(re)Enter the banks

It would appear that the simple story of portfolio theory has been once again sold to Wall Street. According to Variety, Merrill Lynch is leading the charge into the fray with Paramount (see Article here):

"In a groundbreaking deal, Paramount Pictures will receive $200 million - $300 million in production funding through investment bank Merrill Lynch.

Deal is part of a trend in which banks are eyeing film slates as potential investment opportunities. Other studios have been trying to put together similar deals, but this is believed to be the first to come to fruition. Under the arrangement a group of investors will create a fund to back a slate of films."

Films can provide a reasonable (even attractive) return given two important considerations. The first is what the traditional Hollywood credit facility originators have always known: volume. Across a slate of enough quantity, films will perform. You should be able to get to the star that offset the dog(s).

The second is more difficult to obtain: good financing and distribution agreements. With the right terms and splits, more of the gross receipts will actually find their way into investors' pockets.