to bankroll anything but the sure thing.  Billion-dollar directors (family offices in their own right) whose whole lives have been making studio films are out raising capital themselves for independent films.  Despite fierce determination, they are coming up short as midrange films with "a story" have been abandoned in favor of big-budget films on a tighter budget.

You have to look no further than the recent bankruptcy of Relativity Media, the 11-year old digital-age entertainment company run by Ryan Kavanaugh, that claimed clever financing and data analysis could help it unlock the secret to box office riches.   The strategy failed and today a swarm of disgruntled investors and other creditors are fighting for scraps in U.S. federal court supervised auction process.  For any investor looking for lessons learned in Hollywood, you must study the Relativity Media bankruptcy and the public filings which can shed light over the current reality of new media.  

Relativity Media:  Lessons Learned

The Relativity Media bankruptcy aside, the reality today in LA is that the liquidity crisis in Hollywood can also be seen vividly in the scores of well known producers who cannot line up financing and are forced to the sidelines.  Those producers without financial sponsors are regulated to the bench, oftentimes returning to studio jobs for those lucky to find a creative new home.  Producers are also forced to take reduced fees to get a movie made and is then pushed against his or her will into a profit-sharing pool that might include A talent and other producers who want a cut of the action.  The good days appear to be over as producers are getting crushed on the front and back end, with no hope of building a sustainable business.  The reality is that producers are loosing their creative edge and forced to placate studio marketing departments looking for the next horror, vampires, car crashes, or superheros box office hit. Yet, despite the day to day stress, producers all dream of financing their own projects, with their own material, and one day owning their own studios.   The only thing that stands in their way is lack of capital.

In film finance, leading studio executives, directors, producers, and fund managers are all on a global hunt for capital and co-investment partners, as the U.S. and international capital markets are increasingly closed to the entertainment business.  Today, Hollywood executives are flying from LAX to foreign destinations, attempting to close deals with capital partners but are coming home largely empty handed.  We know of one Hollywood family office producer who made over 50 trips to China for capital but came back empty handed not appreciating that he was talking to all the wrong people on the Mainland.  

Thus, promising investor meetings trying to pin down foreign capital commitment do not materialize as Hollywood does not have true access to the international financial and family office community, nor do "creatives" speak the same finance language as a CFA or seasoned finance executive in New York, London, or Hong Kong.  Adding fuel to the fire,  international entertainment investors have all been burned, or have a partner who lost money with a Hollywood producer and the byzantine fee structure that takes care of everyone down the film food chain except the actual investor.  Yet despite the risk, international family office investors are still interested in investing in film, media, and entertainment as Hollywood is the envy of the world.

Despite its sex appeal, investors have not forgotten Hollywood's much publicized 2013 summer of busts, including pricy flops as The Lone Ranger and R.I.P.D. that have made it increasing difficult to close traditional sources of film financing.  Studios are debating whether to alter their strategies to commit to the large budget tent pole and are tightening coffers more than 20% or more.  For example, an Iron Man like template with an original budget of $140 million is now being made for a fraction and only those producers who can come in under budget and on schedule will get the nod.  Skyrocketing costs are crushing profitability at a time when more big-budget movies are in the market chasing illusive investor capital.   

In our experience, film financing is a complex process that requires experienced, hardened financial professionals based both on the ground in Los Angeles and in major money centers globally.  Put another way, without both a local partner living and working in Hollywood, “doing lunches,” and taking the right meetings, family offices interested in investing in the entertainment business will never truly gain access to the right deals or opportunities.  That is why our People are so critical to the success of Privos' entertainment business.

