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Title

Financialized Hollywood: Institutional Investment, Venture Capital, and Private Equity in the

Film and Television Industry

Permalink

https://escholarship.org/uc/item/9tj5n3jx

Journal

JCMS Journal of Cinema and Media Studies, 59(4)

ISSN

0009-7101

Author

deWaard, Andrew

Publication Date

2020

DOI

10.1353/cj.2020.0041

Peer reviewed

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University of California

Financialized Hollywood: Institutional Investment, Venture Capital, and Private Equity in

the Film and Television Industry

Andrew deWaard

JCMS: Journal of Cinema and Media Studies (formerly Cinema Journal) 59.4 (2020).

Forthcoming. Post-print version including revisions.

Andrew deWaard is an Assistant Professor of Media and Popular Culture at the University of

California, San Diego and is the co-author of The Cinema of Steven Soderbergh: indie sex,

corporate lies, and digital videotape (Columbia University Press/Wallflower, 2013).

Abstract:

The financial sector has a hidden, but dramatic effect on Hollywood: three institutional investors

hold the largest investment stakes in nearly all major companies; corporate venture capital has

arisen within every entertainment conglomerate; and private equity firms have enacted leveraged

buyouts of companies in all sectors, including production, distribution, exhibition, talent

agencies, audience measurement, trade press, and content catalogues. This article argues that

“Financialized Hollywood” is a dangerous development; financial engineering strategies are

extracting capital and reducing operational capacity, further depriving Hollywood of the

diversity and heterogeneity it might provide the public sphere.

Keywords: finance, media industries, political economy, venture capital, media consolidation

After a breakdown in negotiations with the Association of Talent Agencies on April 12,

2019, the Writers Guild of America (WGA) took the unprecedented step of instructing its

members to fire their agents. More than seven thousand writers—92 percent of the guild—

dutifully fired their agent. At issue was the WGA’s new Code of Conduct that prohibited agents

from taking packaging fees (which they claim is a breach of fiduciary duty, as it incentivizes

agencies to negotiate a lower fee for talent) or engaging in production (which they claim is a

conflict of interest, as the agencies are again incentivized to lower fees). At the time of writing,

seventy smaller agencies have signed on to the Code of Conduct. However, the big agencies—

Creative Artists Agency (CAA), Endeavor (formerly William Morris Endeavor Entertainment),

United Talent Agency (UTA), and International Creative Management (ICM)—have filed

lawsuits against the WGA, signaling a drawn-out, costly legal battle that the WGA might not be

able to wage against firms now backed by massive investment firms like Texas Pacific Group

(TPG) and Silver Lake. Regardless of the outcome, the bold labor action of the WGA

demonstrates that creative workers in Hollywood may be coming to terms with the impact of

‘financialization,’ defined here as the accelerated growth of the financial sector and its extractive

logic, which relies on financial engineering rather than commodity production. The WGA report,

“Agencies For Sale: Private Equity Investment and Soaring Agency Valuations,” is a

surprisingly scathing indictment of CAA and Endeavor, but the deep, destructive influence of the

financial sector in Hollywood goes much deeper than just the talent agencies.

Since the 1970s, the global economy has been reshaped by the rise of the financial

industries; however, there has not been a corresponding transformation in the scholarly study of

the financialization of the cutural industries. Various scholars assess the structural trends that

have transformed the U.S. media industry by emphasizing the growth of corporations,

integration, globalization, the concentration of ownership, digitization, networking, and

deregulation.

This article’s primary motive is to impress upon its readers the scale of the impact

that the financial sector has had on the American film and television industries in the last twenty

years and thus demonstrate that financialization belongs on that list of key structural trends. Janet

Wasko did pioneering, underutilized work in this area over thirty-five years ago, but the topic

has since been largely ignored, despite the need, as Micky Lee articulates, for the study of

“financial institutions’ direct intervention in media companies’ management and restructuring.”

“The new rulers of Hollywood—and of the global entertainment industry at large,” film historian

Thomas Schatz claims, detailing ‘Conglomerate Hollywood,’ are “not the studios but their parent

companies, the media giants like Viacom (owner of Paramount Pictures), Sony (Columbia),

Time Warner (Warner Bros.), and News Corp. (20th Century Fox).”

Jennifer Holt’s Empires of

Entertainment complements this historical narrative with the legal, regulatory, and political

dimensions of how film and then broadcast and cable television became integrated in the 1980s

and 1990s.

The following article picks up where these histories end and proposes that in

“Financialized Hollywood,” the media giants themselves are now beholden to the larger process

of financialization.

The big conglomerates still dominate film and television production and

distribution, but they are mere investment and profit-extraction opportunities for truly powerful

firms such as Blackrock, Vanguard, Bain Capital, TPG, and Silver Lake, whose watchwords are

highly-leveraged debt, labor efficiencies, and speculation.

A heightened awareness of the financial processes and ideologies that undergird the

actions of media companies, executives, and practitioners is needed. Understanding

Financialized Hollywood requires an analytic perspective attuned to the logic of financial capital,

not just the multinational entertainment corporation. This article demonstrates the ascendancy of

financial capital within Hollywood in six steps. First, it examines the broader concept of

financialization and the role of passive institutional investment firms, which hold the largest

stakes in nearly all Hollywood companies. Second, it documents the rise and influence of

corporate venture capital within every entertainment conglomerate. Third, it analyzes the

destructive effect of private equity, which has enacted leveraged buyouts of companies in all

sectors of Hollywood, including production, distribution, exhibition, audience measurement, and

trade press. Fourth and fifth, it focuses on talent agencies and content catalogues as particularly

insidious cases of private equity extraction; and finally, it considers the role that this financial

engineering is having in the further consolidation of Hollywood. Ultimately, this article argues

that the financialization of the film and television industry is a dangerous development; financial

engineering strategies are extracting capital and reducing operational capacity, further depriving

Hollywood of the diversity and heterogeneity it might provide the public sphere.

Neoliberalism, Financialization, and Institutional Investment. “The only general point of

agreement,” David Harvey proclaims, in evaluating the discourse surrounding the advancement

of capitalism, “is that something significant has changed in the way capitalism has been working

since about 1970.”

For Harvey, a key part of that change is the empowerment of finance capital

in relation to the diminished nation state, resulting from loose monetary policy by the American

and British governments, unmoored exchange rates, and the general breakdown of Fordism and

Keynesianism in the early 1970s. This accelerated form of capitalism has come to be formalized

under the term neoliberalism for Harvey and many others.

“Neoliberalism is a new stage of

capitalism,” according to Gérard Duménil and Dominique Lévy, “that emerged in the wake of

the structural crisis of the 1970s. It expresses the strategy of the capitalist classes in alliance with

upper management, specifically financial managers, intending to strengthen their hegemony and

to expand it globally.”

What separates neoliberalism from previous forms of capitalism is the

concentration of power within financial institutions and the use of exotic financial instruments,

such as derivatives and securitization, to exert control over the means of production.

Deregulation is an essential component of this shift. It is promoted wherever and

whenever possible, especially for financial mechanisms, resulting in the protection of lenders,

the opening of trade frontiers, the privatization of social protection and pensions, the curbing of

inflationary pressures through monetary policies, and the dramatic rise of government and

household debt. Media industry historians consider the deregulation of media ownership

restrictions and the easing of antitrust concerns in the 1980s and 1990s, such as the

Telecommunications Act of 1996, to be transformational events, but far less remarked upon is

the corresponding deregulation of financial mechanisms that occurred during the same era. The

U.S. removed capital controls in 1974, eased banking restrictions with the Depository

Institutions Deregulation and Monetary Control Act of 1980 and the Garn-St. Germain Act of

1982, and repealed the Glass-Steagall Act in 1999, which allowed bank holding companies to

own investment banks. These deregulations are an essential component to what Duménil and

Lévy claim is the “return to financial hegemony” during the rise of neoliberalism, in which the

upper fraction of the capitalist class has a nearly unbridled ability to shape the economy and

society with impunity, as it did in the 1900s and 1910s.

However, as a conceptual term, neoliberalism is somewhat vague; it can refer to political

projects, ideologies, economic shifts, and other reconfigurations that have developed since 1970.

According to Christian Garland and Stephen Harper, following Fredric Jameson, use of the term

neoliberalism, rather than capitalism or class struggle, risks depicting recent shifts as mere

aberrations in need of reform, which “precludes the structural critique of capitalism and its media

institutions.”

Financialization, on the other hand, is a less understood and more delimited

concept; it refers solely to the expansion and increased power of the financial sector. Built

gradually, starting from banks and insurance companies in the nineteenth century, financial

institutions have come to form a networked framework of imposing scale: stock exchanges,

mutual funds, pension funds, hedge funds, private equity firms, derivative markets, central

banks, government-sponsored enterprises, and international institutions (such as the International

Monetary Fund and the World Bank).

A multitude of financial instruments have been developed to facilitate transactions across

this network, one of the most significant being dividends, which are portions of a company’s

profits that are periodically paid out to shareholders. During the postwar period, a considerable

share of profits was retained by corporations for productive reinvestment; in the intervening

years, dividends have soared, as have stock buybacks, when a company buys back its shares

from the marketplace, inflating the value of the remaining stock. The result is that profits are

mostly distributed among the investor class, while corporations curtail opportunities for

reinvestment, including employee wages. Corporations are thus seen less as producers of goods

and services and more as vehicles for speculative capital.

