hollywood billionaire

Chapter 68

"my thoughts?"

Seeing Han Yi's actions, Kevin Hart also scooped up his share of caviar and egg whites, and stuffed them into his mouth.

"When I eat caviar, I go all in."

"Please enlighten me, Kevin." Han Yi probably understood the meaning of Kevin's words, but he hoped that the latter could make it clear, which would also be beneficial to the subsequent negotiations and matchmaking.

"I'm not quite sure what you mean by that."

"I mean, if I'm willing to cut $800 million in pay, I'm also not going to care so much about the $700 million incentive bonus." Kevin Hart put the dinner plate aside and folded his hands Standing on the table, leaning forward, "If I accept an investment of 2500 million US dollars, I hope to invest all of it in "James of the Brave."

Hearing this sentence, Han Yi sat up a little, as if he was expressing his respect for Kevin Hart in this way.

A disciplined and determined gambler.

That's the kind of role that has the best chance to shine in Hollywood.

"So, you're saying, of the $9000 million production cost, you want Hartbeat to get a bigger share."

"That's not true, brother, we don't need internal friction." Kevin Hart raised his hand, swinging back and forth between the two, "My thought is, if there is enough capital, why don't we occupy more investment quota What about it? In addition to the production cost, we can also bear a small part of the publicity cost in exchange for a higher sharing ratio."

"In this way, we can try to increase the initial ratio and the growth ratio separately." Christopher Chasen added.

"How does Manate Entertainment generally operate?" Han Yi asked.

"First of all, for a relatively large amount of slate deal, both parties will recover according to the divided share of the production cost. For example, if you invested 50% of the production cost and the film studio invested the other 50%, then when the income is transferred to the production Here in the company, investors and producers can each get half and recover their respective costs."

"After the cost recovery is completed, generally speaking, until the investor recovers 110% of the investment, the film party will share 20% of the net profit. Then it will increase to 40%, 50%, and the highest can reach 65%. Our operation , which is similar to the industry standard, and the entire industry has benchmark values ​​for financing.”

Jordan Bromley explained in detail.

"This is a way to make investors sound more comfortable. In fact, if the investor can recover 80% of the investment through 110% of the net profit ratio, it means that the film and television group has made a lot of money with interest. not enough."

"That is to say, when we recover 110% of the investment through net profit, if calculated according to the general net profit rate of the film and television industry, the entire project has a total income of about 3.1 million U.S. dollars." Christopher - Chasen in The film and television industry has a deeper understanding than Jordan Bromley, "You also understand, Mr. Han, even with strict investor supervision, film companies can still find many ways to increase expenditure before net profit."

"Yes, the producers still need to share with other participants, producers, directors, and stars like Kevin, so they don't actually get that much. But in general, it's like this, when They get $3.1 million in gross revenue and we get back the $1 million invested and make another $1000 million."

The reason why the film group can become a group is largely due to their precise control of revenue and profits.No large-scale film industry survives by sharing net profits with investors. In fact, film and television groups with independent channel distribution capabilities do not even need to make profits through gross profits.

In the film industry, the distribution share generally accounts for 30%.This means that when the movie is released and the first box office revenue arrives in the account, the film and television group will first put 30% in the pocket of its own channel distribution company, then recover the cost of P&A, and then recover the production cost.After all the expenses that should be deducted are deducted, the so-called "profit sharing" will be carried out with the employer.

Even if it is still in the stage of cost recovery, it must first deduct the distribution share and P&A fees before recovering according to the proportion of the input production cost.

Let’s do the simplest math problem. If the production cost of a movie is 6500 million U.S. dollars, and the publicity cost is 3500 million U.S. dollars, Han Yi and Sony will share the production cost 3250-3250. Han Yi will contribute [-] million U.S. dollars and Sony will contribute [-] million U.S. dollars. US dollars, and the cost of publicity and distribution will be independently borne by Sony.

On the premise that Sony can still get 30% of the channel distribution share, if the movie can get a box office of 1 million US dollars at this time, that is, if it is even on the books, the two parties can't talk about the net profit share at this time, and they are still in the process. cost recovery phase.

At this time, Sony will first share the channel distribution fee of 3000 million U.S. dollars, and then recover the 3500 million U.S. dollars of publicity and distribution fees. The remaining 3500 million U.S. dollars will be divided equally between Han Yi and Sony in proportion.

Han Yi received $1750 million and Sony received $1750 million.

