Film financier and producer Ryan Kavanaugh is back in the film business not long after he swore he was done with Hollywood.
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He built Relativity Media into a major independent film studio with hits including “The Social Network,” “The Fighter” and “Mamma Mia!” before leading it into bankruptcy — twice — and eventually selling the company.
For his comeback, Kavanaugh is looking east to China with his new media firm: Proxima Media.
He spoke exclusively with FOX Business following his keynote at the Wrap's "Grill" conference.
The wide-ranging interview began with a question on why he’s teaming up with a Hong Kong-based studio in the midst of a trade war with China.
“For China, yes, there's a trade war and that's political, but for the Chinese consumer that doesn't change that they love U.S. films and there's no change in the way that films are being made; except that it was just announced that Hong Kong is no longer considered to be part of the [foreign film] quota. So if you are using Hong Kong films, Hong Kong facilities, you actually are considered to now be a Chinese [studio].”
Of course, the Chinese theatrical market rivals the U.S. in size and is only expected to grow.
Kavanaugh says he's raising a $250 million fund that can be leveraged to $1 billion. That will be used to create films with National Arts & Entertainment.
Kavanaugh told Fox Business he hasn't finished raising that fund but is looking to make American-style films with $15 million to $80 million budgets, “I can’t really say what we’ve got ‘raised’ because until the money’s in the bank, and it’s a public company and there’s a lot of protocols it has to go through, but we feel fairly good we will close the whole amount.”
Kavanaugh and the publicly traded Hong Kong studio are also developing a theme park/studio on the mainland called "The World." It will replicate major cities from around the globe that can also be used as sets.
Creating a new film trading platform
The producer was a pioneer in slate financing for films -- bringing in hedge funds and non-traditional investors to back projects. And now, he’s looking to bring film financing from Wall Street to Main Street.
His next act, Proxima Media, includes creating a trading platform and a security token on the Ethereum cryptocurrency platform -- allowing fans to directly invest in movies once they IPO and trade titles as they go from the big screen to streaming video and other windows and platforms that generate revenue for content makers.
“I always saw a better market … a more efficient market, which is not the hedge funds and banks," Kavanaugh said. "But how do we get the very consumers who are buying tickets to movies to be investors in the films they love? So really what we've created is a trading platform that allows for investors to literally purchase into their favorite movies.”
He added, “We believe from our discussions most of [the studios] will list [films] and we'll start listing a good portion of their 600 projects and we can be the marketplace to put end-users and the studios together.”
The movie exec says Entertainment Stock X (ESX) plans to launch later this year. Kavanaugh says the platform is designed to provide dividends, which may attract hedge funds seeking market inefficiencies and alternative assets. But the main thrust is attracting individuals.
He’s confident it will pass government scrutiny under Regulation A of the Jobs Act.
That law allows mass marketing to adults, not only so-called sophisticated (i.e. wealthy) investors, to invest in private companies and even initial public offerings with fewer government regulations and requirements than hedge funds and traditional securities.
In fact, Kavanaugh sees marketing to movie fans alongside film information with links to the ESX, targeting folks who may invest just $50 or $100 each into a film.
“So an 18-year-old who loves, you know, Spider-Man or Batman can actually invest and we can market to that person. So what's changed is Regulation A, of which there's now been I think a couple hundred-plus IPOs, opens up this world where it's a quick, efficient, inexpensive, easy way to take companies public. So every movie is a company, every TV show's a company and at the same time to be able to market to anyone with no lockups, no restrictions, no hold backs and so forth. “
Securities experts say there are risks to the trading platform plan, which may attract greater SEC scrutiny, even under Regulation A, depending on the number of investors and how much Proxima raises.
There are also questions about whether movie fans will invest enough to create a liquid market in the risky film business.
Assembling the Avengers
Kavanaugh is characteristically bullish on this venture, just as he was when arguing to turn certain comic book heroes into silver screen gold.
"I remember literally sitting in the room with 100 bankers in different rooms getting laughed at when they said, ‘You want to tell me that Iron Man, who we’ve never heard of, is going to be the size of Spider-Man? Or Captain America is going to work in France, Italy, and Germany? OK, you’ve got to leave, kid!’”
But the producer added, “Merrill Lynch underwrote it and we brought in studio people to run it as a studio. But looking at it now, I wish I could say I thought it could be as big as it is. I thought it would be big, I believed in it, obviously, I spent a year of my life on it, but it’s awesome to see it actually create a revolution.”