Hollywood's Movers and Sheiks
Using other people's money is classic Hollywood. Over the years, everyone from oil wildcatters to insurance companies have anted up. Now with money apparently running low from the private equity shops, Hollywood seems to have found new sugar daddies: Middle East sheiks with oil money to burn.
On Oct. 14 much of Hollywood decamped to Abu Dhabi, capital of the United Arab Emirates. The moguls and financiers ostensibly were in town for the inaugural Middle East International Film Festival, where über-producer Harvey Weinstein and his ilk attended films and sat on panels set up to teach the locals how to build a movie industry. (So eager were Weinstein's hosts to get him to attend, they flew out his mother and a few of her closest friends.)
The real action was expected to happen off-camera, with one studio executive chortling that he and his Tinseltown pals would be "scooping up money from the sand." The money has already begun to flow. On Sept. 26, Warner Bros. (TWX ) announced a deal to build a theme park, hotel, and theaters in Abu Dhabi that included a fund through which the Arab state will invest $250 million to make American films.
Halloween producer Malek Akkad says he expects to close a $284 million movie fund with wealthy Emirate and other Middle East investors. Of his backers, Akkad says: "They have so many resources that they need to find places to invest them."
It's a good thing Abu Dhabi has lots of money because Hollywood investing is not for the faint-hearted. Just ask the private equity guys. Having put in some $10 billion over the past three years, they are scaling back after a string of big-budget flops (and amid tighter credit markets).
Plus, Hollywood deals typically favor the studios. The Abu Dhabi fund will give Warner a distribution fee before the Arabs see a penny, says movie producer Hunt Lowry, who put together the deal. What's more, Warner can--and likely will--keep its crown jewels out of the deal, including the next Harry Potter film.
Hollywood's famously opaque accounting will almost certainly cause yet more problems for Arab investors, warns Ashok Amritraj, who produced Bringing Down the House. "Some of these deals," says the veteran moviemaker, "have loopholes so large you could drive a truck through them."
By Ronald Grover