Two new firms raising their inaugural funds aim to merge Wall Street and Hollywood by making investments in independent films.
Select Film Fund, which is seeking $1 billion, and Barbarian Fund, which hopes to raise $150 million, were expecting to finish raising their funds in late July.
Select Film Fund, with offices in Hollywood, Calif., and Greenwich, Conn., is seeking a mix of debt and equity financing for a movie investment fund to be run by a team of finance and entertainment industry veterans. The fund will invest in independent studio projects that are budgeted at under $10 million and have “some kind of A-list talent attached to the movies,” says Managing Director Tony Reynolds.
Founders of Barbarian, run by three film industry veterans in New York and Los Angeles, say they plan to finance the fund with one-third equity and two-thirds debt. Barbarian will invest in low-budget films to sell to U.S. and foreign-based studios and distributors. The idea is to invest in a portfolio of films with budgets under $10 million that backers believe can be marketed to international audiences.
Barbarian co-founder and Principal Aaron Kaufman calls the firm “sort of a cross between a hedge fund and a private equity fund that invests in films.”
The firms expect to earn returns for investors from foreign market pre-sales, U.S. sales and the sale of copyrights, according to their fund-raising documents. Additionally, films typically generate revenue for up to 20 years from theater ticket sales, TV syndication, home video and online distribution, and ancillary rights, such as novelizations, soundtracks and merchandising.
Current film projects under consideration at Barbarian include “The Round,” a comedy with a $5 million production budget and a plot centered on a man who scores a record-breaking golf game. The film project is not finalized, but actors attached to it include Greg Kinnear, Sam Rockwell, Tea Leoni, Steve Zahn and Mike Newell.
Another film in development is “My Brother’s Fiancé’s Sister,” a $6 million film about two commitment-phobes who fall in love despite the fact that they are about to become in-laws. Actors attached to it include Heather Graham, Jessica Beal, Ron Livingston, Josh Duhamel and James Garner.
The move by Select and Barbarian into film financing comes as other funds are also gearing up to invest in the sector. IDG Films, a new division of research company International Data Group, with offices in Beijing and Los Angeles, recently formed to invest in the sector. And Relativity Media, a film financing and production company with ties to the hedge fund industry, says it has structured more than $2 billion in production financing deals in recent years.
With the portfolio approach, funds are taking a page from venture capitalists’ textbooks on spreading risk. While films may flop, a single hit or two can make up for a number of misses, says Kaufman. He points to famously successful low-budget films, such as “The Blair Witch Project” and “My Big, Fat Greek Wedding,” which boasted returns that exceeded production investments by many multiples.
In addition to Kaufman, a former vice president of Hong Kong-based private equity investor Spackman Group, Barbarian’s team includes Ron Hartenbaum, a co-founder of radio ad sales firm MediaAmerica, and Douglas Kuber, an attorney specializing in the film industry. The fund has a term of five years and is managed by Partisan Media Group in New York.
Select’s team includes, in addition to Reynolds, Desiree Jellerette, a production manager who has worked with several prominent Hollywood film directors, Kenny Snyder, a television producer who wrote for “The Fresh Prince of Bel Air,” David Areson, a former managing director of sales at Invesco and Citigroup, and Michael Corrigan, a former CFO at MGM.
Corrigan was previously a senior partner in the entertainment, media and communications practice at PricewaterhouseCoopers and was a co-founder of Shelbourne Capital Partners, a boutique financial advisory and merchant banking firm. Reynolds, a Midwestern real estate financier, told Daily Variety that Corrigan brings the film studio the financial experience “to explain to our investors where our dollars are made in film investments.” —Joanna Glasner