Inside Saudi Arabia’s Hollywood Ambitions
On a balmy Wednesday at the tony Four Seasons in Beverly Hills, California, entertainment's finest got their first taste of the industry's new moneymen. Lobby placards in Arabic welcomed visitors to the General Consulate of the Kingdom of Saudi Arabia in Los Angeles. Outside, an oud player and platters of hummus and dates transported visitors to Riyadh - at least, a Hollywood remake of it.
The suits were out in force to court investment from the oil-rich Gulf nation, which is pouring money into Hollywood in a ploy to attract partners to its own nascent entertainment industry. The Saudi delegation, led by Crown Prince Mohammed Bin Salman, booked the entirety of the Four Seasons as part of a lavish three-week US charm offensive. Los Angeles' media moguls played host: Bin Salman, 32, reportedly dined at Rupert Murdoch's Bel Air estate with five major studio heads [and Dwayne "The Rock" Johnson].
Hollywood has a long history of taking dumb money from outside investors who underestimate the volatility of movie returns. Saudi Arabia is its latest target: Studios and small productions companies are now looking to the reforming Kingdom to help finance projects. Given that North American theatrical admissions dipped 6% in 2017, many more are banking on its population being a movie-going goldmine.
"They're the new Chinese," said one insider, whose company is forging a deal with the Saudis. The ritzy mating dance is a reboot: In October 2016, Dalian Wanda Group chairman and billionaire Wang Jianlin cozied up to bigwigs at a similar gala at the Los Angeles County Museum of Art. His real estate conglomerate led China's charge into Hollywood, which resulted in Chinese companies brokering deals with five of the six major studios and Wanda's acquisition of co-financing and coproduction outfit, Legendary Entertainment, for an overblown $3.5 billion, including debt. In 2016, Chinese money in Hollywood totaled approximately $5 billion, but by 2017 that dwindled to some $500 million, as the Chinese government cracked down on foreign investments.
Today, deals with China have completely dried up, and the Saudis are stepping up to the plate. Saudi Arabia's $230 billion sovereign wealth vehicle, the Public Investment Fund, is on track to invest hundreds of millions in Hollywood as the first new screens go up in the Kingdom. Its hallmark purchase is a soon-to-close $400 million deal for an estimated 7% in Endeavor, the sprawling entertainment conglomerate that includes powerful talent agency WME, several live event brands and a burgeoning production business.
Its newly formed government entertainment agency, the General Entertainment Authority, this week announced a new Cirque du Soleil show in Saudi Arabia, plus partnerships with touring company Feld Entertainment, National Geographic Encounter experiences and festival promoter IMG Artists. Following Bin Salman's decision to lift a 35-year cinema ban, AMC Theaters declared intent to open up to 100 cinemas in Saudi Arabia by 2030, with IMAX expected to follow suit. No deal terms were disclosed.
The spate of foreign partnerships is aimed at kick-starting the Gulf nation's entertainment industry with movies, live events and theme parks. Bin Salman has undertaken ambitious social and political reforms to modernize Saudi Arabia's society, diversify its economy - and consolidate his power. As part of his so-called Vision 2030 program, he announced plans for an eye-watering $64 billion investment in entertainment over the next 10 years from both private and government entities.
His tactic: invest in US-based companies to encourage - or obligate - them to come to Saudi.
"It's to bring the know-how," Ibrahim Al Omar, governor of the Saudi Arabian General Investment Authority [SAGIA], said of the exchange. "The whole ecosystem is not there today, so you need to invest to bring the companies. The only way to realize the vision is by partnering with the best."
Like the Chinese, the Saudis are expected to front cash for a major studio film slate to profit off distribution in the Kingdom. Unlike Alibaba and Wanda's studio ambitions, there are no rumblings yet of outright purchase, though current consolidation makes smaller entities, such as Lionsgate and Paramount, ripe for purchase.
Some spy opportunity. AMC believes Saudi Arabian's 32 million residents could generate up to $1 billion at the box office by 2023, putting it on par with Russia's 2017 total. It is not yet clear how much money from ticket sales will flow back to studios.
All moviemakers should expect censorship: Saudi Arabia's General Commission for Audiovisual Media [GCAM] will screen for what it deems to be inappropriate content, which will likely include explicit scenes.
"As in all countries in the GCC, they will ensure the right qualities that will suit the population," said Abdullah Al Dawood, chairman of the Development and Investment Entertainment Company.
The Saudis insist doing business in the nation will be easy. During the investor presentation, they trumpeted the ability to get a business license in 48 hours and that foreigners can fully own companies operating in Saudi Arabia's entertainment sector - something that non-Chinese citizens were forbidden from doing in China.
Two blocks away from the Four Seasons, Bin Salman's presence drew a handful of demonstrators outside Endeavor's glass-walled offices last week. With placards that read "Stop bombing Yemen" and "Saudi Prince War Criminal," they were a small but vocal minority questioning the ethics of the fat Saudi checkbook.
Bin Salman has insulated himself from the nation's appalling human rights record by positioning himself as an agent for change since he was named Crown Prince in June 2017. Not everyone is buying it.
"How can these people take money from a country with such a bad human rights history?" said one high-placed source who asked not to be identified.
While Bin Salman has granted Saudi women permission to drive, they still need male authorization to get a passport and a male chaperone to travel. Genders remain segregated under the nation's conservative interpretation of Sunni Islam. With neighboring UAE, the country has been involved in a bloody assault of Yemen for the last three years that has escalated into a humanitarian crisis. Their religious judicial system routinely sentences people to death, according to Amnesty International, and still condones brutal punishments including beheading, lashings and cutting off hands.
But many in hyper-liberal Hollywood have already taken money from another Gulf state with laws that don't align with its politics. Through entertainment outfit Image Nation Abu Dhabi, the UAE government formed a $250 million feature film fund with production outfit Participant Media, a $100 million joint venture with National Geographic Films, a $250 million financing deal with Ashok Amritraj's Hyde Park, and a long-term contract with Walter Parkes and Laurie MacDonald's Parkes/MacDonald. In fact, the UAE government has quietly had a hand in financing films from 2012's The Men in Black 3 to little-seen Oscar nominee, Roman J. "Israel", Esq.
Image Nation Abu Dhabi, founded in 2007, has been courting US and Bollywood productions by marketing itself as a safe - and cheap - place to shoot. The Abu Dhabi Film Commission offers a 30% rebate on production spend; more than 55 productions have taken up the rebate since it was introduced in 2013, according to twofour54, its government-owned production studio. Even part of Star Wars: The Force Awakens was shot in the nation's desert, with assistance from government entities.
The U.A.E. has already built theme parks, as Saudi Arabia hopes to do. Motiongate, a joint venture in Dubai between DreamWorks Animation, Sony Pictures and Lionsgate, opened in 2016, while a Warner Bros. theme park in Abu Dhabi is set for a summer debut. Universal Studios serves as a cautionary tale: Its mammoth $1.2 billion, seven-million-square-foot theme park within planned complex Dubailand, which broke ground in 2008, was scrapped when the economy tanked.
But executives on both sides of the Atlantic are already rubbing their hands together. In Riyadh, the first new cinema opens next week with Marvel hit Black Panther. For the Saudis, it's show-time.
Source: Forbes, Edited by website team