The Essential of Investment in Creative Industry: A Reality?

In reference to my previous post of Investment in Entertainment: A Myth, I want to reaffirm the reality of investment in creative industry in general.

In my opinion, in Malaysia or Indonesia, we don't have an ecosystem to harness the potential of creative industry. We have bits and pieces everywhere. It is like a huge puzzle without a real possibility to be solved, may be in the short run.

Government Malaysia interventions and promotions of creative products are good but not in the long run. The systemic bias towards quantity or demand rather than quality is becoming a norm. Business sense will kick in to reflect the inherent tendency of viewers preference.

As for me, we don't actually have a total film industry in Malaysia or Indonesia. Simple. We don't have something that Hollywood or Bollywood has.

Do we need to follow Hollywood or Bollywood? Hell ya! Because the structure and fundamental framework they have simulate as an industry.

We don't have dedicated professional writers community at large, casting professionals, professional investors/producers, established distribution network, professional actors (we got a few familiar faces though) etc.

We got a few good directors. We got a lot indies practitioners who do not entirely conform with the mainstream. I suppose in Indonesia, independent film or music movements are bigger than the mainstreams. Indonesia herself is a puzzle, nonetheless.

In Indonesia, it is more like a market mechanism. The market will determine the size of demand and supply, prices, quality, quantity and allocation of resources. Participation from government would be very minimal. Sadly, more on regulating the market mechanism. Don't expect too much on government intervention although I do think that the inflow of capital or investment is necessary to inject and catalyst the market mechanism.

Who is the 'Universal Studios' of Malaysia or Indonesia, anyway?

The Essential of Investment and Entertainment 2.0

Subsequent to investment and entertainment article, I think I should describe a little bit on entertainment.

Investment in entertainment or 'showbiz' focuses on the mass media, music and lately electronic entertainment (games). Exhibition and live entertainment like theme parks, wax museums, circus, comedy clubs, theatre and performance arts are usually at the bottom of the list.In entertainment, investors would look at film, commercial broadcasting, music, new media, fashion and video games (online or offline).

Take-over or merger and acquisitions between film studios in the States is particularly fierce and normal to certain extent. For example +Miramax. It was a leading independent film motion picture before it was acquired by Walt Disney in 1993 for $60 million. 17 years later, Miramax was sold for $663 million to +FilmYard Holdings, a joint-venture between Colony Capital (an international investment firm based in Santa Monica, Los Angeles), Tutor-Saliba Corporation and Qatar Investment Authority. They have 700 film titles including +Reservoir Dogs, +Pulp Fiction, Good Will Hunting, Shakespeare in Love and The Talented Mr. Ripley. Almost tenfold return within 17 years? Awesome!

In commercial broadcasting, the focus is more on television and radio. Based on the business models like free-to-air or Pay TV, the pulling power is the content. The royalties, licensing and franchising streams like Simon Fuller's 'American Idol', 'America Got Talent' or 'So You Think You Can Dance' have been providing a steady flow of income to investors or television network operators for more than 10 years. Imagine the advertising rate for the prime-time series of 'American Idol' was sold more than $700,000 for a 30-seconds slot. The estimated revenue for Season 6 was $870 million and the series was the TV's biggest moneymakers according to Forbes Magazine.

With hindsight, investment in commercial radio, unfortunately, is still relevant. The infrastructure and initial investment setup are relatively cheaper than television and it still spews money like +SiriusXM does. SiriusXM, listed on NASDAQ, broadcasts 135 channels in the United States. Their contents are impressive with the leading figures like Howard Stern, Martha Stewart, Oprah Winfrey and Jamie Foxx.

In fashion, big names such as +Ralph Lauren, Tiffany & Co, Coach and +Michael Kors  are the favourites to the investors. Top performing fashion retails like JCPenny and +Nordstrom Rack nevertheless are also offering a good return for investors. Investors like PPR, home to Gucci, YSL, Stella McCartney and +Balenciaga, look for companies that have significant growth potential with a dynamic and focused business strategy.

Online and offline game developer companies are enjoying a phenomenal growth across the globe. You could expect many private equity firms to support the start-up or growth companies. +Zynga games, +Gameloft, Foldit, +Tapjoy, Warner Bros Interactive and +Electronic Arts (EA) have an impressive run in the industry. Needless to say, the successful Twitter, Facebook, Tumblr, Foursquare and LinkedIn would offer investors more venue to put their money in.

In reality, the scope of entertainment industry is quite huge. From film to gaming, the industry offer a handful of investment venues to the savvy investors. Each sub-industry have a different level of risk that you might need to take into considerations. And the return of investment (R-O-I) or payback period is a bit longer compared to other industry though.

So, do you think investment and entertainment relevant?