Friday, September 05, 2008

Dhabiwood?: Abu Dhabi Invests In Hollywood

Sources: New York Times, Abu Dhabi Puts More Cash on the Line in Hollywood; Los Angeles Times, Abu Dhabi Channels More Cash to Hollywood; Financial Times, Abu Dhabi Takes Fortunes to Hollywood

Just two days after purchasing the premier English football club Manchester City, Imagenation Abu Dhabi announced that it will invest more than one billion dollars over the next five years in productions to be made in Hollywood. Edward Borgerding, the chief executive of Imagenation Abu Dhabi, said Imagenation would make six to eight movies a year, with budgets of ten to fifty million dollars per film.

Imagenation Abu Dhabi is a newly formed subsidiary of the Abu Dhabi Media Co., which is controlled by the government of the United Arab Emirates. Imagenation is therefore controlled by the larger and more powerful Abu Dhabi Media Co., but it is technically a distinct legal entity. Imagenation was formed because media companies in the United States would have been unlikely to accept direct investment from the government-controlled Abu Dhabi Media Co. Foreign direct investment is capital invested by corporations into other countries, usually resulting in an ownership of at least ten percent of voting stock. Because the Hollywood production companies would not want another country, especially an Islamic country, to have any sort of direct control over them, it was necessary for Abu Dhabi Media Co. to form Imagenation Abu Dhabi.

However, there is still some question about how much influence Abu Dhabi will have on the movies that they finance. It is suspected that this new financing from the oil-rich Middle Eastern country will not come without restrictions. In its own state, the government only agreed to show edited versions of recent Hollywood film Syriana because it feared that it would show the Gulf in a negative light. Regardless of possible cultural clashes, Hollywood welcomes the new source of capital as hedge funds and private equity firms have slowed their investments due to disappointing returns and a deepening credit crunch.

Discussion: There is a question as to whether cultural conflicts will ensue between the Islamic state and Hollywood. Do you think that the UAE will attempt to play a direct role in the films that it finances? Do you think that we will begin to see a cultural bias develop in the movies that are funded by Imagenation? What are the pros and cons of foreign investment into a nation's entertainment industry?

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