The rise of institutional investors is a striking case of this corporate speculation.

Institutional investors—entities that pool capital, such as banks, insurance companies, pensions,

hedge funds, endowments, and mutual funds—have gone from owning about 7 percent of the

U.S. stock market in 1950, to 70-80 percent today, a remarkable demonstration of the era’s

financialization.

If counted collectively, the largest institutional investment firms—the “Big

Three” of BlackRock, Vanguard, and State Street—are the largest owner of 88 percent of the

companies listed on the Standard & Poor's 500 (an index of the 500 largest U.S. publicly traded

companies determined by market capitalization), up from 25 percent in 2000.

Worse still,

institutional investors simultaneously hold large blocks of competing firms within the same

industry, known as “common ownership” or “horizontal shareholding,” the rate of which has

increased from less than 10 percent in 1980 to about 60 percent in 2010.

As a result, these

companies are incentivized to keep prices high and wages low. Far from ‘passive’ investment

vehicles, as they were designed, earning light regulation, institutional investors now actively

engage in their investments by exercising the voting power of the shares owned by their funds.

The Big Three utilize coordinated voting strategies and meet privately with management and

board members in order to influence the direction of their investments.

Common ownership of

airlines was discovered to have increased prices by as much as 5 percent, while common

ownership of banks led to increases in fees and reductions in interest rates.

This common

ownership pattern is visible across many industries; the largest owners of Apple and Microsoft,

for example, are Vanguard and BlackRock, just as they are for drugstores CVS, Walgreens, and

Rite Aid.

This pattern of common ownership by institutional investors is readily apparent in the

media sector as well, as demonstrated in Table 1, where we can see a cross-section of just how

much institutional investors dominate the cultural industries. The Big Three are right where you

should expect them: they own the largest stakes in all rival companies, gravely harming

competition. Vanguard, the largest provider of mutual funds and the inventor of the index fund,

holding more than $5 trillion in assets under management, owns the largest stake in Disney,

Comcast, Time Warner, Verizon, and AT&T, and the second largest stake in CBS and Netflix.

By this metric, nearly every popular film or television program should include a “brought to you

Table 1. Largest institutional shareholders in the largest publicly-traded media companies,

March, 2018. Source: Company 13F Filings.

Company

Fund

% Ownership

Combined % of Big Three

Disney (DIS)

Vanguard

6.82%

17.01%

Blackrock

5.99%

State Street

4.20%

State Farm

2.80%

Comcast (CMCSA)

Vanguard

7.02%

17.80%

Blackrock

6.96%

Capital World Investors

4.01%

State Street

3.82%

Time Warner (TWX)

Vanguard

6.62%

16.36%

Blackrock

5.90%

Dodge & Cox

4.05%

State Street

3.83%

CBS (CBS)

Capital World Investors

11.20%

15.16%

Vanguard

6.17%

Blackrock

5.43%

State Street

3.56%

Netflix (NFLX)

Capital Research Global Investors

9.54%

12.98%

Vanguard

6.80%

Blackrock

6.18%

Fidelity

5.76%

Verizon (VZ)

Vanguard

7.29%

17.83%

Blackrock

6.62%

State Street

3.92%

Capital Research Global Investors

3.49%

AT&T (T)

Vanguard

7.25%

17.53%

Blackrock

6.31%

State Street

3.97%

Newport Trust Company

3.27%

by Vanguard” title card during its credit sequence. Blackrock and State Street aren’t far behind,

for the Big Three forms an interlocking group of ownership here as it does in many industries.

This is most visible in the cases of Disney, Comcast, Time Warner, CBS, Verizon, and AT&T,

as the Big Three own a combined 15-18 percent stake in each of them. Capital World and Capital

Research Global Investors are each a subsidiary of the Los Angeles-based Capital Research and

Management Company, which appears to have an outsized interest in its city’s most famous

industry.

Knowing that common ownership in other industries results in decreased competition and

increased prices, we should expect the same in Hollywood, even though specific outcomes and

effects on content are difficult to isolate. The propensity for joint ventures (e.g., Hulu, The CW,

Epix, Movies Anywhere) and joint franchises (e.g., Harry Potter, Terminator, LEGO, James

Bond, Lord of the Rings, The Hobbit, Spiderman) is the kind of outcome we can expect from

common ownership. Another is that movie ticket prices continue to rise beyond inflation because

of the increasingly onerous terms set by the major studios. For example, in order to screen Star

Wars: The Rise Of Skywalker (J.J. Abrams, 2019), Disney required four-week engagements in

the largest auditorium for a film rental of 65%.

Disney’s market power may be the most

immediate factor in that deal, but institutional investment also plays a long-term role. Much like

climate change, in which any one extreme weather event is difficult to conclusively attribute to

human-caused climate change, but the overall probability of extreme weather steadily rises, in

Financialized Hollywood, the overall tendency toward consolidation, reduced operational

capacity, and minimal competition increases within a climate of financialization and common

ownership.

Corporate Venture Capital in Hollywood. The impact of institutional investment can be

considered an external force of financialization acting on the cultural industries; corporate

venture capital (CVC) is a corresponding internal force. CVC refers to minority equity

investment in an entrepreneurial venture by an established corporation. The parent corporation

(e.g., Comcast) operates a financial intermediary or corporate venture capital program (e.g.

Comcast Ventures) which makes equity or equity-linked investments in early-stage, privately

held companies (e.g., Vox Media). Originally created to allow customers to finance the purchase

of consumer products manufactured by the industrial division, the financial arms of major

corporations are now often growing faster than their manufacturing divisions. Their financial

activities, products, and global scale have come to resemble investment banks and hedge funds

more than those of their parent companies. Three short-lived waves of CVC occurred during the

1960s, 1980s, and 1990s, but the current wave appears to be both more pronounced and longer

lasting, with corporate investors accounting for roughly 15 percent of all venture capital activity

since 2000.

For large media companies, investment in tech start-ups through CVC has many

functions: earning profits that do not need to be shared with talent, preventing new competition

from gaining a foothold, and maintaining an oligopoly.

Independent venture capital funds are entirely driven by financial objectives, but

corporate venture capital pursues strategic goals in addition to financial gains.

As massive

corporations grow, they become less agile and able to respond to market changes; CVC allows

them to engage in research and development (R&D) by proxy, acquiring resources and

intellectual property from their ventures. Incorporating CVC into their innovation strategy allows

big companies to gather information on new markets and technologies, monitor their growth, and

enter them more easily. Identifying and assessing potential acquisition targets is another key

function of CVC; the investment can even be made with an option to acquire the portfolio

company if certain metrics are reached. CVC is also used by corporations to hedge their bets,

ensuring that they are strategically placed in regards to emerging technologies, ready to act when

the dominant design prevails.

As catalogued in Table 2, the media sector has been utilizing corporate venture capital

heavily since 2000, in either a direct or indirect fashion. Traditional media parent companies

have been making direct, focused venture capital investments in proven corporate entities, such

as Disney’s $400 million stake in Vice Media and NBCUniversal’s $200 million stake in

Buzzfeed. Meanwhile, these legacy media companies have also created semi-independent

venture capital arms that make riskier bets with early-stage seed funding for companies in a

variety of related sectors, such as virtual reality, streaming technologies, and digital publishing

companies that reach underserved niche audiences. For example, traditional media companies

have invested heavily in start-ups that appeal specifically to millennial and Gen-Z audiences,

such as Bustle, Mic, Fusion, and HelloGiggles. The overall number of investment stakes by

traditional media companies is vast, totaling over a thousand.

A lot of punditry suggests that Vice, Buzzfeed, and other new content companies are

upending the traditional media hierarchy, but these new media companies are mere investment

vehicles and R&D arms for traditional media. As investors, traditional media companies are

entitled access to the latest digital developments and detailed reports about the preferences of

young audiences. If any of these start-ups achieve success and prominent recognition, they

become acquisition targets, such as Viacom’s purchase of Pluto TV, or lucrative paydays in the

event of an initial public offering (IPO), such as Spotify. From radio to television to cable to

VCRs and into the digital age, the Hollywood oligopoly has historically been able to coopt any

Table 2. Corporate venture capital arms of major media companies. Source: Crunchbase.

Venture Capital Arm

Year Est.

