Football yesterday, now Abu Dhabi finds another Risky Business: Hollywood

Football yesterday, now Abu Dhabi finds another Risky Business: Hollywood

Abu Dhabi Media Company to invest $1bn in funding and developing film projects. Spending comes as Merrill Lynch report suggests Hollywood no longer making money.

September 3, 2008 10:46 by kippreport

‘How do you make a small fortune out of owning a football club? Start with a large fortune.’
As Abu Dhabi splashes more than $60m on the first of several promised new players for its English Premier League team, Manchester City, news comes that the UAE capital is to sink as much as $1bn into another financial risky business: the film industry.

Abu Dhabi Media Company (ADMC) has formed a film financing subsidiary that plans to develop, finance and produce as many as 40 feature films over the next five years. Hollywood and Bollywood ventures are sought.

A report by the research company Global Media Intelligence at the end of last year, in association with its partner Merrill Lynch, suggests the money-making potential is not great. The report is titled “Do Movies Make Money?” The researchers’ verdict: not any more.

It estimates that releases from the Big 6 Hollywood studios through 2006 would yield a combined loss of $1.9 billion after collecting the revenue from an entire first cycle of sales to domestic theaters, foreign theaters, home video, pay television and every other source of income. Sales were down 4.6 per cent on 2004, with costs up 13.2 per cent.

The industry is being hit by a drop in DVD sales and an increase in back-end payments to top line stars, both acting and directing. These payments are made on the gross revenue, not the profit. If a movie does well, the talent gets a greater cut. If it flops, they still get paid.

ADMC is not putting all its eggs into Hollywood’s basket. It will invest in Bollywood and is seeking “globally distributed movies and digital content”, according to The National. It will also invest in Middle East talent.

Profit is not the only objective.

“The idea…is to create a relationship with the filmmaking community so we can develop the skills in Abu Dhabi to grow an industry,” said Edward Borgerding, the chief executive of ADMC.

The first of the Hollywood partners will be announced within weeks, the paper reports.

“We will make movies with hundreds of actors and hundreds of directors, and our movies will probably win Academy Awards because these kinds of guys are good at that, which is why I wanted to do business with them,” said Borgerding.