Despite fears that the meltdown of Benjamin Waisbren’s operation might be a watershed moment for the end of the hedge fund dreams of Hollywood, the dream apparently lives on. Like some effin horror movie villian who gets killed at the end of each film but always returns for the sequel. Can someone please name the next one of these funds “Jason VoorheesCapital LP?”
An established Hollywood producer and technology entrepreneur has decided to launch a film hedge fund. Mark DiSalle is launching Colosseum Pictures L.P next month. The fund is organized to invest in full-length motion pictures and take advantage of DiSalle’s successful entertainment and business experience. Some of DiSalle’s past successes include legendary film cult hits like “Bloodsport,” “Kickboxer,” and the “Perfect Weapon,” as well as founding the software security company BioPassword.
Colosseum Pictures L.P.’s primary objective is to finance the creation of successful full-length films while retaining ownership of all of the motion pictures’ rights in order to maximize the long and short term revenues of these films. The philosophy of the fund is to make independent low–risk, high-profit movies with terms that favor the investors. DiSalle tells us “With the new tech wave of digital download and the rapid increase in film revenues, there has never existed a more opportunistic time to create content. Additionally, low budget concept movies will achieve the highest return on investment.”
The rise and fall of Hollywood hedge fund operator Benjamin Waisbren is detailed today in a long article in Bloomberg today. Waisbren was the front man for Stark Investments Hollywood movie, and was axed after the firm sunk money into last year’s ill-fated Poseidon.”
Most of Waisbren’s plan, particularly the part about being smarter about borrowing money to reduce the cost of capital sounds pretty good. But the description of Waisbren’s partner Jack Kavanaugh using investment banking style business modeling techniques is pretty entertaining:
Like Waisbren, Kavanaugh has devised a plan to make Hollywood pay for investors. Taking advantage of the relationships he developed investing on behalf of Hollywood heavies, Kavanaugh compiled as much proprietary historical data as he could about movie returns.
He attaches a numerical value to each participant in a film — the talent, the director, the screenwriter, the producer and so on — based on their historical returns, and then he runs the numbers through Monte Carlo simulations to figure out how much the movie will sell for in foreign territories and, ultimately, the most prudent amount to invest in the budget.
For instance, his models priced a planned movie featuring martial-arts action stars Jet Li and Jackie Chan at $70 million, partly because the two stars would be appearing together for the first time. Similarly, a prequel to the 1987 hit “The Untouchables,” directed by the first film’s director, Brian De Palma, also scored $70 million from Kavanaugh’s models.
We can’t be the only folks who read this and thought, “Why would anyone even bother getting out of investment banking and going to Hollywood if they’re still going be running Excel spreadsheet models all night?” Except for the whole sleeping with starlets thing, we mean. Hedge Fund’s `Poseidon’ Misadventure Drops Curtain on Dealmaker [Bloomberg]