General Electric’s (NYSE: GE) Universal Pictures asset received some good news the other day — 75% of the studio’s film projects for the next few years will be funded, in part, by a financing entity known as Relativity Capital. According to The Hollywood Reporter, the deal calls for Relativity to help cover production costs, but not marketing programs; it could see about $500 million spread out by as many as 45 movies. plus, that is being described as a bona fide partnership — not only will Relativity share in profits generated by ancillary channels, such as home video and television sales, but it will additionally have the ability to co-greenlight a project, and it will be able to review the talent and budget attached to each project.

Financing by hedge funds and private fairness is certainly not new in Hollywood; it’s been around for a towering moment. So has the practice of selling off universal rights and

partnerships amoung studio competitors. Remember James Cameron’s Titanic? It took the studio segments of both Viacom (NYSE: VIA) and News Corp. (NYSE: NWS) to shoulder that costly celluloid endeavor. But, although I recognize that filmmaking is extremely risky, and that a flop is very much in the cards whether or not big stars are in a film, I additionally have to wonder whether it might be better for studios to simply lessen their risk by making much cheaper movies and foregoing the distribution of risk. What’s my beef with distribution of risk? Well, I’m not the first to say that, and it’s pretty obvious at any rate: hedge your bet, and you additionally limit your upside score in terms of a windfall.

Continue reading Should film studios always spread the risk?

Original post by Steven Mallas

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