July 2, 2025 • 24 mins
The financing of film and TV production has changed dramatically compared with how it was in previous decades. And no one knows that better than Daisy Stall, EVP & group head of entertainment finance at California Bank & Trust. Drawing on three decades of experience in this area , she outlines how traditional funding models have been disrupted by streaming services and broader changes in content consumption.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:07):
Welcome to another episode of Strictly Business, the podcast in
which we speak with some of the brightest minds working
in the media business today. I'm Andrew Wallenstein with Variety
Intelligence Platform. As any producer can tell you, financing film
and TV production has changed a lot over the years.
So to get some perspective on where it's been and
(00:28):
where it's going, who better to talk to than someone
who's been active on this side of the business for
nearly three decades. In today's episode, I'll talk with Daisy Stall,
head of the Entertainment Finance Group at California Bank and Trust.
We'll be right back. We're talking today about changes in
(00:56):
the ways TV and films get financed with Dais Stall,
head of the Entertainment Finance Group at California Bank and Trust.
Thanks for being with me, Daisy.
Speaker 2 (01:06):
It's a pleasure to speak with you. Andy Cool.
Speaker 1 (01:09):
So I want you to paint a picture of the
before and after, because for a very long time, there
were certain tried and true ways to do what you do.
You sold a script and then secure distribution from all
over the world, or you bonded a film. It's not
quite that simple anymore, is it.
Speaker 2 (01:30):
No, No, it's not. You know, as revenue models change,
we all in this ecosystem have to change alongside, you know,
the revenue changes. So what I'd like to start out
with is kind of lay a foundation of what has
been in practice and developed over the past thirty five
to forty years. So there has been a very developed
(01:54):
ecosystem that involves producers, distributors, and capital providers. What I
mean by capital providers, I represent bank financing, financial institutions.
And the way that the distribution model worked in the
past is that you could write a script and you
could presell it to one distributor or thirty distributors around
(02:19):
the world, and those contracts came to come. They came
in a form and developed over time where financial institutions
could reliably lend against them, and that developed over time.
So it involved multiple aspects including very you know, I
(02:44):
hate to use too much legalies, but notices of assignment,
where distributors knew that a bank would need a certain
legal document and waivers to certain aspects of their distribution
agreements in order for the producer to obtain bank financing.
So they knew that they had to work with their
(03:04):
financial institutions and the bank partners in order to support
that producer making its content.
Speaker 1 (03:12):
It's hard for me to imagine that kind of system
persisting in a world where the streaming services have sort
of reconfigured the global entertainment landscape.
Speaker 2 (03:25):
And that's where it felt equalized. You know, twenty thirty
years ago, distributors needed to cooperate in order to obtain content.
Producers needed to work with the banks to determine what
form the contract should look like in order for them
(03:45):
to obtain the financing. So usually you would have these
three parties working collectively to support the production of film
and TV. What has happened over the years is revenue
models have been really abended. Now in the early days
of streaming, it actually simplified things. So you had, rather
(04:07):
than thirty distribution agreements that you know, I'm representing a
financial institution, I would have to lend against thirty contracts,
I could lend against one. It could be a major
conglomerate with the streaming platform. So in that sense it
made it slightly easier. But on the other side, the
(04:27):
streamer represented you know, their large conglomerate, they had a
lot more leverage, you know, and when you have leverage
you can dictate more of the business terms. And that's
what started to happen. Everybody was, you know, there's this
proliferation of production. You know, a lot of content being
(04:48):
produced film and TV over the past maybe about seven years.
And as the content was being produced and there was
a lot more volume and the streamers needed less, they
started to have the shift in leverage. They could dictate terms.
(05:10):
Once upon a time, somebody could produce a film with
equity and then maybe there could be a bidding war
and it might be three x the production costs, unbeknownst
to the streamer who was picking it up. Then there
were other terms that you could pre sell to a
streamer and there would be a fixed margin embedded in
(05:33):
that contract, so maybe one hundred and fifty percent of
your production budget, so you could have a fifty percent margin.
