Hollywood still rakes in cash as oil prices rise

Fuel prices affect all but now movie studios are feeling the production pinch, but for some in Hollywood it barely matters. 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. This is 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. This 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. However the greatest potential upside to oil and gas price increases lies with ticket sales at the box office. In 1981 and 1982, for example, oil prices rose roughly 30% and then 10% year-over-year; in that same period, box office saw sizable increases of 8%, then 16%.

In years when oil prices were roughly flat, like 1992, box office rose only 1%. Other years, however, show little correlation: 2005’s notorious 6% drop in box office came when oil prices actually had risen more than 25%. So with the rise in oil prices the movie going audience actually plummets, and now with TV being as addictive as it is its there where the money really is.
Via