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Panel Detail:
Tuesday, April 25, 2006
2:10 PM - 3:25 PM
The New Value Chain: The Link Between Wall Street, Hollywood and Silicon Valley
Speakers:
Sanford Climan,
President, Entertainment Media Ventures Inc.
Roy Salter,
Principal, The Salter Group
Aizaz Shaikh,
Head of High-Yield Research, Senior Credit Analyst, Media and Telecommunications, BNP Paribas
Moderator:
Tony Uphoff, Publisher, The Hollywood Reporter; President, VNU Film & Performing Arts Group
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Panelists discussed the growing ties between Wall Street and Hollywood as entertainment entitites have become large corporations with diverse holdings and interests — what Sanford Climan, above, calls the "corporatization" of Hollywood.
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Hollywood and Wall Street are forming deeper ties, technology is driving distribution and multinational media companies are set to benefit from changes in the way investments are being made to the bright lights of show business.
Investing in entertainment has historically been a tricky proposition for investors wary of volatility and unpredictable returns. Yet in recent years, there has been a tremendous influx of new capital, new equity and financing innovations that are fueling programming ventures. Hollywood has restructured its corporate identity, hedge funds are partnering up with producers, and deals are becoming more creative.
At the beginning of the decade, after the stock market bubble burst, investors were looking for new industries and Hollywood was looking for new forms of capital. Fortunately for both, media companies were in the midst of a massive vertical integration, creating themselves into great corporate identities that not only produced movies but also owned networks, publishing companies and sports franchises.
It was the "corporatization" of Hollywood, as panelist Sanford Climan of Entertainment Media Ventures Inc. noted. And with that, media companies became easier to analyze for Wall Street. Panelist Aizaz Shaika of BNP Paribas, said the rise in transparency among media companies made the industry more attractive to investors.
Hollywood also finds itself with a new breed of partners is the form of hedge funds. From Batman to the Matrix, private equity funds are teaming up with producers to finance new films. Many studios are finding this to be a welcoming sign. As Climan put it, "the studio’s desire for long-term partnerships with financial players is a new phenomenon."
Despite the new investment levels, the entertainment industry is still a tough proposition. Panelist Roy Salter of The Salter Group described the difficulty to investing, from understanding the nomenclature to following the cash flow. If investors aren't diligent in their research, he said, they could have a flop on their hands. However, he added, these highly integrated and diversified conglomerates present many opportunities for creative deal making.
The panel agreed that there is a great future for this industry and that the percentage of consumer spending in likely to increase in the coming years. They cautioned that technology will further flatten the distribution channels with the introduction of push-button entertainment, where eventually all media will be "on demand." Furthermore, the definition of "Hollywood" and what it produces is likely to broaden. For example, communication is becoming more a part of entertainment. As Climan explained, if you're not on the phone for business, then that's a form of entertainment.
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