And over time that margin has shrunk where instead of
one hundred and fifty percent, it could be one hundred
and fifteen percent, So there's not that much margin for
anything like over budget or financing costs. It may have
(05:55):
not been included in the original budget. And now where
we're seeing contracts is the streamer or the distributor. I'll
use them kind of interchangeably, may not pick up worldwide,
they may only pick up domestics. So it leaves the
producer left with, Okay, how do I sell the rest
(06:17):
of the world or specific territory. So it is really
evolved over time, and the leverage seemed to be held
by the bigger streamers, and so it really tightened margins
for the producers. Producers had to give up the intellectual
(06:38):
property in perpetuity. So now when they produce content, it's
like a producer for hire. You produce it, you make
your margin. You don't own the IP, you can't build
the library. There's no further value from that IP that
you built. That value is now owned by the streamer
or distributor.
Speaker 1 (06:59):
Just one of the ways that being a producer has
gotten very difficult in this town. And also what about
when you're what about like non exclusive rights for other
windows like fast channels. I mean this didn't even exist
five years ago.
Speaker 2 (07:17):
I'd guess, yeah, so that I would put in a
different category. So when we're you know, what I was
previously discussing was about new content and producing new content.
There is a separate area of existing content. So what
has also happened over the years, is there's been a
(07:39):
lot of capital going into the system to acquire existing
libraries because there is value in these existing libraries that
first of all, they are not owned in perpetuity by
a streamer, so they can be exploited around the world
in different, different and emerging platforms. So when we talk
(08:02):
about fast channels, that is for existing content that has
been exploited in free TV is now going to other
ancillary windows like fast channels on a non exclusive basis.
And with respect to that kind of business model for
existing libraries, it actually helps expand the revenue generation for
(08:26):
that content because it's non exclusive.
Speaker 1 (08:29):
Got it, so a distinction between old and new content.
But you've talked about the shift in the revenue models.
I mean, is it Wasn't it always as simple as
just a fixed licensed fee? Is that not that simple anymore?
Speaker 2 (08:48):
No, Actually, it has evolved even within the past seven
to eight years. So it initially started as a fixed
license fee for the IP in perpetue so the producer
didn't known it anymore. Then it transitioned to a fixed
license fee for twenty years. Then it moved on to
(09:10):
a fixed license fee for maybe fifteen to twenty years.
But now it's only a certain territory. So now I've
seen maybe two streamers picking up one has a specific
territory or window timeframe and the other has the rest.
So I've seen two streamers pick up one content, one
(09:34):
specific ip. Now I've started to see and this is
really in the infancy stage where it looks more like
the traditional split rights deals that were happening in the
nineties and two thousands, where one domestic distributor and let's
say it's a streamer, will pick up specific rights and
(09:55):
then the rest of the world will be available to
sell to others and they, you know, the producer could
hire a sales agent to monetize the rights that were
not picked up by that streamer. And now I'm starting
to see contracts that are not a fixed license fee
from the streamer but looks something like a rev share,
(10:18):
which actually gives me hope. You know, it's because rather
than just a fixed license fee, you well, in the
in the sense of a fixed license fee, you just
have one fee and you have you can't monetize in
any other ancillary windows. The revenue stops there. But if
you have a rev share agreement, everybody's on risk to
(10:43):
monetize and keep monetizing beyond a certain platform into other platforms.
So the distributor wants to make you know, additional revenue,
so they are going to distribute in other areas and
they're on risk, and then the producer has potential upside
(11:04):
rather than that one license fee. So there's a risk
reward analysis that you have to do. So you can
have certainty with the fixed license fee, but you miss
any upside if you do the revenue shore. You have
to have confidence in your partner to exploit the content
and increase over and above what you would have received
(11:26):
for that fixed license fee and take the upside. Got it? Now?
