Reliance in Bid for MGM; planning bigger piece of Hollywood pie!

Anil Ambani struck a big deal with Steven Spielberg in 2008-2009 and then joined with Walt Disney and JP Morgan to finance Dreamworks movies of Steven Spielberg.  The idea was to get a piece of the Hollywood pie.

And no, Spielberg won’t be making Bollywood masala films. Instead, this huge chunk of change will allow DreamWorks to finance Spielberg’s penchant for expensive box office hits. Since DreamWorks broke up its relationship with Viacom’s Paramount Pictures in late 2008, the studio hasn’t released a single film, but has been working on some.

In 2008, even Warner bros had tried its hand in Bollywood with Chandni Chowk to China, but the movie failed.

Wharton suggested that it was quite a win-win situation for both the parties:

Wharton faculty members and movie industry experts view the Spielberg-Reliance deal as compelling math on many fronts. Spielberg would have found few other investors with a penchant for the movie business willing to invest such a large amount, and Reliance offers a gateway to Indian audiences, they say. For Reliance, Spielberg represents the lowest-risk opportunity to secure its lofty $10 billion revenue target while tapping markets globally.

Although the risks are high in this business but given the consistency of Spielberg, many management experts believe it was a less risky deal for Ambani.

According to Eliashberg, “a good return on investment” in the movie business would be about 15%, and “Spielberg would be able to deliver that.” With the big bets Reliance is making in the movie business, it is taking “minimal risks” by partnering with Spielberg, he says. For a sample of 281 movies produced between 2001 and 2004, the return on investments at a studio ranged from  -96.7% to more than 677%,  Eliashberg noted in a June 2007 paper published in the journal Management Science which he co-authored with Wharton professors Sam K. Hui and Z. John Zhang.

Now Reliance has entered the race to buy the coveted US Film Group Metro-Goldwyn-Mayer (MGM).  MGM has film properties like the James Bond and the Pink Panther series.  Reliance Entertainment is planning to enlarge its presence in Hollywood.

The Economic Times, citing an unnamed person familiar with the deal, said Reliance could be one of a dozen potential bidders in the running for MGM, which has been put up for sale.

The revered studio was bought by a group of investors, including private equity groups, in 2004 for around five billion dollars. It faces crushing debt repayment obligations stemming from the buyout and has been put on the block.

MGM has a massive film library, which boasts around 4,000 titles and more than 10,000 television episodes.

If Reliance indeed wins the deal – which it very well may – then it may have a strong monopolistic dominance in the US Film Industry.  Maybe there may come a time in future when Indian culture and movies may get the place they deserve.

As an Indian, I used to always wonder, how come the Chinese movie makers and actors were more popular in Hollywood, when they hardly had ven half as much an industry as India had.  And not even as sophisticated – when you bring in the regional movies as well.  Well, the Indian Movie industry went the other route – striking deals.  A few years back, Movie making became an “industry” – so it could be eligible for bank loans and corporate deals/financing.  And now what you see is how legitimate finances and money if put center-stage instead of all the mafia money that Dawood Ibrahim was making – could catapult the industry and the country’s culture to the world levels!

Go Bollywood and Indian financers.. its time to take over the world and dump the Dawood Ibrahims in their own mess!