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Saturday, April 29, 2006

More movie sampling ... Hedge funds bet on movies

- Despite its celeb-heavy cast, `Lucky Number Slevin' hasn't been that fortunate at the box office so far ($19 million in the US).

So to try to generate some positive buzz, and keep the movie in the theaters, The Weinstein Company has decided to release the first eight-minutes of the movie on the Web. You can watch the opening sequence here.

(Universal did something similar last year with `Serenity,' though the clip was larger and higher-quality.)

I call this movie `sampling' -- giving prospective viewers something more than just a quick-cut trailer to go by. I do think it can have negative effects, perhaps persuading some people that the trailer dolled things up deceptively. But it can have an upside as well, bringing in ticket-buyers who may have been on the fence, waiting for the DVD release.

- This gist of this Wall Street Journal piece on hedge funds getting more involved in motion pictures is that hedge fund managers think they can reduce the risk of putting money into movies and pick surefire winners. But studios aren't allowing them to invest in some of their top-shelf projects, like `Spider-Man 3,' `The Da Vinci Code,' or the next James Bond movie. Kate Kelly writes:

    Wall Street has historically shied away from dabbling in movie production, which was considered a fool's game because of the difficulties inherent in predicting the public's fickle tastes. But a handful of hedge funds and other money managers, flush with cash and eager to find investments that don't rise and fall with the broad stock, bond and currency markets, are plunging in. They see Hollywood as a $50 billion industry with the promise of double-digit returns for the right portfolios of movies. Armed with computer-driven investment simulations, some think they can pick movies with the right characteristics to make money.

    "For me, it's a widget business," says Ryan Kavanaugh, a former venture capitalist who lost his shirt -- and was hit with some shareholder lawsuits -- in the dot-com bust but has had a key role in a number of recent film-financing deals. "As long as it fits the [investment] model, we don't care."

And a bit later in the article...

    Yet in a business where the conventional wisdom says that 10% of a studio's films are responsible for 100% of its profits, even a passel of Harvard Business School graduates may not be immune to the pitfalls faced by nearly every investor to have hit the intersection of Hollywood and Vine.

    Some long-time investors in the sector think the downpour of new cash won't last long. "The question is not if the money will dry up, but when," says John Miller, a managing director at J.P. Morgan Chase & Co. who has dealt with the entertainment sector for almost 40 years. Except in a handful of cases, Mr. Miller has stuck to lending Hollywood money, instead of taking what amounts to equity stakes in films.