Saturday, May 29, 2010

Angelina's Bottom Line For Planet Money

Hollywood studios' invisible financing, including government subsidies and tax-credit deals, is no where better illustrated than in the way Paramount put together the deal for Lara Croft: Tomb Raider. The budget, including Angelina Jolie's $9 million fee, was a staggering $94 million on paper. But after Paramount applied the arcane art of studio financing, of which the deal is a minor masterpiece, the studio's outlay was only $8.7 million.
First, it got $65 million from Intermedia Films in Germany in exchange for distribution rights for six countries: Britain, France, Germany, Italy, Spain, and Japan. These "pre-sales" left Paramount with the rights to market its film to the rest of the world.
Second, it arranged to have part of the film shot in Britain so that it would qualify for Section 48 tax relief. This allowed it to make a sale-leaseback transaction with the British Lombard bank through which (on paper only) Lara Croft was sold to British investors, who collected a multimillion subsidy from the British government, and then sold it back to Paramount via a lease and option for less than Paramount paid (in effect, giving it a share of the tax-relief subsidy.) Through this financial alchemy in Britain, Paramount netted, up front, a cool $12 million.
I recently explained how this worked on NPR's Planet Money.