Speaker 1 (11:31):
I want you to put this also in the context
of what you do coming from a bank talking you know,
whether it's senior debt, private credit. How do those sort
of different financial tools come to bear here?
Speaker 2 (11:49):
Well, twenty thirty years ago, a producer could get their
film made through pre sale contracts and no equity required.
It could be fully financed by a bank, But over time,
with the soft international markets and fewer and fewer distributors
offering pre sales, it has required additional forms of capital
(12:10):
such as equity and or private credit, which is really
defined as non bank lenders to step in into the
shoes that the banks traditionally held. So now you have
multiple forms of capital to produce one project. It could
be equity, private credit, and a bank facility, and so
(12:31):
they all have different costs of capital. It makes it
more expensive for the producer, so that interest, those interest
charges eat up what they would otherwise spend on production.
What has now happened is because if there are very
few pre sales, then it might be easier for the
(12:52):
producer to just equity finance the whole project. So I
do see in independent film many projects are produced with
equity that is provided by not institutional equity like big funds,
but more high net worth and family offices on a
project by project basis. I also see a lot of
(13:15):
private credit come in or trying to penetrate this space
because they see that there's a need. There's a big
gap between what banks can provide and what they can
lend against and their risk tolerance and equity. So private credit,
I've seen a lot of folks trying to come in
and provide that financing to independent producers. I've seen some done,
(13:41):
I've seen some trying to penetrate the space because it's
definitely a need that has been identified by those outside
of our industry.
Speaker 1 (13:49):
I remember the days where you know, you'd have private
investors come in and be passionate about a particular project,
or these member of the Big day, you know, slave
financing or do we still see these kinds of arrangements.
Speaker 2 (14:06):
We do see them. It's harder and harder to raise
the capital for them. So ten years ago, ten fifteen
years ago, every studio had a slate financing or maybe
multiple slate financing partners, every major studio out there. And
(14:27):
then those slate deals they wrap up in five years
and then they have to find a new partner. It
has been harder and harder to find partners, not because
of the lack of desire, but usually if you're looking
for a slate deal, it's got to be two hundred million,
three hundred million in equity raised, so that institutional capital
(14:49):
is not as interested in film and co fis today
as they were ten fifteen years ago, unless it's no
you know, a studio with really known IP if they've
got some major franchise that they're forecasting to have huge
wide releases. You know in the near term, but you
(15:11):
know that institutional capital is not completely dried up, but
it's definitely lessened in the past three to five years.
Speaker 1 (15:22):
We'll be back in just a moment with more with
Daisy Stall from California Bank and Trust. Stick around and
we are back talking with Daisy Stall, head of the
Entertainment Finance group at California Bank and Trust about the
ever evolving world of financing content and well. I also,
(15:47):
Daisy wanted to get your perspective on something that's not
quite financing content, but is something that I know it
must be figuring more into your conversations about finance in Hollywood,
and that's AI, which, as you know, is sort of
working its way into the sort of every little nook
(16:09):
and cranny of the supply chain. From your perspective, explain
how AI is now figuring into investment opportunities in the
role you could play, Well, I.
Speaker 2 (16:21):
See it from two different sides. So there are the
creators that can utilize AI to reduce production budgets and
with softer pre sales, you know the need for capital
that could make the difference between making a film and
not making a film. So I could see uses of
(16:43):
AI to help more films get financing. Now, with respect
to the finance side, you know, I haven't heard of
any AI tool yet, but I do see some potential
on you know, kind of on the financial side of
the business, in particular complex contracts that have very complex waterfalls.
