Don't Invest in Hollywood

Equity Private, like many of us, is a huge fan of Vipal Monga – financial journalist, filmmaker, and all-around good guy. Better yet, she has a subscription to Monga's home, the Daily Deal, which means she can quote some of his pull-no-punches journalism, this time on the subject of funds which invest in Hollywood movies:

The separation of investors from their investments is a hallowed Hollywood tradition...
Hollywood's structured financings may be the worst way ever to invest in the film industry. This is especially true for equity investors, located at the bottom of a movie slate's so-called waterfall...
What's being whispered in Hollywood corridors today will then resonate all the way to Wall Street. "My understanding from people who invested in the equity is that they are totally wiped out," says the expert on studio economics.

(Full disclosure: I worked with Monga at Bridge News, way back in the 20th Century, which is one reason I'm giving him all the props here rather than his co-author, Richard Morgan.)

Only a fool, I think, would invest in the expectation of making a profit either in films or in art. Both Hollywood and the art world are essentially cartels, which are very good at extracting money from rich people while tantalizingly promising them jam tomorrow – and lots of glamor today.

Buying art can make sense all the same, if you love it. But it's a good idea to let someone else produce the movies you love. For $11 you can get all the benefit, and leave the costs and the headaches to starry-eyed fools.