Co-Financing Hollywood Film Productions with Outside Investors: An Economic Analysis of Principal Agent Relationships in the U.S. Motion Picture Industry ... Markets and Organisations Book 6)

Over the past two decades, investors from outside the motion picture industry have increasingly supplied equity to U.S. film productions. Today, these so-called co-financing arrangements are a common phenomenon in Hollywood. While the large studios usually carry out the operative tasks of movie production and distribution, the financiers as co-owners of the completed films have rights to the residual profits. Kay H. Hofmann analyzes the conflicts of interest and the organizational problems that may arise between the experienced major studios and investors with comparably low industry expertise. Guided by principal agent theory, the empirical analysis provides evidence for adverse selection and multiple aspects of moral hazard during production as well as distribution. Based on these findings, the author develops solutions that are not only relevant for current and future investors but also for studios and film producers who rely on the long-term availability of external funds. "Co-financing arrangements in which investors from outside the motion picture industry become co-owners of the completed films are a common phenomenon in Hollywood. Kay H. Hofmann analyzes the conflicts of interest and the organizational problems that may arise between the experienced major studios and investors with comparably low industry expertise. Guided by principal agent theory, the empirical analysis provides evidence for adverse selection and moral hazard. Based on his findings, the author develops solutions that are not only relevant for investors but also for film producers who rely on the long-term availability of external funds."--Library of Congress Front Matter....Pages 1-1 Introduction....Pages 1-9 The Hollywood Mega Industry....Pages 10-40 Contemporary Co-Financing Practices in the Motion Picture Industry....Pages 41-54 Principal Agent Relationships in Co-Financing Deals....Pages 55-64 Description of the Data and Variables....Pages 65-83 Agency Problems in Financer Deals: Results and Discussion....Pages 84-105 Implications of the Appearance of Slate Investors....Pages 106-110 Agency Problems in Slate Financing Arrangements: Results and Discussion....Pages 111-126 Concluding Remarks....Pages 127-133 Back Matter....Pages 11-11