(17:09):
So you know what a waterfall is is that you know,
if there is some kind of intellectual property that generates revenues,
there can be many participants in those revenues from the
day that it's released and exploited to you know, ten
twenty years down the road, and that intellectual property and
(17:32):
the revenue waterfall we call it participations, or in the
music space it's royalties. Those are complex contracts that have
entire groups called participations and residuals, and oftentimes, you know,
generally they're reliable, but it takes a lot of people. Oftentimes,
(17:54):
you know, the recipients of the participations, maybe it's talent,
maybe it's the direct the producer. You know, they may
have some questions or discrepancies. And then there are processes
that are referred to as audits, and they go back
and they audit their participation statement or their royalty statement. Well,
(18:17):
the use of AI, in my opinion I'm not a technician,
but it could be supported by It could support these
manual processes to reduce the time that it takes to
determine the participations and the respective amounts for each individual.
(18:39):
It could decrease potential errors in those calculations, or alternatively,
you could use it to audit and come to a
resolution of the audit results faster.
Speaker 1 (18:52):
I see you know, I'm surprised we've made it this
far into the conversation and interest rates having come up,
so I feel like I got to throw that out
there for you. How is that figuring into the current
investment picture in Hollywood.
Speaker 2 (19:07):
Well, it definitely eats away of potential dollars that could
go towards physical production. So on the one hand, that's
the direct impact. On the other hand, when assets are
trading in the market, and what I mean by trading,
so you can sell a film or TV library, you
(19:29):
could sell a music catalog. The way that these catalogs
and libraries are valued is basically taking a forecasted cash
flow over the next ten to twenty years. You use
an interest rate, which we refer to as net present value,
and when interest rates increase, it decreases the valuation. So
(19:52):
that's put a little pressure on valuation of these kinds
of assets. Nonetheless, if the assets have strong cash flow,
there's still interest out there for financing them and for
equity to acquire them.
Speaker 1 (20:05):
Okay, good to know. And look, we've talked a lot
of film and TV, but you know the music world
as well, and so I'm curious to get your sense
almost on a comparative level, just in terms of the
attractiveness of music as an industry for investment.
Speaker 2 (20:26):
Yeah, I've seen a lot of capital go into the
music space over the past ten years. Music went through
the digitization twenty years ago two twenty ten, and that's
what film and TV is going through now. So music
had to go through its challenges, and the revenue models
(20:51):
have stabilized, have been fairly stabilized, and the cash flows
are very reliable from an investor's perspective. So we've seen
a lot of a lot of equity coming into the
space to acquire catalogs or to support firms that are
aggregating and acquiring catalogs. We've seen a lot of capital,
(21:15):
both bank debt, private credit, and equity going in to
support operators, so music publishers, music labels to provide capital
support to those firms in the music industry acquiring catalogs,
exploiting catalogs. So it was very hot. It's cooled down
(21:41):
a little bit, but it's still a very stable part
of the business for capital providers.
Speaker 1 (21:50):
But when you put in perspective that historical perspective, as
you did TV going through the digitization that music and
film did ten years ago, what's the takeaway then? For TV?
Should we be hopeful that maybe the turbulence of today
will give way to a more stable ground tomorrow.
Speaker 2 (22:11):
I'm hopeful. It just takes time and people have to
determine how the revenue model is going to work because
it's unsustainable. If a platform is taking rights in perpetuity,
what is that platform? How are they going to continue
(22:32):
to monetize? How is the producer going to continue to monetize?
There is an ecosystem that needs to survive with revenues
generated so that they can use that capital to deploy
and continue to produce new content. So, you know, it
took many, many years for the music industry to stabilize
(22:53):
and find a revenue model that worked and was sustainable,
and I think, you know it's going to take some time,
but my belief is having gone through this and seeing
how everything is evolved over thirty years. You know, I
am hopeful that the revenue model will continue to evolve.
In the next couple of years, there will be more
(23:14):
revenue sharing. The form of how that occurs, I can't predict,
but I am hopeful.
Speaker 1 (23:22):
Well. Seems like a good note to end on. Hope
is always a good thing, Daisy, thank you for walking
us through this today pleasure.
Speaker 3 (23:35):
Thanks for listening. Be sure to leave us a review
at Apple Podcasts or Amazon Music. We love to hear
from listeners. Please go to Variety dot com and sign
up for the free weekly Strictly Business newsletter, and don't
forget to tune in next week for another episode of
Strictly Business.
