Your average hedge fund pulls in an internal return rate of 12% to 18%. But over the past five years, even Columbia Pictures—the weakest of Hollywood's Big Six—has been clocking a 14% return on movie investments!
That's way easier, cleaner, steadier, and more profitable than the constant wheeling and dealing hedge funds do in stocks, futures, or bonds!
Seeing he'd won Michael Ovitz over, Dunn felt a wave of relief wash over him. He leaned back and said, "In the last decade, U.S. box office numbers have jumped 52%, and overseas? They've tripled! Plus, with tech advancing, Hollywood's revenue streams are only getting broader. That kind of solid return is bound to catch the eye of hedge funds—maybe even investment banks!"
Ovitz nodded. "Sure, but convincing hedge funds, private equity, or investment banks to fork over big money takes more than that. You need a rock-solid pitch."
Dunn grinned. "Oh, I've got it covered."
He pulled out another file and handed it over. "In probability theory, there's this widely used trick called the Monte Carlo method. Lately, investment firms have been all over it. Basically, it's about combining a bunch of risky unknowns into a portfolio to smooth out the ups and downs of returns."
"This morning, I checked in with some buddies and roped in an analyst from Merrill Lynch to crunch some numbers. Take a look. According to Monte Carlo simulations, once you're investing in 20 to 25 films, the volatility shrinks big time. Scale up to that many movies, and you've dodged the big risks."
"At its core, movie investing isn't all that different from stocks—both use portfolios to hedge bets. But unlike stocks, even if the movie market dips, you don't get a sudden crash. It's less dicey. I'm calling this approach 'slate financing.'"
Ovitz took the file, staring at the jumble of probability formulas and charts. His head spun. He shot Dunn a stunned look. "You whipped this up in one morning?"
"Yup."
"Whoa…"
Ovitz sucked in a breath.
He'd been navigating Hollywood for decades, rubbing shoulders with everyone from White House bigwigs to the little guys. But someone like Dunn, with this kind of insane range? First time he'd seen it.
The media loved calling Dunn a "stock wizard" or investment guru. Ovitz had always brushed it off as hype.
But now, flipping through this detailed probability breakdown, a flicker of respect sparked in him. And maybe a touch of pity for his old rival, Michael Eisner.
Going up against a kid like Dunn? Eisner was either way too cocky—or he'd seriously underestimated him!
The more you hung around Dunn, the more you realized he was a bottomless well of surprises.
You never knew when he'd drop some wild, jaw-dropping idea that somehow made perfect sense.
Ovitz might just be a top-tier agent who thrived on people skills, not a finance whiz, but even he could tell Dunn's "slate financing" concept had legs!
Still, he was baffled. "Dunn, how the heck did you come up with this? It's unreal."
Dunn chuckled. "Just standing on the shoulders of giants."
Ovitz cracked up, thinking Dunn was joking—playing the humble Newton card.
He had no clue Dunn was dead serious!
With his own limited know-how, Dunn couldn't have dreamed up Monte Carlo simulations or slate financing on his own.
He really was borrowing from giants!
This whole thing actually kicked off in 2003.
Viacom's corporate vibe—conservative yet cutthroat—mirrored its big boss, Sumner Redstone. You could tell from how they'd snubbed Dunn's partnership offers.
Paramount, Viacom's movie arm, had always struggled with cash flow. Then, in 2003, their VP of commercial ops, Isaac Palmer, cooked up a genius financing fix.
Yup—Dunn's "slate financing" plan.
Paramount teamed up with Merrill Lynch to set up a private equity fund. Over two years, they'd pump cash into 25 Paramount films, covering 20% of the budgets.
The "slate financing" pitch hit Hollywood and Wall Street like a thunderbolt. In the years that followed, more investment banks and private funds jumped in, raking in solid returns.
It was hands-down the happiest marriage Hollywood and Wall Street ever had—billions of dollars in play.
The big names? Relativity Media, Dune Entertainment, and Legendary Pictures. They acted as middlemen, funneling Wall Street cash into Hollywood.
Here's the kicker: if hedge funds or private equity dealt directly with studios, they'd get no rights—just a cut of the profits.
But setting up a management outfit like Legendary? That changed the game. Invest 20%, and you'd snag 20% of the rights in negotiations.
Later, when Legendary hit rough waters and nearly went bust, a real estate giant swooped in with a fat buyout. Why? Over a decade of slate deals had stacked their vault with intellectual property.
The profits weren't huge, but in an era where content was king, those rights could fetch a fortune!
The 2008 financial crisis shook things up—hedge funds and private equity pulled back, tightening the purse strings. Wall Street stepped out, and emerging markets like Asia and the Middle East picked up the slate financing baton.
Right now, it's 2000. Slate financing isn't even a blip on the radar yet.
Dunn was stepping up, ready to gift Hollywood this game-changer early—and make sure the whole industry owed him one.
That's the power of influence!
…
Dunn's brainstorm finally cracked the puzzle that'd been gnawing at Ovitz.
Back in the day, he'd relied on star power to fund single films. Now, he saw the future: massive, scaled-up slate financing was the real hook for investors.
Thing is, slate financing didn't quite gel with his old "one-stop shop" vision. This was a beast of a project—way too big for AG Agency to tackle solo.
They'd need more partners to jump in and launch a new company.
AG could take a stake in it and ride the wave of benefits.
Dunn shot Ovitz a glance, catching the barely contained excitement on his face. He teased, "Michael, don't just think about your own payday. I'm still getting hammered by Disney over here!"
Ovitz froze, then burst out laughing. "Dunn, every studio's tearing their hair out over cash right now. If your slate financing idea pulls them through, you think Disney's little tantrum will even matter?"
Dunn frowned. "I need results fast!"
Ovitz got it.
With Disney's ban hanging over him, every day Dunn stayed quiet chipped away at his cred with Hollywood's inner circle. People were starting to think he was scared of Disney.
He had to clap back—and quick. A sharp, bold move to prove he wasn't afraid of Michael Eisner, and that Dunn Films could go toe-to-toe with Disney!
Ovitz mulled it over. "Give me a week to work it. After that, you can hit back at Disney with confidence. Keep it small-scale, though—don't let it blow up too big."
"Got it!" Dunn waved a hand, half-skeptical. "A week's enough? This slate financing thing's just a framework. Convincing investors takes more prep than that."
Ovitz grinned. "Leave the people stuff to me—you don't need to sweat it. Landing big investments takes time, sure, but I can tip off the major studios first. Keep them from piling on you in the meantime."
Dunn nodded. Fair point.
With Ovitz's silver tongue, he could easily paint a juicy picture for the studios.
Right now, aside from Dunn Films, every movie outfit was desperate for outside cash. If Dunn could play matchmaker, they wouldn't dare risk ticking him off by joining Disney's pile-on.
He trusted Ovitz to handle it.
"Slate financing's got legs—huge potential. Nobody's clued into it yet. Once they catch on, Wall Street and Hollywood will be racing to build bridges. We've got to keep it hush-hush and strike fast when we move!"
Dunn wasn't kidding around.
Back in 2003, Paramount and Merrill kicked things off with the slate model. Soon after, Columbia, Warner, Universal, Fox, and Disney all jumped in, partnering with hedge funds to spread the risk.
This was Dunn's brainchild now—he wasn't about to let anyone swipe it.
Even if they did, he'd make sure he'd milked it for all it was worth first.
Ovitz caught his drift and waved it off with a laugh. "Relax, I've got this. Studios are a mess of insider games—who'd dive in blind? Even Wall Street's deep pockets won't touch Hollywood without a safety net. A solid middleman's the only way to play it smart."