Finance and Economic

Investors seeking riches in Hollywood are finding out why the movie capital is called Tinsel Town — all that glitters is not gold.

After pouring $15 billion into recent film deals, some investors have taken losses and many are demanding that film studios change how they structure the projects. Roiling credit markets have scared many away from untraditional investments, while some investors say studios treated them shabbily.

In recent years, hedge funds flush with cash were drawn to Hollywood deals amid projected double digit returns. But both Hollywood and banking executives say several of the deals over the past few years wound up costing investors hundreds of millions of dollars in losses.

“A lot of hedge fund money has come into Hollywood in the last two years and some deals haven’t panned out,” said Eileen Burke, a managing director at investment firm D.B. Zwirn & Co.

The funds, partnered with big investment banks, often backed studios in transactions known as movie slate financing deals, taking on some risks formerly absorbed by studios in return for a share of profits from films in the slate.

By 2006, many studios such as Sony Corp 6758.T, Viacom Inc’s <VIAb.N Paramount, Time Warner Inc’s (TWX.N: Quote, Profile, Research) Warner had lined up these deals.

“In 2004, slate financing really began in earnest and has met with a variety of results no fax payday loans. With every kind of transaction, there are lessons learned. It’s an evolving model,” said Laura Fazio, managing director at Deutsche Bank.

But after some films flopped, investors complained that studios were tilting terms to favor themselves over the funds and putting less than certain projects in the slates, while keeping sure hits to themselves. 

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