Investments

Select Investments

Comcast

2000

SnagFilms, Invite Media, MetaTV

Comcast Ventures

2007

207

Vox, Slack, FanDuel, Meerkat, Instacart

NBCUniversal

2007

Vice, Buzzfeed, Popsugar

Walt Disney

2000

Hulu, Jaunt, Vice, BAMTech

Steamboat Ventures

2000

107

GoPro, Photobucket, GameSalad, NetMovie

Disney Accelerator

2014

Littlstar, Twigtale, Naritiv

Shamrock Capital Advisors

2007

FanDuel, T3Media, Maple Media

News Corp

2000

Roku, Beyond Oblivion, AppNexus

21st Century Fox

2013

Vice, DraftKings, The Skimm

TimeWarner

2000

Hulu, Glu Mobile, Urban Entertainment

Time Warner Investments

2000

Mashable, Bustle, StubHub, Maker Studios

Sony Venture Capital

1998

Digilens, Transmeta, CDNow

Sony Music Entertainment

2000

Shazam, 360HipHop, Artistdirect

Universal Music Group

2000

Shazam, Meerkat, Merchbar, Pluto TV

Warner Music Group

2000

LANDR, Incoming Media, imeem, Lala

iHeartMedia

2015

Unified, Jelli

Bertelsmann

1999

Udacity, DramaFever, Musicbank

Bertelsmann Dig. Media Investments

2006

Mic, CrowdTwist, Visionary VR

Liberty Media

1999

SiriusXM, Tastemade, Sling Media

Liberty Global Ventures

2005

Mediamorph, Celeno, O3b Networks

CAA Ventures

2012

Rinse, Giphy, Patreon, CrowdRise, Medium

Discovery Communications

2010

DivvyCloud, FloSports, VS Media

Hearst

2000

Complex, Roku, Pandora, Refinery29

Hearst Ventures

1995

Buzzfeed, Pandora, XM Radio, Refinery29

Axel Springer

2013

Mic, Thrillist, Jaunt

Axel Springer Digital Ventures

2014

Business Insider, Blendle, Pocket

AOL Ventures

2010

MoviePass, SocialFlow, TastemakerX

Sky TV and Broadband

2012

iflix, Jaunt, Drone League Racing

Verizon Ventures

2000

VideoSurf, Beamr, School Yourself

The New York Times

1999

The Skimm, Atlas Obscura, The Street

new technological development and turn it into another revenue source; corporate venture capital

is merely the latest, financialized chapter in this age-old story. However, an even larger

dimension of financialization is also transforming the industry. To paraphrase the title of a

popular book about the rise of “corporate raiders,” there are “Barbarians at the Gate” of

Hollywood.

Private Equity in Hollywood. Another manner in which corporations are treated as speculative

capital is through the actions of private equity firms. Previously known as leveraged buyout

firms or “corporate raiders” during their rise in the 1980s, private equity (PE) firms, such as Bain

Capital, Blackstone Group, Kohlberg Kravis Roberts & Co. (KKR), Texas Pacific Group (TPG),

Thomas H. Lee Partners (THL), the Carlyle Group, and Apollo Management, are a specialized,

high-risk type of investment fund that are subject to minimal regulatory oversight. Typically

operating investment funds with five to ten year terms, PE firms raise enormous levels of debt

against the assets of the target company (referred to as “leverage”), purchase the company,

restructure and financially engineer the company to maximize efficiency, then sell the

streamlined company or its assets at high profit margins. Since the turn of the century, in part

due to expansionary monetary policy and favorable tax breaks, there has been a huge boom in PE

deals, only temporarily slowed by the financial collapse. From 2002-2012, there were nearly

3,000 private equity firms in the U.S., which used $3.4 trillion of capital to make leveraged

buyouts of almost 18,000 companies, employing roughly 7.5 million people.

The modus operandi of private equity firms is succinctly summarized by Eileen

Appelbaum and Rosemary Batt as “tak[ing] high risks using other people’s money.”

Though

they only invest 1 to 2 percent of the equity in the private equity fund, the PE firms receive 20

percent of the profit if the rate of return achieves a certain threshold (usually 8 percent). To fund

the rest of the acquisition, PE firms solicit investment from pension funds, endowments,

sovereign wealth funds, and investment banks, while also raising debt in junk bond markets.

With these massive funds (upwards of $20 billion), private equity firms extract value from their

target companies through financial engineering: paying themselves dividends, exploiting tax and

debt loopholes, selling assets for profit, going into and out of bankruptcy, and not honoring

contracts, as well as various methods of lowering labor costs, such as laying off high-wage labor,

reducing wages and benefits, intensifying workloads, and shifting to non-unionized workers.

With little to lose if the company’s debt drives it to eliminate labor or even file for bankruptcy,

but much to gain if the investment can be exited from successfully, private equity is a textbook

case of “moral hazard,” as someone else bears the cost of their risks. Recent scholarly work in

media production studies often focuses on the precarious conditions faced by workers in the

cultural industries, often utilizing a “bottom-up” perspective, but it’s worth complementing these

considerations with the “top-down” perspective that labor conditions are often facilitated by

abstract financial processes as well.

Hollywood has faced instances of extractive financial engineering in the past, such as

Kirk Kerkorian’s pillaging of MGM in the 1970s and the corporate raiders that reconfigured

Disney in the 1980s. However, there has been a pronounced escalation of these practices in the

media sector in the past fifteen years. Elsewhere, I have marked the beginning of the

financialization of the music industries with the purchase of Warner Music Group in 2004 by

Bain Capital, THL Partners, Providence Equity Partners, and Edgar Bronfman.

That same year,

MGM was the target of a leveraged buyout with one of the same private equity firms. As

evidenced in Table 3, MGM was the first major buyout in the era of financialization, followed by

Table 3. Private equity buyouts and investment in Hollywood, 2004-2018. Source: Wall Street

Journal and Bloomberg Businessweek.

Year

Target

Buyer/Partner/Investor

Cost/$ bn

Type

Medium

2004

MGM

Providence Equity Partners, TPG Capital, Sony,

Quadrangle Group, DLJ Merchant Banking Partners

4.8

Leveraged

Buyout

Film/TV

2004

Cinemark

Madison Dearborn Partners

Leveraged

Buyout

Exhibition

2004

AMC

theaters

J.P. Morgan Partners, Apollo Global Management

Leveraged

Buyout

Exhibition

2004

Odeon &

UCI Cinema

Terra Firma

1.2

Leveraged

Buyout

Exhibition

2006

Nielsen

Company

THL Partners, Blackstone Group, Carlyle Group,

Kohlberg Kravis Roberts, Hellman & Friedman,

AlpInvest Partners

9.7

Leveraged

Buyout

Data

2007

Univision

TPG Capital, Providence Equity Partners, THL

Partners, Madison Dearborn Partners, and Haim Saban

13.7

Leveraged

Buyout

Film/TV

2007

Hulu

Providence Equity Partners

0.1

Investment

Film/TV

2008

Dreamworks

Reliance ADA Group

0.325

Investment

Film/TV

2008

The Weather

Channel

Blackstone, Bain Capital, NBCU

3.5

Leveraged

Buyout

Film/TV

2010

Miramax

Colony Capital

0.66

Leveraged

Buyout

Film/TV

2010

AMC

theaters

J.P. Morgan Partners, Apollo Global Management

---

IPO

Exhibition

2010

CAA

TPG Capital

0.165

Min. Stake

Talent

2011

Nielsen

Company

THL Partners, Blackstone Group, Carlyle Group,

Kohlberg Kravis Roberts, Hellman & Friedman,

AlpInvest Partners

---

IPO

Data

2012

WME

Silver Lake

~0.250

Min. Stake

Talent

2012

Providence's

share in Hulu

News Corp, Disney, NBCU

0.2

Exit

Film/TV

2013

WME

Silver Lake

0.5

Maj. Stake

Talent

2013

IMG

WME/Silver Lake

2.2

Acquisition

Talent

2014

CAA

TPG Capital

0.225

Maj. Stake

Talent

2016

UFC

WME/Silver Lake, KKR

Acquisition

Film/TV

2018

Wanda/AMC

Silver Lake

0.6

Investment

Exhibition

many others. Far from its halcyon days of Gone with the Wind (Victor Fleming, 1939) and The

Wizard of Oz (Victor Fleming, 1939), MGM struggled for many years, losing $1.6 billion over

just six years in the 1990s.

Seizing the opportunity to acquire a distressed asset, a consortium of

investors purchased MGM for $4.85 billion in 2004, each getting a sizable stake: Providence

Equity Partners (34 percent), TPG Capital (23 percent), Comcast (21 percent), Sony (14 percent),

and DLJ Merchant Partners (8 percent). As with most PE deals, this one was highly leveraged,

and MGM was saddled with $3.7 billion of debt.

On paper, MGM’s assets looked promising: a 4,000+ film library, 43,000+ hours of

television, and lucrative franchises like James Bond, Rocky, and Spider-Man. Sony hoped to

exploit this content catalogue with cross-content synergies, while Comcast intended to populate

its cable and on-demand channels. However, the DVD market had just begun to decline in 2004;

the digital sales, rentals, and subscription market had yet to take off; and MGM was releasing

few films of its own. Furthermore, the standard private equity playbook of mass layoffs

backfired: “so many people were let go,” according to Variety, “that MGM was no longer a

viable operating company.”

By 2010, the company was drowning in interest payments on its

debt to the tune of $300 million a year and filed for bankruptcy in order to clear its debt. With a

loan from JPMorgan Chase and two hedge funds, Anchorage Advisors and Highland Capital

Management, it would reemerge the following week, but the original PE firms would lose out on

their investment (as would any pension funds or endowments involved). The subsequent layoffs

were, of course, severe.

In 2007, during the height of the pre-crash private equity boom, an even larger leveraged

buyout occurred with the $13.7 billion takeover of Univision, the Spanish-language broadcasting

giant. As the owner of the largest media properties in the fastest-growing demographic segment

of the U.S. media industry, Univision was a prime target. It attracted two consortiums, the first

including PE giants KKR, Carlyle, and Blackstone, and the second, successful consortium

consisting of Providence Equity Partners, TPG, THL, Madison Dearborn Partners, and Saban

Capital Group.

