Lara Croft: Risk Management
Croft: Tomb Raider is a minor masterpiece of the
arcane art of studio financing, or as Sumner Redstone
calls it, "risk management." The trick, though
applied in subtle brushstroke, is to use OPM-- -- Other
Here is the triple-play through which Paramount made
a $94 million movie for only $8.7 million.
got $65 million from Intermedia Films in Germany in
exchange for distribution rights for 6 countries: Britain,
France, Germany, Italy, Spain and Japan. These "pre-sales"
left Paramount with the movie, and all the rights, the
rest of the world.
arranged to have part of the film shot in the Britain
so that it qualified for a Section 48 tax relief. This
allowed it to make a sale-leaseback transaction with
the British Lombard bank Paramount on paper sold the
movie to British investors, who captured the British
government subsidy, and then via a lease and option,
returned it to Paramount. Through this financial alchemy,Paramount
netted, up front, a cool $12 million.
sold the copyright through Herbert Kloiber's Tele-München
Gruppe to a German tax shelter.
Because German law did not require the movie to be shot
in Germany, and the copyright transfer was only a temporary
artifice, the money paid to Paramount in this complex
transaction was truly, as an executive put it, money-for-nothing."
Through this maneuver, Paramount made another $10 million.
Before the movie was ever green-lit or cameras ever
began turning, Paramount had gotten back, risk-free,
$87 million. to be sure, for arranging this financial
legerdemain, Paramount paid about $1.7 million in commissions
and fees to middlemen, but that left it with over $85.3
million in the bank. So, its total out-of-pocket cost
for the $94 million was only $8.7 million. And Paramount
could cover even that paltry risk by selling the Pay-TV
rights to its corporate sibling, Showtime, for $10 million.
The lesson of Lara Croft: Tomb Raider is that
things in Hollywood-- and especially numbers-- are not
what they appear to be to the outside world. According
to the public numbers, it cost $94-million to make a
movie that earned only $62.8-million in rentals in North
America. That equation changes radically when the $85
million that Paramount netted from its non-public"risk
management" is added in, proving, yet again, in
Hollywood, the real art of movies is the art of the