Speaker 2 (24:00):
Yes,
Welcome to another episode of Strictly Business, the podcast in
which we speak with some of the brightest minds working
in the media business today. I'm Andrew Wallenstein with Variety
Intelligence Platform. As any producer can tell you, financing film
and TV production has changed a lot over the years.
So to get some perspective on where it's been and
(00:28):
where it's going, who better to talk to than someone
who's been active on this side of the business for
nearly three decades. In today's episode, I'll talk with Daisy Stall,
head of the Entertainment Finance Group at California Bank and Trust.
We'll be right back. We're talking today about changes in
(00:56):
the ways TV and films get financed with Dais Stall,
head of the Entertainment Finance Group at California Bank and Trust.
Thanks for being with me, Daisy.
Speaker 2 (01:06):
It's a pleasure to speak with you. Andy Cool.
Speaker 1 (01:09):
So I want you to paint a picture of the
before and after, because for a very long time, there
were certain tried and true ways to do what you do.
You sold a script and then secure distribution from all
over the world, or you bonded a film. It's not
quite that simple anymore, is it.
Speaker 2 (01:30):
No, No, it's not. You know, as revenue models change,
we all in this ecosystem have to change alongside, you know,
the revenue changes. So what I'd like to start out
with is kind of lay a foundation of what has
been in practice and developed over the past thirty five
to forty years. So there has been a very developed
(01:54):
ecosystem that involves producers, distributors, and capital providers. What I
mean by capital providers, I represent bank financing, financial institutions.
And the way that the distribution model worked in the
past is that you could write a script and you
could presell it to one distributor or thirty distributors around
(02:19):
the world, and those contracts came to come. They came
in a form and developed over time where financial institutions
could reliably lend against them, and that developed over time.
So it involved multiple aspects including very you know, I
(02:44):
hate to use too much legalies, but notices of assignment,
where distributors knew that a bank would need a certain
legal document and waivers to certain aspects of their distribution
agreements in order for the producer to obtain bank financing.
So they knew that they had to work with their
(03:04):
financial institutions and the bank partners in order to support
that producer making its content.
Speaker 1 (03:12):
It's hard for me to imagine that kind of system
persisting in a world where the streaming services have sort
of reconfigured the global entertainment landscape.
Speaker 2 (03:25):
And that's where it felt equalized. You know, twenty thirty
years ago, distributors needed to cooperate in order to obtain content.
Producers needed to work with the banks to determine what
form the contract should look like in order for them
(03:45):
to obtain the financing. So usually you would have these
three parties working collectively to support the production of film
and TV. What has happened over the years is revenue
models have been really abended. Now in the early days
of streaming, it actually simplified things. So you had, rather
(04:07):
than thirty distribution agreements that you know, I'm representing a
financial institution, I would have to lend against thirty contracts,
I could lend against one. It could be a major
conglomerate with the streaming platform. So in that sense it
made it slightly easier. But on the other side, the
(04:27):
streamer represented you know, their large conglomerate, they had a
lot more leverage, you know, and when you have leverage
you can dictate more of the business terms. And that's
what started to happen. Everybody was, you know, there's this
proliferation of production. You know, a lot of content being
(04:48):
produced film and TV over the past maybe about seven years.
And as the content was being produced and there was
a lot more volume and the streamers needed less, they
started to have the shift in leverage. They could dictate terms.
(05:10):
Once upon a time, somebody could produce a film with
equity and then maybe there could be a bidding war
and it might be three x the production costs, unbeknownst
to the streamer who was picking it up. Then there
were other terms that you could pre sell to a
streamer and there would be a fixed margin embedded in
(05:33):
that contract, so maybe one hundred and fifty percent of
your production budget, so you could have a fifty percent margin.