The latter group leveraged their deal with a debt level twelve times Univision’s

annual cash flow, twice the norm of buyouts during that time.

Within two years, Univision was

weighed down by nearly $11 billion in debt, forcing it to sell its music arm to Universal Music

Group (strengthening Universal’s monopolistic position in the music market) and to conduct

multiple rounds of layoffs, including “periodic staff purges and management restructuring.”

2017, Univision’s capacity to produce compelling content was severely hampered, and it ceded

almost half of its audience to rival Telemundo. Amidst declining advertising revenues, its PE

firms are seeking to exit their investment by filing for an IPO in order to pay off its now-

maturing $9 billion debt.

Another prominent media company acquired during the private equity boom, in 2006,

was Nielsen, then the Dutch publishing company VNU NV, owner of Nielsen Media Research

and venerable industry trade press publications Adweek, The Hollywood Reporter, and Billboard.

Again, we can witness the private equity formula: a consortium of PE companies (in this case,

KKR, THL, Blackstone, Carlyle, Hellman & Friedman, and AlpInvest Partners) acquires the

company for an enormous price ($9.7 billion), saddles it with excessive debt (still $8.6 billion

five years later), strips its assets (the iconic publications) for capital extraction, slashes its

workforce (in a 4,000 person “restructuring”), and exits the investment with a profit achieved

through financial engineering. In 2011, their return was estimated at 10 percent, far higher than

typical investments over that time period.

The fallout of this deal for Hollywood’s trade press is another example of private equity

impropriety. In 2009, the PE-managed Nielsen sold its suite of trade publications to another

investment firm, Guggenheim Partners, which acquired the properties in partnership with

Pluribus Capital, naming the new company e5 Global Media. The entity experienced more

turmoil and cost-cutting, was renamed Prometheus Global Media, and was then subsumed under

the Guggenheim Digital Media division. Guggenheim further built the library with more

publishing assets, including Backstage, Film Journal International, and Mediabistro, before the

entire catalogue of publications was spun out into its own company, Eldridge Industries. This

hot-potato ownership, in which a media property bounces between multiple investment firms,

each attempting to extract profit at the expense of labor, is not uncommon.

For example, Dick Clark Productions, the historic production company created in 1957

for its founder’s radio show and subsequent television shows, which include American

Bandstand (ABC, 1957–1987) and The Dick Clark Show (ABC, 1958–1960), continues to

produce variety, event, and award shows to this day. Its contemporary management, however, is

rocky, to say the least. In 2002, it attracted the interest of investment firms Mosaic Media, then

Mandalay Entertainment in 2004, before being taken over by the private equity firm Red Zone

Capital Management in 2007. It was then sold again to a partnership led by Guggenheim Partners

in 2012. Following a failed deal with China’s Wanda Group that valued the company at about $1

billion dollars, Dick Clark Productions joined the aforementioned Eldridge Industries in 2017. A

year earlier, to strengthen its trade publication portfolio, Eldridge acquired SpinMedia, adding

online publications tailored to specific music audiences—Spin (alternative rock), Vibe (R&B and

hip hop), and Stereogum (indie)—creating a diverse stable of niche media content coverage. In

2018, Eldridge’s media holdings, now spanning trade publications, Dick Clark Productions,

Media Rights Capital (which will be discussed below), and a minority stake in the trendy film

distributor A24, were merged into an entity called Valence Media. It is worth pausing to consider

the consequences of all this private equity mismanagement and financial extraction for

Hollywood’s trade press. While The Hollywood Reporter, Billboard, and the others mentioned

are now operated by Valence, a boutique investment firm, most of the rival trade press and

entertainment publications (including Variety, Deadline Hollywood, Indiewire, and Rolling

Stone) are owned by Penske Media Corporation, which is funded by Quadrangle Capital

Partners, a private equity firm, and Third Point LLC, a hedge fund. As Hollywood and the music

industry are ravaged by private equity extractions, its private equity based trade press is

disincentivized to provide critical coverage of the devastation.

Silver Lake Partners and TPG Capital, Hollywood’s Private Equity Shadow Studios.

Following the financial crisis in 2008, many financial elites sought to take advantage of low

interest rates and a landscape of distressed assets. Two private equity firms, Silver Lake Partners

and TPG Capital, took a particular interest in Hollywood and over the subsequent years have

assembled their own versions of film and television conglomerates. Hollywood’s talent agencies

were the primary targets, the first of which was TPG’s investment in Creative Artists Agency,

one of the industry’s two most powerful agencies. In 2010, TPG spent about $165 million for a

35 percent stake in the company, then invested another $225 million in 2014 to give it a 53

percent stake.

Similarly, Silver Lake Partners acquired a 31 percent stake in William Morris

Endeavor (WME), the industry’s other dominant talent agency, for $200 million in 2012, then

followed that with a $500 million investment in 2014 to give it the largest ownership stake. With

Silver Lake's funding, WME acquired sports and media group International Management Group

(IMG) for $2.4 billion in 2013; the combined WME-IMG was now larger than its rival CAA in

scale, with a market capitalization of roughly $5.6 billion.

Reflecting its conglomerate status,

WME-IMG was reorganized into a holding company in October 2017 and renamed Endeavor, a

callback to co-CEO Ari Emanuel’s original company, Endeavor Talent Agency.

As we’ve seen, the first step in the private equity playbook is lowering overhead, and

both CAA and Endeavor have been lowering costs by laying off several top-earning agents,

cutting bonuses, and reducing expenses.

“Suddenly guys who had been there for fifteen, twenty

years, who thought they were just going to be CAA lifers, were getting pushed out without a

parachute,” claims a rival agent.

Salaries and bonuses for top agents are nowhere near their

previous heights, but those who have remained at CAA and Endeavor have been incentivized

with bits of equity that could translate to big paydays, if and when the companies go public.

Even while cutting labor costs, Silver Lake and TPG have been spending freely in order

to expand the scope of Endeavor and CAA’s business. Typically, in order to avoid conflicts of

interest, film and television union contracts forbid talent agencies from participating in media

production; consequently, talent agencies have moved aggressively into content outside of just

film and television. Endeavor has been the most aggressive on this front, with expansions into

sports (acquiring IMG and Professional Bull Riders), digital (partnering with Turner on an

eSports league), events (acquiring Donald Trump’s Miss Universe Organization), fine art

(partnering with Frieze, a contemporary art fair), and other agencies (acquiring the Wall Group

and a stylist agency business as well as Global eSports Management). By 2016, Endeavor was

ready to facilitate massive deals itself, with the acquisition of the professional mixed martial arts

organization Ultimate Fighting Championship. The purchase cost $4 billion, financed by Silver

Lake Partners, KKR, and MSD Capital.

Amidst this acquisition spree, the talent agencies also began to skirt around the

prohibition against film and television production as early as 2009. Both CAA and Endeavor,

through the proxy of their private equity owners, set up inscrutable financing arms. Endeavor

owns a stake in the Raine Group, a merchant bank formed with the help of Ari Emanuel in 2009,

which invests in digital, media, and entertainment companies, such as Vice. Through Raine,

Endeavor invests in Media Rights Capital, previously-mentioned, Valence-owned, opaquely-

named firm described as a “hybrid financier, rights-holder, and development pod.”

It has been

involved in a number of films that primarily feature so many Endeavor clients (actors and

directors) that it could hardly be a coincidence, including Ted (Seth MacFarlane, 2012), Elysium

(Neill Blomkamp, 2013), 22 Jump Street (Phil Lord and Chris Miller, 2014), and Furious 7

(James Wan, 2015). Other investors in Media Rights Capital include Goldman Sachs, AT&T,

advertising giant WPP, and the private equity firms ABRY Partners and Guggenheim Partners.

In 2015, Silver Lake Partners acquired Cast & Crew Entertainment Services for $700

million. This forty-year-old company provides many back-end accounting services to Hollywood

productions, such as payroll processing, residuals processing, workers’ compensation services,

health insurance, labor relations, production incentives, and production tax credit financing. The

following year, Silver Lake acquired Cast & Crew’s main competitor, CAPS Payroll. Owning

the combined data of two of the biggest payroll companies in Hollywood is an obvious strategic

advantage, as the same company negotiates wages and residuals for its clients while having the

historical and industry-wide data about those rates. Silver Lake has thus fashioned a new type of

content business with financialized vertical integration. It now facilitates the talent (Endeavor),

data (Cast & Crew and CAPS), financing and production (Media Rights Capital, Endeavor

Content, IMG Original Content), exhibition (ownership stake of AMC Theatres), and investment

portfolio (Raine, WME Ventures). Silver Lake’s “shadow studio” is itemized in Table 4, along

with TPG’s.

Table 4. Silver Lake and TPG Capital’s investments in the media sector which constitute

vertically financialized ‘shadow studios.’ Source: Wall Street Journal and Bloomberg

Businessweek.

