Oscar-winning British actor Daniel Day Lewis once said: "Being at the centre of a film is a burden one takes on with innocence — the first time. Thereafter, you take it on with trepidation." And in many ways Day Lewis could easily have been speaking as much about investment in the film industry as about acting.
Many investors are attracted to the industry for its glamour, excitement and access to celebrities, however, it is a certain type of individual that is able to make consistent returns from investment in film.
Meet Anthony Mosawi, chief executive of Mayhem Entertainment, LLC, a company he founded in June 2005. Since then, and in previous Hollywood lives,
Mosawi has steadily been making a business acting as, what in other industries could be called, an "opportunistic investor". Mosawi proved his chops at some of Hollywood's most famous studios, with some of the biggest names the industry has to offer. Prior to forming Mayhem he was chief operating officer of Mutual Film Company, ("Saving Private Ryan," "Lara Croft: Tomb Raider," "Lara Croft Tomb Raider: The Circle of Life," and "Timeline"), a production and financing company on the Paramount Pictures studio lot. Before joining Mutual Film Company, Mosawi was an attorney in the Motion Pictures division of Paramount Pictures. He started out his career as an English barrister.
Through working within the studio system, Mosawi built up a wealth of expertise, understanding how to view films as assets and commodities.
"The biggest challenge with professional film investing, over and above getting access to the right product, is the difficulty to get scale. With film, each product is a prototype," explains Mosawi. "And those companies that try to build traditional 'manufacturing' type businesses in film – like production companies or distributors – sooner or later come unstuck if they don't keep getting lucky, i.e. get hits."
Mayhem was launched to embrace this problem rather than fix it. Mosawi says the company looks for product that is being developed or produced at studios, and uses a variety of investment approaches to buy into their product at an opportune time in its lifecycle.
"When done right, that buy-in price is very favourable to us," he says. "Film is a form of intellectual property, after all, and can be traded like other IP products."
Mayhem Entertainment, LLC is a multi-strategy finance and distribution company focusing on wide-release feature films. The company was launched with private backing and is based in Los Angeles, where Mosawi is firmly at home in the studios and lots of the entertainment capital of the world.
"Mayhem primarily focuses on exploiting the significant inefficiencies inherent in the production of motion pictures. We have a very strong network of banks, overseas distributors, financiers and studios that we use in our private equity model to film. Sometimes the strategy is more akin to arbitrage, like with our last film, and at other times it involves a lot of the same skills as restructuring, but on a project basis," says Mosawi.
Mosawi says distribution is one of the critical keys to success in turning a bad investment into a great return: "You have to intimately understand the process and what the potential distribution rights are."
"If you can secure the right distribution on the right property, you are focusing on the right area."
Mayhem's latest example of their strategy baring fruit is their latest release, the dance film "Make it Happen," released in 2008 through The Weinstein Company in the US.
The film is a classic example of what Mosawi has set out to do: build investments which are not focused in a binary way on performance, and which leverage deep relationships overseas to de-risk them. "Make it Happen" was assembled with participation from Mosawi's foreign distribution relationships, who had all expressed an interest in a "Flashdance"-type dance project. The film was pre-sold (i.e. in advance of production) with large enough contracts to cover the entire budget cost, with profits being calculable prior to any performance. As it happened, performance worked as well, with "Make it Happen" opening in the top 5 at the box office in the UK, Australia and Italy in the past few months.
"As an investment class, we're proving that film intellectual property, handled responsibly, can be a very valuable proposition," says Mosawi. "Investing in film doesn't need to be a gamble or hobby. It can be a serious asset class with serious returns."