Despite tales of excess development money chasing too few deals in Hollywood, the truth is that the lack of capital is being manifested across Hollywood in additional ways:  the Big Five broadcast networks are slow in buying new dramas; entertainment related apps are not being launched; script deals and commitments are harder to come by; writers are more interested in chasing their own passion projects; the “Netflix effect” is forcing some players to the sidelines and ABC, CBS, Fox and NBC often cannot compete and the movement of viewers away from movies to television due to multiplexes around the world filled with movies that no one wants to see.  We are also seeing actors, and their family offices, insisting on being paid “scale,” taking what amounts to a “success fee” for their efforts in lieu rights to their own intellectual property, and even branching out into gaming, TV, and other intellectual property licensing deals to supplement their income.  Studios like Sony that spent $150 million on Angels & Demons or now cutting budgets to $50M for the same quality film.  Content is king, for those in the know.

A lack of capital in Hollywood can also trigger the metaphorical parade of horribles:  money runs out for a film; a release date is pushed back; preproduction tasks are off schedule; a completion bond falls through; film-makers are sent home until an equity partner or bank loans are secured for the project; or a drama is not green lighted by a network due to financial constraints.  Creators of all levels and independent filmmakers are also feeling the pain of searching in vain for capital that is frequently promised but hard to close, despite best efforts of numerous people involved in the process.  

The good news is that worldwide sales from international markets is the saving grace for Hollywood and one reason why global family office investors and investors, with deep ties to their local foreign host market, are in demand as a capital partner.  In 2014, ticket sales reached $4.7 billion, a notable 7 percent increase compared with the previous year record of $4.4 billion, set in 2011.  Truly, it is international distribution which has saved the day.  For example, Guillermo del Toro’s Pacific Rim, which the studio put up 75 percent of the film’s $200 million budget, struggled to crack $100 million in the U.S. market; however, the film recovered enough from international sales to cross $400 million worldwide, including $100 million in China.   Brad Pitt’s World War Z took $250 million or more to make and its international haul of $526 million worldwide was the film’s saving grace.  Paramount’s Star Trek Into Darkness, with a cost of $190 million, has earned nearly $459 million worldwide, its international sales exceeding expectations at $231 million.  In television, international distribution also help the five broadcast networks exceed their revenue targets and market a new network smash.  Last season, there were 23 new comedy offerings.  Showtime, with its TV hit Homeland, earned a total of $692 million last year, with international distributing adding to its profits.

Privos Entertainment

At Privos, our people have expertise working with investors on a wide range of entertainment projects. We help our international family office partners with a wide range of entertainment related opportunities.  We also partner with Hollywood producers, actors, talent and LA based family offices craft a solid business plan, work outside of the studio systems, and execute on global capital opportunities.  Our people have experience work working to secure equity and debt financing, negotiating tax credits, and selling off rights to foreign distributors that help films soar commercially worldwide.

Our family office network in Hollywood is robust.  Our people and partners work closely with directors and producers, film and music publicists, foreign distributors, talent bookers, foreign news correspondents, singers, actors, literary managers, programming and development executives, international film agents, cinematographers, independent film producers, TV anchors, studio executives, journalists, entertainment attorneys, and theater owners.   We have deep ties and experience in London and with the European and UK film finance industry, which has been assisted by British and European talent which is taking an increasing visible role in Hollywood.  In Doha, we have been involved in the Doha Film Festival; in Asia, we work with leading family offices who are involved in the world-wide entertainment business.  

Our people and family office partners also participate regularly in the international film festivals including Venice, Telluride, Cannes, Tribeca, Seattle, Doha and are active at Berlin’s European Film Market. Last year, the Toronto Film Festival, a magnet for the studios and always a venue for heightened deal making, showed 288 features to a high profile audience of critics, including WikiLeaks drams, The Fifth EstateEnough SaidAugust: Osage CountyRushParkland and American Dreams in China.  Toronto is also a growing film market where sales agents sell of foreign rights to unfinished films and deals are made, especially in light of the recent Cannes Film Festival where the lack of product was an issue.  Our People and partners are all working these exciting events and help our family office partners understand where and how to play in this complicated entertainment space.

We always welcome the opportunity to meet and work with new friends and colleagues in the entertainment and new media business, including those of you in the gaming, digital medial, social media, as well as Hollywood bankers, lawyers, accountants and others in traditional film finance and new media.  We look forward to hearing from you.