TPG Capital

Silver Lake

Talent Agency

CAA

Endeavor (WME-IMG)

Data

Cast & Crew

CAPS Payroll

Content Production

STX

Media Rights Capital

Univision

Miss Universe

Funny or Die

UFC

Platform One Media

Endeavor Content

Vice Media

IMG Original Content

wiip

Exhibition

AMC Theatres

Investment Arms

Evolution Media Capital

Raine

CAA Ventures

WME Ventures

Creative Labs

At TPG-owned CAA, there has been a similar financialized content production arm in

STX Entertainment, a film and television studio created by film producer Robert Simonds and

TPG managing partner Bill McGlashan in 2014. TPG and Hony Capital, a Chinese private equity

firm, provided the initial investment, with subsequent funding coming from a number of wealthy

investors and a variety of East Asian firms, including Huayi Bros. Media, China’s largest private

film company; Tencent, the Chinese tech giant; and PCCW, the Hong Kong telecom and media

company. The publicized strategy is to develop, produce, and self-distribute a slate of eight to

twelve films, targeting the star-driven, mid-range budget ($20-$80 million) movies for adult

audiences that the traditional studios have neglected in favor of superhero franchises and

children’s animation. Another way to look at STX, however, is as a production arm of CAA, as

both are owned by TPG.

Just as Silver Lake features its own Endeavor talent in its Media Rights Capital

productions, TPG overwhelmingly features its own CAA talent in its STX productions. The Gift

(Joel Edgerton, 2015), Free State of Jones (Gary Ross, 2016), Bad Moms (Jon Lucas and Scott

Moore, 2016), and The Circle (James Ponsoldt, 2017) all feature above-the-line talent

represented by CAA. STX negotiates its own distribution agreements directly with the big North

American theater chains (i.e., AMC Theatres, Regal, and Cinemark), and its Chinese investors

give it an advantage in being approved for release in their heavily-regulated and highly sought-

after market. Silver Lake’s attempt at fashioning its own content studio has thus far produced

mostly underperforming film and television, relative to their budget, and though it relies on

Showtime and Universal Home Entertainment for distribution in later release windows, its

financialized vertical integration has managed to mostly avoid the big Hollywood conglomerates

and represents a new approach to content production and distribution.

In recent years, the talent agencies have become bolder in flaunting the rules against

production. Endeavor operates both IMG Original Content, which has more than fifty series and

specials on its roster, as well as Endeavor Content, which has financed, packaged, or sold more

than 100 films and TV shows since 2016, including Academy-Award winners Arrival (Denis

Villeneuve, 2016), La La Land (Damien Chazelle, 2016), and Manchester by the Sea (Kenneth

Lonergan, 2016), as well as the Emmy-winner Killing Eve (BBC, 2018-present). Known in

industry jargon as “double-dipping,” the involvement of talent agencies in production was

expressly banned by the Screen Actors Guild (SAG) for nearly sixty years, but its legality has

been in limbo since the “master franchise agreement” between SAG and the talent agencies

expired in 2002. As mentioned, this flagrant conflict of interest has caused strife with the WGA,

which began flagging the practice as early as March 2018, claiming that “agencies have little

incentive to defend or improve quotes (writers’ previous pay) because their compensation is not

tied to the well-being of their client.”

The talent agencies can afford to be in open conflict with the WGA in part because film

and television talent are no longer their sole focus. The expansion into other talent sectors such

as sports, fashion, and fine art is one example of this diversification, while another is the move

into corporate venture capital. CAA Ventures, for instance, invests in early-stage startup

companies, including Uber (transportation networking), Meerkat (mobile live streaming), Funny

or Die (comedy-focused website and production company), and WhoSay (social media services

and branding for celebrities). Evolution Media, another investment subsidiary within CAA, also

provides seed funding to startups with capital from TPG’s fund, as well as negotiating and

structuring over $37 billion of sports media deals since 2015.

Endeavor also has a pair of

investment subsidiaries, the aforementioned Raine and WME Ventures, that offer access to an

even broader network, including film, television, digital media, fashion, music, sports, brands,

and events. Because they are housed within talent agencies owned by private equity firms, these

corporate venture capital firms offer their investment companies not only seed capital but also

unique and valuable consultation on navigating Hollywood’s singular culture and connection to

the agency’s talent roster.

There is another finance-related and talent-adjacent entity that has increased its role

within Hollywood, even more directly tied to “the 1 percent.” At least as far back as Howard

Hughes, Hollywood has been a destination for the wealthy to spend their money in pursuit of

fame and glamour. Financialized Hollywood is even more welcoming to this kind of patronage,

with the added dimension of affluent heirs and heiresses spending their inheritance. The scope of

boutique production and distribution companies funded by plutocratic patrons is outlined in

Table 5, along with selections from their film and television roster. Blending “independently

wealthy” with “independent film,” many of the films facilitated by billionaire boutiques are

directed by auteurs, designed for awards, and marketed as “prestige.” Where is the financing

from these films coming from? Idle capital earned by oil barons, shipping magnates, Wall Street

vultures, and Silicon Valley tycoons.

If not for the spoiled children of the wealthy, it would be more difficult for aging legends

such as Martin Scorsese and Terrence Malick, acclaimed auteurs such as Alfonso Cuarón and the

Coen brothers, television innovators such as Sam Esmail and Cary Joji Fukunaga, as well as

newer filmmakers like Yorgos Lanthimos and Lulu Wang to get their films financed. It is thus

tempting to consider this instance of financial capital as benign, even charitable. However, this

subservience to plutocracy has reached new, explicit levels in contemporary Hollywood, far

beyond the constraints to create challenging work in Hollywood that filmmakers have always

faced. Megan Ellison, daughter of Larry Ellison (founder of Oracle and one of the wealthiest

men in the world), has used her massive inheritance to become the patron to filmmakers like

Kathryn Bigelow, Paul Thomas Anderson, and Spike Jonze. The name of her company?

Annapurna, the Hindu goddess of nourishment. As we are witnessing in many sectors,

democracy can’t function merely on the benevolance and “trickle down” ideologies of the

wealthy; filmmaking is no different. What does it mean that Hollywood is increasingly reliant on

the whims and vanity of the one percent? In a time of extreme wealth inequality, Hollywood’s

Table 5. Boutique production/distribution companies funded by plutocratic patrons in

Hollywood. Source: Variety and The Hollywood Reporter.

Year

Company

Plutocratic Patron

Films

2000

Anonymous

Content

Laurene Powell Jobs,

widow of Steve Jobs

(Apple)

Spotlight (Tom McCarthy, 2015), The Revenant (Alejandro

González Iñárritu, 2016), Mr. Robot (USA, 2015-2019), True

Detective (HBO, 2014-present)

2004

Participant

Media

Jeff Skoll (eBay)

Good Night, and Good Luck (George Clooney, 2005), The

Inconvenient Truth (Davis Guggenheim, 2006), Citizenfour

(Laura Poitras, 2014), Roma (Alfonso Cuarón, 2018)

2004

Sidney

Kimmel

Entertainment

Sidney Kimmel (Jones

Apparel Group)

The Lincoln Lawyer (Brad Furman, 2011), The Place Beyond the

Pines (Derek Cianfrance, 2013), Hell or High Water (David

Mackenzie, 2016)

2005

Big Beach

Marc Turtletaub, son of

Alan Turtletaub (The

Money Store)

Little Miss Sunshine (Valerie Faris and Jonathan Dayton, 2006),

Away We Go (Sam Mendes, 2009), Safety Not Guaranteed

(Colin Trevorrow, 2012), The Farewell (Lulu Wang, 2019)

2009

Cross Creek

Pictures

Timmy Thompson (oil

tycoon)

The Black Swan (Darren Aronofsky, 2010), The Ides of March

(George Clooney, 2011), Hacksaw Ridge (Mel Gibson, 2016)

2009

Faliro House

Productions

Christos V.

Konstantakopoulos, son

of Vassilis C.

Konstantakopoulos

(shipping tycoon)

Before Midnight (Richard Linklater, 2013), Only Lovers Left

Alive (Jim Jarmusch, 2014), The Lobster (Yorgos Lanthimos,

2016), The Founder (John Lee Hancock, 2016)

2010

Skydance

Media

David Ellison, son of

Larry Ellison (Oracle)

True Grit (Ethan Coen and Joel Coen, 2010), Star Trek Into

Darkness (J.J. Abrams, 2013), Mission Impossible - Rogue

Nation (Christopher McQuarrie, 2015)

2011

Waypoint

Entertainment

Ken Kao, son of Min Kao

(Garmin)

Silence (Martin Scorsese, 2016), Knight of Cups (Terrence

Malick, 2016), The Nice Guys (Shane Black, 2016), Song to

Song (Terrence Malick, 2017)

2011

Annapurna

Pictures

Megan Ellison, daughter

of Larry Ellison (Oracle)

20th Century Women (Mike Mills, 2016), Foxcatcher (Bennett

Miller, 2015), Her (Spike Jonze, 2016), American Hustle (David

O. Russell, 2013), Zero Dark Thirty (Kathryn Bigelow, 2012)

2012

Black Bear

Pictures

Teddy Schwarzman, son

of Stephen Schwarzman

(Blackstone)

The Imitation Game (Morten Tyldum, 2014), Gold (Stephen

Gaghan, 2016), All is Lost (J. C. Chandor, 2013), Broken City

(Allen Hughes, 2013)

2012

RatPac

Entertainment

James Packer, son of

Kerry Packer (Australian

media tycoon)

Gravity (Alfonso Cuarón, 2013), The Lego Movie (Chris Miller

and Phil Lord, 2014), Mad Max: Fury Road (George Miller,

2015), Batman v Superman (Zack Snyder, 2016)

2013

Boies/Schiller

Film Group

David Boies

(lawyer/private equity)

Gold (Stephen Gaghan, 2016), Jane Got a Gun (Gavin

O'Connor, 2016), The Babysitter (McG, 2017)

2014

Black Label

Media

Molly Smith, daughter of

Fred Smith (FedEx)

La La Land (Damien Chazelle, 2016), Sicario (Denis

Villeneuve, 2015), Breaking a Monster (Luke Meyer, 2015)

2015

Primeridian

Entertainment

Arcadiy Golubovich, son

of Alexei Golubovich

(Russian oil tycoon)

Third Person (Paul Haggis, 2014), 99 Homes (Ramin Bahrani,

2015), A Hologram for the King (Tom Tykwer, 2016)

ability to comment on our crisis is immobilized by its dependence on that same disparity. Truly

radical film and television that challenges capitalist oppression will require a non-plutocratic

structure.

This is not to say that these billionaire boutiques are not producing any interesting film or

television. In fact, Black Bear Pictures alone has produced progressive films like the agri-

business critique At Any Price (Ramin Bahrani, 2013), the corporate-mining drama Gold

(Stephen Gaghan, 2016), and the Barack Obama biography Barry (Vikram Gandhi, 2016).

However, Black Bear was founded by Teddy Schwarzman with money from his father, Stephen

Schwarzman, the co-founder of Blackstone, the private equity firm that holds approximately

$550 billion in assets and was involved in the aforementioned buyouts of Univision and Nielsen,

among countless others in the wider economy. Blackstone’s landlord practices have been

criticized by the United Nations for “wreaking havoc” in communities with “aggressive

evictions” and “constant escalation of housing costs,” contributing to the “financialization of

housing.”

Schwarzman also once remarked that Barack Obama’s mere suggestion to raise the

carried interest tax rate (key to private equity profit) was “like when Hitler invaded Poland in

1939.”

In this case, following the money raises some uncomfortable questions regarding the

culpability of ‘indie’ Hollywood’s relationship with plutocracy. Are these films progressive? Or

do they cynically exploit progressive themes for the further enrichment of their plutocratic

patrons? Regardless of your position, the mere existence of these films is a fitting, paradoxical

symbol of our gilded age.

Content Catalogues as Private Equity Investment Portfolio. Cultural producers “have to

insure themselves against the risks of failure associated with cultural commodities,” according to

French media theorist Bernard Miège, and “the construction of a catalogue [is] the only way to

spread the risks.”

For this reason, film libraries have always been a lucrative asset for the

Hollywood system, a history Eric Hoyt dates back to the 1910’s.

Unlike individual films,

which are a risky venture, film libraries are a reliable, diversified asset with long-term profit

potential, no matter the pedigree or built-in audience. Private equity, consequently, has looked

upon Hollywood libraries as robust investment opportunities. Again, Bain Capital was the

pioneer in this strategy, acquiring LIVE Entertainment, a home video distributor, back in 1997.

Later named Artisan Entertainment, it grew its library from 2500 titles to 7000 through

acquisitions of the rights of Hallmark Entertainment and Republic Entertainment, among others.

(It also produced smash hits like The Blair Witch Project [Eduardo Sánchez and Daniel Myrick,

1999]). Artisan’s CEO, Amir Malin, has since formed Qualia Capital, which manages and

advises on intellectual property asset portfolios, funding acquisitions such as the Rysher

Entertainment, Gaylord, and Pandora libraries, with the backing of Canyon Capital Partners. As

mentioned previously, the MGM acquisition by Providence, TPG, and others in 2004

demonstrates the limits of this investment approach, as the timing of that deal—just as DVD

sales were peaking but too early for streaming video’s rise—resulted in bankruptcy. Other types

of content portfolio investment that became popular during that period’s easy credit have proven

equally risky.

In the years prior to the Great Recession, Wall Street capital flooded into Hollywood.

Whereas previously the studios typically relied on passive, revolving lines of credit from banks,

funds were now designed for private equity firms, hedge funds, and investment banks to actively

participate in financing smaller catalogues of films. An estimated $15 billion was pumped into

“slate-financing,” in which a series of films (upwards of twenty-five) were produced from the

same pool of capital, thereby diversifying the risk and return.

Former venture capitalist turned

film financier Ryan Kavanaugh excelled in arranging these investment funds. Gun Hill I, for

example, was the name of a $600 million fund for eleven Sony films and nine Universal films in

2006; one year later, Gun Hill II raised another $700 million for another twenty films.

Both

funds were backed by Deutsche Bank and performed disastorously for investors. By 2007, every

major studio had lined up PE backers for at least one slate. Kimberly Owczarski has detailed the

use of slate-financing by both Kavanaugh’s Relativity Media and Legendary Pictures,

considering the ways in which Wall Street finance allowed these minor studios the temporary

ability to compete with the major studios.

With the former ending in corruption,two instances

of bankruptcy, and a new group of investors attempting to resuscitate it, and the latter resulting in

an acquisition by Chinese media giant Wanda, these two examples demonstrate the destructive

and consolidating impact of Wall Street finance in Hollywood.

Another destructive example is the case of Steven Mnuchin, a former Goldman Sachs

trader and hedge fund manager, who exploited the housing crisis and then used that money to

enter Hollywood. The story begins with Mnuchin acquiring IndyMac, a mortgage lending bank

that had failed in 2008 and was seized by the United States Federal Deposit Insurance

Corporation (FDIC). With a group of investors, Mnuchin renamed IndyMac OneWest Bank and

then aggressively foreclosed on homeowners for profit, earning the accusation of “widespread

misconduct” by the state attorney general department for repeatedly breaking California’s

foreclosure laws and forging documents.

The investors put $1.5 billion into the bank and sold it

for more than $3 billion five years later. Mnuchin then turned his vulture capitalist tendencies to

Hollywood. His financing firm Dune Entertainment invested in a catalogue of more than seventy

films with Fox starting in 2006, while another funding company, Rat-Pac Dune Entertainment,

founded with producer-director Brett Ratner and billionaire James Packer in 2013, formed a

seventy-five picture deal with Warner Bros. Mnuchin has profited handsomely from such

megahits as Avatar (James Cameron, 2009), The LEGO Movie (Chris Miller and Phil Lord,

2014), American Sniper (Clint Eastwood, 2014), Batman v Superman: Dawn of Justice (Zack

Snyder, 2016), and Suicide Squad (David Ayer, 2016), as well as, appropriately, Wall Street:

Money Never Sleeps (Oliver Stone, 2010). As Secretary of the Treasury under President Donald

Trump, Mnuchin has turned to a far larger transfer of capital to the wealthy, helping orchestrate

the $1.9 trillion Tax Cuts and Jobs Act. By 2027, the bill will actually raise taxes on most

Americans, while 82% of the benefits will go to the top 1 percent.

Mnuchin fared better in Hollywood than most; despite their sophisticated risk-

management strategies, many financiers suffer when they encounter “Hollywood accounting,”

the dubious, byzantine math by which film-financing is engineered asymmetrically so that

individual films rarely achieve profit on paper yet the distributors still earn massive fees.

Furthermore, the films offered up to slate-financing deals are often the riskiest studios have; they

prefer to finance their reliable films themselves, particularly their franchises, and retain the bulk

of that revenue. Compounding this difficulty, the credit crunch forced many financiers to pull out

of these slate-financing deals in 2007 and 2008 and sell their Hollywood assets at a discount of

up to seventy percent.

Most of these deals were considered failures, with investors losing

hundreds of millions of dollars. Of course, every failure in the finance market just means another

opportunity for some other alignment of capital.

Content Partners, for instance, was more than happy to buy these distressed investments.

A financial boutique that acquires intellectual property, founded by two financiers who had

worked for talent agencies, Content Partners began in 2006 as a sort of payday loan firm for

profit participation. They would offer actors, directors, and producers a lump sum of cash in

exchange for the revenues associated with the long-term release windows of syndication,

physical media sales, and streaming rights. Backed by JP Morgan, Carlyle, and other wealthy

investors, Content Partners expanded into larger intellectual property assets, including the

discounted slate-financing deals, as well as a 50 percent stake in CBS’s lucrative CSI franchise

(700+ episodes that are on the air in 200+ countries) for an estimated $400 million.

In 2017,

Content Partners acquired Revolution Studios, which itself was a private equity-owned

production company and intellectual property management firm, having acquired the libraries of

Morgan Creek International, Cold Spring Pictures, and OK Films.

By 2019, the aggregated

investment portfolio of Content Partners has reached 400 films and nearly 3000 hours of

television.

Unlike in 2004 when the MGM library proved overvalued, Content Partners’ library is

now proving a lucrative asset, easily exploitable in the gold-rush atmosphere of digital streaming

distribution led by Netflix, Amazon, Hulu, Disney+, Apple TV+, HBO Max, CBS All Access,

Peacock, and others. Diverse libraries are a crucial lure for attracting digital subscribers to

streaming platforms; consequently, private equity firms have been securing them as much as

possible. In 2010, Disney sought to unload Miramax’s famed indie library of 700+ films, which

consists of almost 300 Oscar nominees, including Pulp Fiction (Quentin Tarantino, 1994), There

Will Be Blood (Paul Thomas Anderson, 2007), and No Country for Old Men (Ethan Coen and

Joel Coen, 2007). Tom Barrack, CEO of private equity firm Colony Capital, along with

investment from Tutor Perini, a construction magnate, acquired the library for nearly $700

million.