And over time that margin has shrunk where instead of
one hundred and fifty percent, it could be one hundred
and fifteen percent, So there's not that much margin for
anything like over budget or financing costs. It may have
(05:55):
not been included in the original budget. And now where
we're seeing contracts is the streamer or the distributor. I'll
use them kind of interchangeably, may not pick up worldwide,
they may only pick up domestics. So it leaves the
producer left with, Okay, how do I sell the rest
(06:17):
of the world or specific territory. So it is really
evolved over time, and the leverage seemed to be held
by the bigger streamers, and so it really tightened margins
for the producers. Producers had to give up the intellectual
(06:38):
property in perpetuity. So now when they produce content, it's
like a producer for hire. You produce it, you make
your margin. You don't own the IP, you can't build
the library. There's no further value from that IP that
you built. That value is now owned by the streamer
or distributor.
Speaker 1 (06:59):
Just one of the ways that being a producer has
gotten very difficult in this town. And also what about
when you're what about like non exclusive rights for other
windows like fast channels. I mean this didn't even exist
five years ago.
Speaker 2 (07:17):
I'd guess, yeah, so that I would put in a
different category. So when we're you know, what I was
previously discussing was about new content and producing new content.
There is a separate area of existing content. So what
has also happened over the years, is there's been a
(07:39):
lot of capital going into the system to acquire existing
libraries because there is value in these existing libraries that
first of all, they are not owned in perpetuity by
a streamer, so they can be exploited around the world
in different, different and emerging platforms. So when we talk
(08:02):
about fast channels, that is for existing content that has
been exploited in free TV is now going to other
ancillary windows like fast channels on a non exclusive basis.
And with respect to that kind of business model for
existing libraries, it actually helps expand the revenue generation for
(08:26):
that content because it's non exclusive.
Speaker 1 (08:29):
Got it, so a distinction between old and new content.
But you've talked about the shift in the revenue models.
I mean, is it Wasn't it always as simple as
just a fixed licensed fee? Is that not that simple anymore?
Speaker 2 (08:48):
No, Actually, it has evolved even within the past seven
to eight years. So it initially started as a fixed
license fee for the IP in perpetue so the producer
didn't known it anymore. Then it transitioned to a fixed
license fee for twenty years. Then it moved on to
(09:10):
a fixed license fee for maybe fifteen to twenty years.
But now it's only a certain territory. So now I've
seen maybe two streamers picking up one has a specific
territory or window timeframe and the other has the rest.
So I've seen two streamers pick up one content, one
(09:34):
specific ip. Now I've started to see and this is
really in the infancy stage where it looks more like
the traditional split rights deals that were happening in the
nineties and two thousands, where one domestic distributor and let's
say it's a streamer, will pick up specific rights and
(09:55):
then the rest of the world will be available to
sell to others and they, you know, the producer could
hire a sales agent to monetize the rights that were
not picked up by that streamer. And now I'm starting
to see contracts that are not a fixed license fee
from the streamer but looks something like a rev share,
(10:18):
which actually gives me hope. You know, it's because rather
than just a fixed license fee, you well, in the
in the sense of a fixed license fee, you just
have one fee and you have you can't monetize in
any other ancillary windows. The revenue stops there. But if
you have a rev share agreement, everybody's on risk to
(10:43):
monetize and keep monetizing beyond a certain platform into other platforms.
So the distributor wants to make you know, additional revenue,
so they are going to distribute in other areas and
they're on risk, and then the producer has potential upside
(11:04):
rather than that one license fee. So there's a risk
reward analysis that you have to do. So you can
have certainty with the fixed license fee, but you miss
any upside if you do the revenue shore. You have
to have confidence in your partner to exploit the content
and increase over and above what you would have received
(11:26):
for that fixed license fee and take the upside. Got it? Now?
Speaker 1 (11:31):
I want you to put this also in the context
of what you do coming from a bank talking you know,
whether it's senior debt, private credit. How do those sort
of different financial tools come to bear here?