In this way, Sony invested a total of 6750 million US dollars and recovered 8250 million US dollars. Although the production company is still in a state of loss, the entire group has made a net profit of 1500 million US dollars.

And Han Yi...a total investment of 3500 million U.S. dollars, received 1750 million U.S. dollars, a hard loss of 1750 million U.S. dollars.

50% capital loss rate.

Do you now know why Lone Star and Citigroup abandoned Sony Pictures?

Under normal circumstances, if you lose two deals with blood, lose four deals with a small loss, and then tie two or three deals, you can at least make a big profit on one or two deals, and the return on investment depends entirely on the latter.

In the past two years, Sony has just encountered hackers, WikiLeaks, and the ensuing wave of box office poison.

Earning is not earning a penny, and losing is losing money.

If Lone Star and Citigroup don't run away, the entire joint fund will be gone.

"Why do so many capital still have a soft spot for Hollywood?" Han Yi tilted his head, feeling that the numbers he heard were absurd, "In most cases, they can guarantee a 10% return on investment. Not bad."

"That's because you are looking at the problem from a higher dimension. Yi... 10% rate of return is already considered a good financial product." Jordan Bromley smiled, "In 2005, Relativity Media Ryan Cavanaugh, the CEO of Sony and Universal, made a slate deal for the upcoming 6 films of the two studios. He integrated $2006 million in hedge fund funds to create a company called Gun Hill Road’s film fund provided financing services for these 7 films. In [-], Kavanaugh absorbed another $[-] million in funds to provide financial support for another [-] films.”

"In the end, this US$13 billion investment fund recorded a return of US$1.5 million, and another US$2500 million in follow-up income...Yi, if you are an investor in this fund, the exit cycle is much shorter than that of private equity funds. What do you think of getting a return of 13.4% for a long time?"

"Understood." Han Yi breathed a sigh of relief, "The information is poor."

"Yes, ordinary investors can't get in touch with Hollywood, what they can see is an investment opportunity of an 'entertainment industry fund'. Expectations are different, and satisfaction is naturally different." Jordan Bromley's explanation is very succinct, " And whether it’s a hedge fund manager or a private equity managing partner, they have a variety of ways to make money. Film and television investment is just a small part of their asset portfolio. Think about it, Kavanaugh has integrated several The investment quota of a hedge fund, only to get 6 million US dollars... How much money does a good hedge fund manage? Billions? Tens of billions?"

"Indeed."

After Han Yi thought for a while, he nodded.His $3.99 million that is about to expire at the Carlyle Group accounts for only 0.106% of the entire capital group.But even for such an insignificant amount of cash in the entire financing market, Han Yi has to divide it into many lines for investment. The success or failure of "Game of the Brave" can have a certain effect on the investment effect, but it is by no means decisive.

Thinking about it this way, Han Yi understood why so many top capitals were willing to sign a slate deal financing agreement with Hollywood Film and Television Group.

The probability of losses for independent production companies is extremely high, but the films produced by the six major film companies still have a certain degree of protection, at least the existing audience and historical achievements are placed there.Especially under the framework of slate deal, even if 80%-90% of the movies lose money or barely keep their capital, the 10% of the hit movies can help various financial institutions obtain a rate of return that satisfies investors.

This is the fundamental reason why people always say that Hollywood is controlled by Wall Street.If Wall Street's private equity groups and hedge funds raise the cost of using funds a little bit, the entire film and television industry will probably enter a severe winter.

"Unfortunately, it was me that Sony met."

Han Yi pointed at himself and grinned his white teeth.

"My requirements for returns will be higher than those of ordinary investors...Jordan, Chris, first of all, I want to say that I hope to increase the change base point of the net profit sharing ratio to 150% of our total investment. The net profit share received will be reduced accordingly for each income ladder. Secondly, as Kevin said, we not only want to bear the full production cost, but also want to share a part of the P&A cost, so that after deducting the channel distribution fee , we can directly distribute the first funds.”

"You can definitely give it a try. The contract is negotiated." Jordan Bromley hesitated for a moment, thinking about how to express Sony Pictures' attitude after hearing the conditions in a more subtle and precise way. "Sony will probably not agree to the proposal to share the P&A expenses. Publicity and distribution, for such a large film and television group, many publicity links are actually their own channels, and they are just discounted calculations...the left-handed and right-handed within the group It’s a trick. It’s not worth it to them if you share the cost.”

