"Wall Street is awash with cash and it is heading for the film industry," proclaimed Tim Forbes, the proprietor of Forbes magazine , at the inaugural Forbes Film Investment Forum in New York last week.
The all-day conference attracted a glittering array of investment bankers, studio heads, billionaire entrepreneurs and hedge funds, alongside top Hollywood producers and distributors.
It was one of the most fascinating days I've had during 13 years in the film business.
For the first time, the link between major investment institutions, awash with billions of dollars to invest, and the returns available from the film industry was being formally recognised. During the last month, there have been articles in the Wall St Journal, The Financial Times and the trade magazine, Screen International, extolling the virtues of investing in a carefully planned portfolio of films.
One of the reasons that film has traditionally been seen as a risky investment asset class is that returns have been analysed on a single film basis. The new tidal wave of investment into the industry is based on the classic invest-ment mantra of building a diversified portfolio which spreads risk but gives the opportunity for spectacular gains if you identify the next My Big Fat Greek Wedding which cost $3 million and grossed over $300 million.
An equity or property fund investor wouldn't risk all his funds on one stock or property and an investor in the film industry shouldn't just include one film in his investment portfolio.
What has caused this influx of investment funds into the film industry?
Firstly, it must be said that investment in most other valid investment classes is now saturated. But there has also been a major structural change in the film industry over the last five years. Each of the major studios in Holly-wood is now part of a media conglomerate.
The herds of accountants in the conglomerates' head office decided studio costs had to be cut in order to achieve their quarterly targets. Swathes of development and production staff have been laid off and the studios have focused their attention on their international and North American distribution business.
This has resulted in a gap in the market in the supply of new commercial films which independent companies, backed by the Wall Street dollars, have been quick to exploit.
The studios, meanwhile, have concentrated their efforts on producing "tent-pole" films such as Spider-Man and Harry Potter and acquiring the independent, award winners such as Brokeback Mountain and Crash for distribution.
Companies such as Intandem Films now have a clear opportunity to step into the gap of supplying films without having to worry what the Chancellor is doing in this country with regards to tax relief on investment into film. It won't be long before UK investors and institutions follow Wall St in identifying the attractiveness of this "new", hundred year old investment class.
* Birmingham-based Gary Smith is head of Intandem Films. ..SUPL:
