Churning Profits out of Dreams

Hedge funds are rapidly discovering a new asset class: lower budget movies. Will this stifle art and expression? Or create more of it? If the very creators of the blockbuster category believe its dead (as, presumably, the movie industry fragments along the same fractures apparent in the TV industry), will private equity and hedge fund managers exert their dollar influence to shape a movie's message and cinematography? Or will they bet on directors and actors like hot stocks? How will they try to create information asymmetries from which they can benefit? Thoughts?

The business side of the dream factory has recently captivated me, ever since I first tackled F. Scott Fitzgerald's unfinished final work, (The Love of) The Last Tycoon.

The Deal Book has some details, excerpt below (free registration required).

Dealbook: "Investing in films has always been a hit or miss affair, but the massive changes under way in the industry have led more sophisticated investors to believe they now have a better shot at making a profit. George Lucas, the creator of Star Wars who helped form the blockbuster template, recently speculated that the blockbuster movie is dying and that low-budget films with novel financing will become the norm. Further, lower-cost digital film is increasingly gaining acceptance. These are the classic market inefficiencies that good hedge funds exploit."

Tags: Hollywood, Cinema, Finance, Hedge Funds