"In addition, in the financing model commonly used in the industry, the investor's funds will probably account for 35-50% of the total production cost. The pre-sale in overseas markets is relatively sluggish now, accounting for only 10% of the production cost, and then there are 10% of the production cost. % is 'soft money', which is usually tax incentives, subsidies, and sponsorship of some commercial brands provided by various local governments. The remaining 45%, generally speaking, film and television companies will spend from their own accounts. Sony Pictures is now Lacking cash flow, they may choose gap financing, or super gap financing.”

"The executives of these film and television groups are smart, Yi. Even if they are not so optimistic about a certain movie, as long as the movie can reach the production stage, it means that they still have a certain promise for this project. Even for "Brave" For a project like Game of Thrones, it is absolutely impossible for Sony Pictures to hand over 100% of the production share to you for investment, because they know that in this way, you will definitely demand a higher share ratio and stricter requirements. audit standards."

"The production resources of the same film group are almost the same, and the publicity and distribution channels are basically the same template. Whether it can be well received or not, to be honest, most of the time it is just a matter of probability... If the film becomes a big hit, they Wouldn't he become a fool ridiculed by the whole industry?"

"So, in my opinion, let alone sharing part of the P&A costs, even if they are short of money, they will not be willing to let you bear all the production costs. Although they don't have cash, they have credit as the six major Hollywood studios. , any bank will be happy to provide them with short-term lending services."

"Short-term borrowing to make up for the remaining 45%, or let you throw out the 45% and end up losing more revenue at the box office. Yi, guess which one will the executives of Sony Pictures choose?"

After speaking this long paragraph, Jordan Bromley took a breath, took a sip of champagne, and then spoke leisurely.

"This is a listed company. In a sense, every executive is a wage earner in the secondary market. Will these people hesitate to use the company's assets as collateral?"

"So, I know you have enough money to support the entire "Jumanji" movie, but you should be prepared to spend even if you have money ... This is Hollywood."

"This is Hollywood..."

Han Yi repeated it in a murmur, and sighed softly.Jordan Bromley's reminder brought him back to reality from his smug plans.

As Jordan said, who would give 100% of the financing to a company?Leaving aside the share for the time being, if there is a problem with the management and the supply of funds cannot keep up, wouldn't the whole movie be dead in the womb?
Can Hollywood, which has prospered and developed for 100 years, be what I want?Whatever you want, just like that?
Still too young.

Han Yi silently alerted himself in his heart, raised his head, and found that Kevin Hart's lips were also moving slightly.

One is a fledgling comedy star, and the other is a fledgling capital upstart. The lively discussions between the two are full of loopholes in the eyes of insiders like Jordan Bromley.The latter did not immediately choose to veto it out of respect for the two customers, but followed the temptation to slowly reveal to them the operating principles behind the industry.

However, all this did not make Han Yi feel frustrated.Frustration of plans is a very natural learning process in the business world. If this can generate negative emotions, then you are doomed to fail.

Looking at Kevin Hart's gradually firm eyes, Han Yi knew that the other party's thinking must be almost the same as his own.

A feeling of sympathy and sympathy for meeting good talents quietly rose in Han Yi's heart.

To do things is to be a person, and to practice is to cultivate one's mind.A good partner is more valuable than any asset.

Maybe Kevin's cooperation with himself will not necessarily be limited to Hartbeat...or even in the field of film and television.

"It's okay, buddy."

In the end, it was Kevin Hart who broke the brief silence at the dinner table.

"Hartbeat and your industrial investment fund can allocate the investment quota according to the ratio of 20/80. If the investment quota given by Sony Pictures is too small, it doesn't matter if Hartbeat cuts some shares. Anyway, I This side will vote for "James of the Brave", no matter what the conditions are."

"I didn't expect you to be so optimistic about this movie, Kevin..." Han Yi paused for a moment, and then said slowly, with a hint of uncontrollable curiosity in his voice, "What if "James of the Brave" loses money? If the money is lost, at least half of the 2500 million US dollars will have to be removed in an instant.”

"I'm not optimistic about Jumanji, Yi."

Kevin Hart raised the fork, turned the tip towards himself, and pointed the handle at Han Yi.

"I am optimistic about your vision."

"As for what to do if you lose money..."

"If you lose money, I will arrange two more rounds of talk show tours to let you earn back."

(End of this chapter)