Speaker 2 (11:49):
Well, twenty thirty years ago, a producer could get their
film made through pre sale contracts and no equity required.
It could be fully financed by a bank, But over time,
with the soft international markets and fewer and fewer distributors
offering pre sales, it has required additional forms of capital
(12:10):
such as equity and or private credit, which is really
defined as non bank lenders to step in into the
shoes that the banks traditionally held. So now you have
multiple forms of capital to produce one project. It could
be equity, private credit, and a bank facility, and so
(12:31):
they all have different costs of capital. It makes it
more expensive for the producer, so that interest, those interest
charges eat up what they would otherwise spend on production.
What has now happened is because if there are very
few pre sales, then it might be easier for the
(12:52):
producer to just equity finance the whole project. So I
do see in independent film many projects are produced with
equity that is provided by not institutional equity like big funds,
but more high net worth and family offices on a
project by project basis. I also see a lot of
(13:15):
private credit come in or trying to penetrate this space
because they see that there's a need. There's a big
gap between what banks can provide and what they can
lend against and their risk tolerance and equity. So private credit,
I've seen a lot of folks trying to come in
and provide that financing to independent producers. I've seen some done,
(13:41):
I've seen some trying to penetrate the space because it's
definitely a need that has been identified by those outside
of our industry.
Speaker 1 (13:49):
I remember the days where you know, you'd have private
investors come in and be passionate about a particular project,
or these member of the Big day, you know, slave
financing or do we still see these kinds of arrangements.
Speaker 2 (14:06):
We do see them. It's harder and harder to raise
the capital for them. So ten years ago, ten fifteen
years ago, every studio had a slate financing or maybe
multiple slate financing partners, every major studio out there. And
(14:27):
then those slate deals they wrap up in five years
and then they have to find a new partner. It
has been harder and harder to find partners, not because
of the lack of desire, but usually if you're looking
for a slate deal, it's got to be two hundred million,
three hundred million in equity raised, so that institutional capital
(14:49):
is not as interested in film and co fis today
as they were ten fifteen years ago, unless it's no
you know, a studio with really known IP if they've
got some major franchise that they're forecasting to have huge
wide releases. You know in the near term, but you
(15:11):
know that institutional capital is not completely dried up, but
it's definitely lessened in the past three to five years.
Speaker 1 (15:22):
We'll be back in just a moment with more with
Daisy Stall from California Bank and Trust. Stick around and
we are back talking with Daisy Stall, head of the
Entertainment Finance group at California Bank and Trust about the
ever evolving world of financing content and well. I also,
(15:47):
Daisy wanted to get your perspective on something that's not
quite financing content, but is something that I know it
must be figuring more into your conversations about finance in Hollywood,
and that's AI, which, as you know, is sort of
working its way into the sort of every little nook
(16:09):
and cranny of the supply chain. From your perspective, explain
how AI is now figuring into investment opportunities in the
role you could play, Well, I.
Speaker 2 (16:21):
See it from two different sides. So there are the
creators that can utilize AI to reduce production budgets and
with softer pre sales, you know the need for capital
that could make the difference between making a film and
not making a film. So I could see uses of
(16:43):
AI to help more films get financing. Now, with respect
to the finance side, you know, I haven't heard of
any AI tool yet, but I do see some potential
on you know, kind of on the financial side of
the business, in particular complex contracts that have very complex waterfalls.
(17:09):
So you know what a waterfall is is that you know,
if there is some kind of intellectual property that generates revenues,
there can be many participants in those revenues from the
day that it's released and exploited to you know, ten
twenty years down the road, and that intellectual property and
(17:32):
the revenue waterfall we call it participations, or in the
music space it's royalties. Those are complex contracts that have
entire groups called participations and residuals, and oftentimes, you know,
generally they're reliable, but it takes a lot of people. Oftentimes,
(17:54):
you know, the recipients of the participations, maybe it's talent,
maybe it's the direct the producer. You know, they may
have some questions or discrepancies. And then there are processes
that are referred to as audits, and they go back
and they audit their participation statement or their royalty statement. Well,
(18:17):
the use of AI, in my opinion I'm not a technician,
but it could be supported by It could support these
manual processes to reduce the time that it takes to
determine the participations and the respective amounts for each individual.
