Private, like many of us, is a huge fan of Vipal Monga
– financial journalist, filmmaker, and all-around good guy. Better yet,
she has a subscription to Monga’s home, the Daily Deal, which means she can
quote some of his pull-no-punches journalism, this time on the subject of funds
which invest in Hollywood movies:
The separation of investors from their investments is a hallowed Hollywood
tradition…
Hollywood’s structured financings may be the worst way ever to invest in the
film industry. This is especially true for equity investors, located at the
bottom of a movie slate’s so-called waterfall…
What’s being whispered in Hollywood corridors today will then resonate all
the way to Wall Street. "My understanding from people who invested in
the equity is that they are totally wiped out," says the expert on studio
economics.
(Full disclosure: I worked with Monga at Bridge News, way back in the 20th
Century, which is one reason I’m giving him all the props here rather than his
co-author, Richard Morgan.)
Only a fool, I think, would invest in the expectation of making a profit either
in films or in art. Both Hollywood and the art world are essentially cartels,
which are very good at extracting money from rich people while tantalizingly
promising them jam tomorrow – and lots of glamor today.
Buying art can make sense all the same, if you love it. But it’s a good idea
to let someone else produce the movies you love. For $11 you can get all the
benefit, and leave the costs and the headaches to starry-eyed fools.