For all the excitement that greeted the news last week that India's Reliance ADA Group was in advanced talks to bankroll a major chunk of DreamWorks, allowing the company to free itself from Paramount, there was a requisite degree of skepticism.
Hollywood is a melting pot of talent, producers and execs from around the world assimilated into the studio and indie systems to great effect.
But the idea of foreign ownership of a Hollywood studio engenders some trepidation. There's the jingoism: Newsweek famously featured a Statue of Liberty dressed in a kimono on its cover after Japanese electronics giant Sony bought Columbia Pictures. But perhaps it is the foreigners who should be trembling -- the track record of overseas investors is lousy.
In almost every case, the cliquey and exceptional nature of Hollywood has left the newcomers scratching their heads, wondering what happened. They made the wrong hires, backed the wrong projects and were tripped up by infamous "Hollywood accounting." The string of failures has built Hollywood's ugly reputation as a voracious consumer of other people's money.
Assuming a deal gets done, can Reliance be any different? Can it become a successful studio owner?
"They have made it very clear they want to be aggressive in this business, but (news of the negotiations) was a bit of a surprise," analyst Saurabh Gurnurkar at Kotak Securites in Mumbai, says. "We are not clear about the management structure (of the new looking DreamWorks) and not clear about the IP ownership structure. It is all going to come down to quality of execution."
But there is a world of difference between knowing a local market inside out and taking on the Hollywood insiders at their own game, and Reliance has no intention of being a passive investor.
"At the core of the entertainment industry are talent and egos, that is not different in India or Hollywood," Reliance Entertainment prexy Rajesh Sawhney tells Variety. "The practices will be different, but it may come down to 30 or 40 people. Our biggest challenge will be management of creative talent."
Reliance ADA owner Anil Ambani and Sawhney are buying into a content boutique, not a studio with its own distribution. So they will do well to pay close attention to the details of the distribution deal that is eventually cut with Par, Fox or Universal. "Fees, gross deals with actors and residuals schedules can make even a hit film unprofitable, but then again the Indians are the world's best negotiators," says one veteran film banker.
Reliance is scarcely known in Hollywood, though it is simultaneously bidding to be a major force in global telecoms and is already an energy, finance and entertainment powerhouse in India.
No matter what the results, Reliance is joining a long line of foreign investors who tried to stake a claim in Hollywood. In some past cases, it seemed they wanted nothing more than to sit next to the celebrities at premieres. Other times they seemed to want to run the business they owned or, shock, to change it.
In 1989 and 1990, it was Sony and Columbia, and Matsushita bought MCA and its Universal Studios subsidiary.
In 1991, Credit Lyonnais acquired MGM/UA, and Seagram drank down 80% of MCA/Universal. In 2000, the French utilities group Vivendi bought Seagram, which by then included PolyGram as well as Universal.
Reasons for turbulence, however, have differed.
The Japanese electronics firms appeared to be determined to prove the case for hardware-software synergy that is still moot. Although Sony could today point to crossover between "Spider Man" and Blu-Ray, or buoyancy in filmed entertainment that in recent years has helped carry its ailing games business, the losses incurred in the early part of Sony's ownership mean there are cheaper ways of acquiring content than buying the studio.
The Vivendi case, instead, points to the inflated and ill-founded self-esteem of its CEO, Jean-Marie Messier, a man who regularly described himself as "master of the world," and who was egged on by execs at Canal Plus who were sore at not getting hold of PolyGram the first time round. More charitably, Messier's vision of digital convergence that ranged from French pay-TV, Internet portals, gaming and mobile phones was one that was ahead of its time.
"Successive waves of star-struck money have yet to beat Hollywood, and that includes Wall Street," says one veteran film banker. "It wasn't the credit crunch that killed several of the deals on offer to private equity and hedge funds last year. The deals had so many soft edges and lack of clarity over revenue waterfalls. Many of these will go south."
Reliance is a new name to Hollywood, but the company has been hatching big plans for several years in its campus, an hour's drive outside Mumbai. Hiring big brains and sharp operators, Reliance has applied last mover advantage to several of the industries it has moved into and has a reputation for good project management.
For instance, it is delaying launch of its DTH satellite platform until the fall, by which time it will have its own bouquet of Big TV-branded channels, and the monsoon rains will not interfere with reception.
Indian companies in other industries are successfully acquiring and managing global companies: Mittal in steel, Aditya Birla in aluminum and Infosys in software.
Tata, whose car-making unit recently bought Jaguar and Land Rover, is also a satellite operator and is scaling up in animation and special effects.
In other words, Reliance is not the only Indian behemoth with international ambitions in entertainment. Inevitably, more will make their way to Hollywood, too.
© Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.
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