(18:39):
It could decrease potential errors in those calculations, or alternatively,
you could use it to audit and come to a
resolution of the audit results faster.
Speaker 1 (18:52):
I see you know, I'm surprised we've made it this
far into the conversation and interest rates having come up,
so I feel like I got to throw that out
there for you. How is that figuring into the current
investment picture in Hollywood.
Speaker 2 (19:07):
Well, it definitely eats away of potential dollars that could
go towards physical production. So on the one hand, that's
the direct impact. On the other hand, when assets are
trading in the market, and what I mean by trading,
so you can sell a film or TV library, you
(19:29):
could sell a music catalog. The way that these catalogs
and libraries are valued is basically taking a forecasted cash
flow over the next ten to twenty years. You use
an interest rate, which we refer to as net present value,
and when interest rates increase, it decreases the valuation. So
(19:52):
that's put a little pressure on valuation of these kinds
of assets. Nonetheless, if the assets have strong cash flow,
there's still interest out there for financing them and for
equity to acquire them.
Speaker 1 (20:05):
Okay, good to know. And look, we've talked a lot
of film and TV, but you know the music world
as well, and so I'm curious to get your sense
almost on a comparative level, just in terms of the
attractiveness of music as an industry for investment.
Speaker 2 (20:26):
Yeah, I've seen a lot of capital go into the
music space over the past ten years. Music went through
the digitization twenty years ago two twenty ten, and that's
what film and TV is going through now. So music
had to go through its challenges, and the revenue models
(20:51):
have stabilized, have been fairly stabilized, and the cash flows
are very reliable from an investor's perspective. So we've seen
a lot of a lot of equity coming into the
space to acquire catalogs or to support firms that are
aggregating and acquiring catalogs. We've seen a lot of capital,
(21:15):
both bank debt, private credit, and equity going in to
support operators, so music publishers, music labels to provide capital
support to those firms in the music industry acquiring catalogs,
exploiting catalogs. So it was very hot. It's cooled down
(21:41):
a little bit, but it's still a very stable part
of the business for capital providers.
Speaker 1 (21:50):
But when you put in perspective that historical perspective, as
you did TV going through the digitization that music and
film did ten years ago, what's the takeaway then? For TV?
Should we be hopeful that maybe the turbulence of today
will give way to a more stable ground tomorrow.
Speaker 2 (22:11):
I'm hopeful. It just takes time and people have to
determine how the revenue model is going to work because
it's unsustainable. If a platform is taking rights in perpetuity,
what is that platform? How are they going to continue
(22:32):
to monetize? How is the producer going to continue to monetize?
There is an ecosystem that needs to survive with revenues
generated so that they can use that capital to deploy
and continue to produce new content. So, you know, it
took many, many years for the music industry to stabilize
(22:53):
and find a revenue model that worked and was sustainable,
and I think, you know it's going to take some time,
but my belief is having gone through this and seeing
how everything is evolved over thirty years. You know, I
am hopeful that the revenue model will continue to evolve.
In the next couple of years, there will be more
(23:14):
revenue sharing. The form of how that occurs, I can't predict,
but I am hopeful.
Speaker 1 (23:22):
Well. Seems like a good note to end on. Hope
is always a good thing, Daisy, thank you for walking
us through this today pleasure.
Speaker 3 (23:35):
Thanks for listening. Be sure to leave us a review
at Apple Podcasts or Amazon Music. We love to hear
from listeners. Please go to Variety dot com and sign
up for the free weekly Strictly Business newsletter, and don't
forget to tune in next week for another episode of
Strictly Business.
Speaker 2 (24:00):
Yes,
Popular Podcasts
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.