Tom Cruise joins Bono of U2 in the elite world of hedge funds
Online, March 16, 2010 (Newswire.com) - When motion picture powerhouse Paramount ended their 14-year association with Tom Cruise, CEO Sumner Redstone, one of the most powerful media moguls simply stated he doesn't like some of Cruise's actions in the last year. Normally, when a studio breaks with a star, there is no public statement. None is required out of mutual respect, they just part ways.
It is rumored by Hollywood executives that Viacom had offered Cruise a $2 million production deal, down from $4 million and Cruise felt it was not enough. Here's the real deal, Tom Cruise did "Mission Impossible III" for Viacom, the movie grossed nearly $400 million world-wide. Cruise had a fee of 25% of Viacom's gross revenue on the movie. After Viacom paid the $150 million for the movie plus advertising, Viacom gets zero and Cruise nets $100 million. This is why Sumner Redstone of Viacom is so annoyed, and Cruise is sitting on top of the world.
Now, Tom with partner Paula Wagner brought back United Artists and are soliciting hedge funds to produce independent films. Wagner has already found funding worth $100 million from two hedge funds.
A recent wave of hedge funds and private equity investment in the entertainment business, have been popping up to help studios finance pictures with stratospheric budgets. Elevation partners, who is perhaps best known for its association with rock band U2 lead singer Bono, has made investments totaling more than $1 billion in media and entertainment projects. One of its best investments has been in Palm Inc, their $325 million dollar investment is now worth over $2 billion, according to a report by CNBC. Another venture that Bono liked, was user-generated site Yelp, he invested $25 million in the company. Yelp makes money selling local business advertising that appears as a yellow labeled "Sponsored Results" around the site.
The Cruise/Wagner team negotiated what they call "an unprecedented multi-faceted financing deal" with "two top hedge funds." The deal will reportedly provide $100 million in revolving funds, which will be renewed annually, with an option to up the funding to as much as $300 million per year. Peter Tasca, CEO of Laureate Trust, a British Virgin Islands based hedge fund which returned 33% net of fees in 2009. States, "The Tom Cruise films that Paramount produced with Cruise/Wagner Productions earned revenues of over $2 billion globally and were responsible for 15% of the gross income the studio generated in the last 10 years, I wouldn't bet against the market value Tom Cruise can bring to any studio project."