High oil prices may be good for Hollywood

Thu Jul 10, 2008 11:45pm EDT
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By Steven Zeitchik

NEW YORK (Hollywood Reporter) - Oil crisis? What oil crisis? As energy prices hit historic highs, studios have been forced to shoulder higher production costs. But the spike at the local Exxon doesn't spell bad news for everyone in Hollywood. For some, it's actually a boon.

And for the industry as a whole, economists say that, despite some mixed signals, there is some evidence to support the truism that higher gas prices boost box office sales by prompting consumers to opt for the local multiplex over longer trips.

A certain kind of film financier has been the most obvious beneficiary of the recent spikes. For instance, Ingo Volkammer's Leomax Entertainment, a Los Angeles- and Berlin-based financing and production banner, has found that the jump in oil prices has opened up its financing options.

The company has created a five-year slate using money from an oil-based hedge fund -- one of its current projects is a thriller called "Short Cut" from Adam Sandler's production company -- and found financing relatively easier to come by.

"If you need to shelter windfall profits, there's really no better place than the movie business," Volkammer says.

Basically, that's because tax laws in some European countries require that windfall profits are taxed heavily unless the money is quickly invested in an intangible asset like film.

That has prompted oil investors to look more favorably on the film biz -- any film, really -- because it means that even if a movie loses, say, 20% or 30% of its money, investors still come out on top because those losses pale compared with what a government might have taken. (Financing experts like Grosvenor Park chairman Don Starr caution that more direct sources of oil money from the Middle East haven't materialized. "I've heard a lot of hype, but I haven't seen any checks being written," he says.)

Of course, the silver lining isn't limited to financial instruments. One of the surprise cable hits of the summer is "True Gold," a story of modern oil-diggers, or wildcatters. In its first three weeks on truTV, formerly known as Court TV, the show has brought in twice as many male viewers as the Time Warner network had been seeking.   Continued...

<p>Gas prices are displayed at a gas station in Hollywood, California March 10, 2008. REUTERS/Mario Anzuoni</p>