Colony Capital barely added any new productions to the library while they owned it;

nevertheless, they were able to sell it in 2016 to Qatar-based broadcaster BeIN Media Group and

earn 3.5 times their equity investment, demonstrating the increasing value of content libraries.

A series of smaller private equity library deals have taken place since the rise of

streaming as well. In 2011, the PE firm Vista Equity Partners invested in MarVista

Entertainment, a production, distribution, and acquisition company with 2,500 hours of film and

television content. In 2015, the consortium Ambi Group, backed by PE firm Raven Capital

Management, acquired the library of Exclusive Media Group, which contains approximately 400

titles, including Cruel Intentions (Roger Kumble, 1999), Memento (Christopher Nolan, 2000),

The Mexican (Gore Verbinski, 2001), Donnie Darko (Richard Kelly, 2001), and The Ides of

March (George Clooney, 2011). In order to add value to the library, a film fund was also

established to finance and produce mid-level, star-driven films, similar to the previously

mentioned STX.

These catalogues pale in comparison to the size and scope of the catalogues held by the

major Hollywood studios. Warner Bros., for example, holds one of the most extensive film

libraries, with rights to over 7,000 feature films that it monetizes across various release windows,

including network television, cable, premium cable, OnDemand, DVD and Blu-ray, digital sales

and rentals, and streaming platforms. A prolific producer of television since the 1950s, Warner

Bros. owns 5,000 television programs, making for tens of thousands of episodes; combined with

its film library, this amounts to 80,000 hours of programming.

The Warner Bros. catalogue, set

to be utilized by HBO Max, was a key asset motivating AT&T’s acquisition of Time Warner,

now WarnerMedia. Conglomerates with a historical connection to one of the three major

broadcast networks, meanwhile, have even larger television catalogues. Comcast, for instance,

inherited NBCUniversal’s catalogue, which includes the rights to 100,000 television episodes

and 5,000 films that will fuel its Peacock streaming service.

The major film and television

conglomerates are growing and consolidating their libraries as they transition into a streaming-

based distribution system. The debt-financed work of private equity accelerates this

consolidation.

Financing Media Consolidation. The result of institutional investment, venture capital, private

equity, and financial engineering in Hollywood is a surge in the consolidation that has been

transforming the media sector since the 1970s. Financialization is facilitating an increase in scale

in a global marketplace and permitting big media companies to take on massive debt to enact

mergers and acquisitions, as seen in Table 6. Telecommunications companies have targeted

content companies in order to expand beyond their traditional role as mere providers of network

access , in such massive deals as Comcast’s acquisition of NBCUniversal and AT&T’s purchase

of DirecTV and Time Warner. Content companies, meanwhile, have sought out sources of

intellectual property in order to expand content catalogues, as the sector transitions to streaming

technology in which viewers privilege access over ownership. Media industry historians have

certainly written about mergers, acquisitions, and the broader issue of concentration of media

ownership before, but we need to understand the increasingly financialized dimensions of this

ownership better, especially its private equity aspects. The impact of PE’s financial engineering

on the cultural industries should not be underestimated; as Matthew Crain notes in an early look

at this phenomenon, “private equity ownership exacerbates the ongoing evisceration of our

media institutions.”

The concentration of ownership in Hollywood, hastened by the financial sector over the

last fifteen years, is visible in the market share of total theatrical box office. Figure 1 is a

Table 6. Mergers and acquisitions in Hollywood and American telecommunications, 2004-2019.

Source: Wall Street Journal and Bloomberg Businessweek.

Year

Target

Buyer/Partner/Investor

Cost/bn

Type

Medium

2004

Universal

General Electric/NBC

5.8

Merger

Film/TV

2005

AT&T

Southwestern Bell Corp

Merger

Telecom

2006

BellSouth Corp

AT&T

Acquisition

Telecom

2006

Pixar

Disney

7.4

Acquisition

Film/TV

2006

Adephia Cable

Comcast

5.6

Acquisition

Telecom

2009

NBCU

Comcast

37.3

Majority Stake

Film/TV

2009

Marvel

Disney

4.2

Acquisition

Film/TV

2012

AMC Theatres

Dalian Wanda Group

2.6

Acquisition

Exhibition

2012

Lucasfilm

Disney

4.1

Acquisition

Film/TV

2013

NBCU (GE's 49%)

Comcast

16.7

Acquisition

Film/TV

2013

Virgin Media

Liberty

16.3

Acquisition

Telecom

2014

DirecTV

AT&T

48.1

Acquisition

Telecom

2015

Time Warner Cable

Charter

78.7

Merger

Telecom

2015

Charter

Liberty Broadband

4.3

Investment

Telecom

2016

Yahoo

Verizon

4.8

Acquisition

Telecom

2016

Legendary

Dalian Wanda Group

3.5

Acquisition

Film/TV

2016

Dreamworks Animation

Comcast

3.8

Acquisition

Film/TV

2016

Starz

Lionsgate

4.4

Acquisition

Film/TV

2016

Odeon & UCI Cinemas

AMC Theatres

1.2

Acquisition

Exhibition

2016

Carmike Cinemas

AMC Theatres

1.1

Acquisition

Exhibition

2017

TimeWarner

AT&T

85.4

Acquisition

Film/TV

2018

Scripps

Discovery

14.6

Acquisition

Film/TV

2018

Regal

Cineworld

3.6

Acquisition

Exhibition

2019

Fox

Disney

52.4

Acquisition

Film/TV

2019

CBS

Viacom

Merger

Film/TV

Disney

Universal

Warner

Sony

Fox

Paramount

Lionsgate

Dreamworks

Independents

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Market Share

Year

Figure 1. Market Share of United States and Canada Box Office for Film Releases from 2004 to 2016. Data source: Box Office Mojo.

representation of this increased domination of the major studios in the financial era. The

combined market share of all independent film distributors hovers between a mere 6 to 10

percent, while global blockbuster franchises propel Disney, Universal, and Warner Bros. to

larger and larger shares. Since its acquisitions of Pixar, Lucasfilm, and Marvel, along with their

lucrative intellectual properties, Disney has dramatically increased its market share; its

acquisition of key Fox assets will see its market share approaching 40 percent and a clearly

dominant position in the industry. The future imagined by David Mitchell in the novel Cloud

Atlas, in which movies are just known as “disneys,” might not be too far off.

As it does elsewhere in the gilded economy, such consolidation results in stagnation,

fewer jobs, reduced operational capacity, homogeneity, and higher prices. Total movie ticket

sales are on a steady decline, though profits have been propped up by increasing ticket prices,

particularly 3D surcharges, as well as continued expansion into global markets, especially China.

Hollywood is not yet the oligopoly of three (Universal, Warner, Sony) that the recorded music

industry has become, but if that industry’s experience with private equity and financialization is

any indication, further concentration and inequality in Hollywood is on the horizon.

Hollywood shares another parallel with the music industry in that a new streaming

technology platform with considerable financial backing is transforming its distribution model.

Just as Spotify is leading to a sea change in the economics and consumption patterns of recorded

music, Netflix is pioneering a transition in the film and television industry. Unlike music,

however, where the line between consumption (most streaming music listening occurs on

Spotify, Apple Music, or Amazon Music) and catalogue production (most popular musicians are

signed to Universal, Warner, or Sony) is fairly distinct, resulting in minimal competition or

innovation, the film and television industry is much more unsettled and the lines between

production, distribution, exhibition, and consumption much more blurred.

Netflix has moved

aggressively into this precarious situation, transitioning from a DVD delivery service into a

global streaming video platform, content producer, and the belle of Wall Street. Crossing the 100

million subscriber mark in 2017, Netflix shares rose 13,000 percent since its IPO in 2002,

making for the second highest returns on the S&P 500 over the last fifteen years.

Originally

seen by Hollywood as just another release window, Netflix has become something of a frenemy

to the legacy conglomerates: a valuable destination to license its wares but also a threat to its

dominance as Netflix moves into original content production. Hedging their bets, four of the

major studios developed an important counterstrategy: their own streaming platform, Hulu.

With early investment from Providence Equity Partners, Hulu launched in 2007 and has

grown into a formidable Netflix rival. Although it lacks Netflix’s global footprint and has fewer

subscribers, Hulu has quickly surpassed Netflix in an important long-term metric: catalogue size.

In addition to next-day availability of television shows from four of the five major networks,

Hulu secured exclusive deals with Comedy Central, AMC, Bravo, E!, A&E, FX, Syfy, USA, Fox

Sports, PBS, Nickelodeon, and Epix. As Netflix moved into original programming, so did Hulu,

with high-profile, award-winning series. By 2016, Hulu could boast a catalogue spanning more

than 6,600 movies and nearly 3,600 television series, compared to Netflix’s 4,500 and 2,400,

respectively.

For Netflix, this catalogue tally represents a drop by over 50 percent, from a high

of roughly 11,000 titles in 2012.

The company accounts for this drop by claiming it is focusing

on original content production, but the reality is a proxy fight between traditional Hollywood,

Netflix, and Wall Street.

Catalogue size, which reflects the economics of distribution and licensing, is just one of

the battlefronts between legacy Hollywood companies and Netflix; data is another crucial vector.

Essential to Netflix’s public image and branding strategy is the ability to mine its global

consumption data to make content more appealing to target demographics and to fuel the

personalized, algorithmic suggestions for users. But until Disney’s recent purchase of Fox,

leading to their majority ownership of Hulu, it was jointly owned by Disney, Fox, Comcast, and

Time Warner. Though unacknowledged in the trade press, I confirmed with a Hulu executive in

a personal conversation that each of its parent companies have access to its trove of data (a

common feature of corporate venture capital relationships). With such an extensive catalogue

that spans many formats and demographics, the granular consumer data generated by Hulu gave

an important advantage to these four Hollywood conglomerates. It also bound them together in

their cold war with Netflix.

Around 2015, legacy media company executives began to hint openly at a joint effort to

limit Netflix’s ascent. Time Warner CEO Jeff Bewkes argued against undercutting its own

business “by having somebody else [Netflix] pay a fraction of the cost and create a better

inventory on the various shows you yourself invented,” while Discovery CEO David Zaslav

proclaimed that “it’s just not rational that… [we] have allowed [Netflix] to gain so much share

and offer it without our brands.”

FX president John Landgraf indicated a “concerted effort not

to only sell to Netflix,” and Fox CEO James Murdoch declared that “the business rules around

how we sell to [Subscription-Video-On-Demand] providers is changing.”

By this point,

however, Netflix was expanding rapidly; its international expansion was in full force and its

subscriber numbers and stock price climbed along with it.

This is not the first time legacy Hollywood companies have been challenged by new

technology; in fact, Hollywood’s history is one of initially resisting but eventually profiting off

of every technological advancement, from synchronized sound to television syndication to home

video formats and into the digital age. Disney+, HBO Max, and Peacock will soon join Hulu and

CBS All Access (from the newly re-merged ViacomCBS) as legacy Hollywood moves belatedly

but aggressively into direct-to-customer (D2C) streaming distribution. History would suggest

that streaming technology will be merely one more entertainment format that the Hollywood

conglomerates eventually dominate, except this time, the challengers are well-funded by a

financial sector that is chasing dwindling investment opportunities in a hollowed-out economy.

Looking for the next Facebook, Wall Street has rewarded Netflix’s ability to rapidly grow its

global subscriber base, ignoring its growing debt and comparative lack of earnings in the hopes

of a future windfall. Amazon, similarly, received years of Wall Street investment despite a

distinct lack of profits, using that coffer to increase scale and expand into a vast array of

industries, including streaming media. According to JustWatch, a web service that aggregates

what is available on each streaming service, Amazon Prime Video was offering nearly 25,000

films and television series in 2019, a catalogue that dwarfs both Hulu and Netflix. Along with

Apple and Google, each a crucial interface for the digital consumption of film and television, this

handful of tech stocks has come to be known as FAANG: Facebook, Amazon, Apple, Netflix,

and Google. In March of 2019, these five companies together held a market capitalization of $3.1

trillion, a value bigger than the gross domestic product of all but four countries; only the U.S.,

China, Japan, and Germany are bigger than FAANG.

However, total net income for the

FAANG companies in 2018 was only $93 billion, most of which came from Apple’s lucrative

iPhone sales, so the massive market capitalization of FAANG is an extreme form of investor

speculation.

Wall Street is literally banking on a future in which these five companies dominate

and monopolize their respective industries, producing far more income to justify their valuation.

Will traditional Hollywood conglomerates become mere content suppliers to these bigger tech

titans, or will they be able to compete for customers on their own terms? Unfortunately for us as

citizens, the terms of this competition are not content, or culture, but mere financial extraction.

The Future of Financialized Hollywood. Caught up in this swirl of speculation, Hollywood

faces an uncertain future. Its film industry is steady, but declining. The conglomerates have

priced out most competition with ever-increasing budgets, global marketing campaigns, and the

most well-known intellectual properties. Television, however, is in flux and subject to

transformation. There is a confluence of trends moving in opposite directions that suggest, at

best, a volatile, competitive market and, at worst, a bubble ready to burst. Both cable television

channels and scripted television productions have dramatically expanded in the last decade,

which FX President John Landgraf famously referred to as “Peak TV.”

One might assume that

if supply is being increased so acutely, demand must be growing as well, but “cord-cutting,” in

which pricey cable television subscriptions (averaging over a hundred dollars a month) are being

exchanged for more affordable video-on-demand internet services (averaging ten dollars a

month) or free, over-the-air broadcast television, continues to accelerate, reaching nearly 5%

annual decline in 2019.

The other key revenue source in the television ecosystem is advertising sales, which

peaked in 2016 and are projected to decline at least 2 percent a year.

Advertising dollars are

increasingly diverted away from traditional media formats such as television and newspapers and

into Google and Facebook. This “digital duopoly” accounted for 75 percent of all new online ad

spending in 2015—nearly 60 percent of the digital market—and surpassed the television

advertising market in 2017.

Furthermore, overall employment in the broadcasting industries is

declining while expenses are rising. With fewer cable subscriptions, declining advertising

dollars, and increased expenses, one would expect the television industry to be facing “Valley

TV” or “Nadir TV” rather than “Peak TV.” The only explanation is a speculative tidal wave

funded by Wall Street, wherein investors are escalating production and distribution, hoping that

they will have placed their bets on the right configuration of culture and content.

As one of the world’s most successful investors Warren Buffett once said, “you only find

out who is swimming naked when the tide goes out.”

In this case, when the tide goes out, as it

must in a bubble-driven economy, it will be the operating capacity, diversity, and talent of the

U.S. film and television industries that are left vulnerable during the next recession. Media

scholars need to understand the gravity of the problem that is “Financialized Hollywood” in

order to advocate for its correction. “Resistance must know about financial regulation in order to

demand it,” Gayatri Chakravorty Spivak recently proclaimed. “We must produce knowledge of

these seemingly abstract globalized systems so that we can challenge the social violence of

unregulated capitalism.”

Acknowledgements. The author wishes to thank John Caldwell, Denise Mann, Stephen Mamber,

Johanna Drucker, Alisa Perren, and Caetlin Benson-Allott, as well as the Social Sciences and Humanities

Research Council of Canada.

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Since the publication of his article, 20th Century Fox was acquired by Disney and Warner Bros. was

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Jennifer Holt, Empires of Entertainment: Media Industries and the Politics of Deregulation, 1980-1996

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Throughout the article I will be using ‘Hollywood’ as shorthand for the American film and television

industry, with occasional reference to its broader relationships with entertainment and technology. When

discussing streaming platforms, I will differentiate between “legacy media companies” (Disney,

WarnerMedia, NBCUniversal, etc.) and technology companies (Netflix, Amazon, etc.), though there is no

denying that the tech companies are now operating heavily ‘within’ Hollywood, whether that is defined

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David Harvey, The Condition of Postmodernity: An Enquiry into the Origins of Cultural Change

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Duménil and Lévy, The Crisis of Neoliberalism, 18.

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Posner, Morton, and Weyl, “A Proposal to Limit,” 674.

Fichtner, Heemskerk, and Garcia-Bernardo, “Hidden Power,” 306.

Posner, Morton, and Weyl, “A Proposal to Limit,” 676.

I conducted this analysis in March of 2018, before Time Warner was acquired by AT&T and before

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Appelbaum and Batt, Private Equity at Work, 3.

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Nikki Finke, “Layoffs And Firings At MGM,” Deadline, April 1, 2009,

https://deadline.com/2009/04/source-wholesale-layoffs-at-mgm-8970; Dave McNary, “MGM slashes

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David Mitchell, Cloud Atlas (London, Sceptre, 2004).

The Paramount decrees, established between 1948 and 1952, have long governed the rules for

production, distribution, and exhibition of film; in November, 2019, the U.S. Justice Department filed a

motion to end the decrees, a move which will contribute to a further deregulated and consolidated

entertainment market. See Ryan Faughnder and Anousha Sakoui, “Justice Department to throw out

decades-old film business regulations. What effect will it have?” Los Angeles Times, November 18, 2019,

https://www.latimes.com/entertainment-arts/business/story/2019-11-18/doj-to-throw-out-decades-old-

film-business-regulations-but-what-impact-will-it-have.

Lucinda Shen, “Netflix Went Public 15 Years Ago. It’s Been a Better Stock Than Apple or Amazon,”

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amazon/.

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movies-tv-comparison-1201759030/.

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Todd VanDerWerff, “Hulu has overtaken Netflix to become the best streaming service,” Vox, October

22, 2015, https://www.vox.com/2015/10/22/9591606/hulu-best-streaming-netflix; David Lieberman,

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1201529682/.

Will Kenton, “FAANG Stocks,” Investopedia, March 18, 2019,

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Monetary Fund 2019 figures,

https://www.imf.org/external/datamapper/NGDPD@WEO/OEMDC/ADVEC/WEOWORLD.

This calculation was done using figures from https://www.macrotrends.net, which draws data from

company filings.

Quoted in Cynthia Littleton, “FX Networks Chief John Landgraf: ‘There Is Simply Too Much

Television,’” Variety, August 7, 2015, https://variety.com/2015/tv/news/tca-fx-networks-john-landgraf-

wall-street-1201559191.

Daniel Frankel, “Cord-Cutting Got 75% Worse in Q1, Most Terrible Quarter Ever for Pay TV,”

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worse-in-q1.

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