Turkish cinema, TV series now to receive investments with capital market instruments

Published 25.12.2018 00:09
Updated 25.12.2018 08:00

One of Turkey's largest investment fund companies, Azimut Portfolio is establishing a mutual fund for movies and TV series for the first time.

The portfolio, which manages nearly TL 4 billion ($750 million) in the country, will be launching the Cinema TV Venture Capital Fund in the first half of 2019. As a result, the Turkish film industry will benefit from capital market instruments and investors will be able to enter the sector without going through a producer.

Turkish cinema and TV series industry is one of the largest in the world and has won a global following. More than 100 Turkish TV series have been exported to more than 150 countries over the recent years. With more than $350 million in export revenue and over 500 million viewers, Turkish series is ranked second worldwide.

Up until now, the industry worked mostly through traditional financing, through producers and sponsors. But Azimut Portfolio's new capital market instrument, which was approved by the Capital Markets Board (SPK) on Dec. 7, will change that. As of the first half of 2019, the fund will begin exporting and Turkish TV and cinema industry will be able to receive Hollywood-style investments.

According to the Hürriyet newspaper, the hedge fund had to wait almost a year before getting the required permission.

Hollywood often funds projects through hedge funds. For instance, James Cameroon's 2009 sci-fi blockbuster, "Avatar" was partly by Wall Street hedge funds. Hollywood hedge fund "slate financing" developed in the 1990s when Wall Street investors were seeking new markets and studios were seeking new funding sources. Slate financing has significantly impacted the structure of the U.S. film industry.

Rather than footing the bill for one movie at a time as per traditional financing, hedge funds can provide enough money to help support a range of films, which are put together in a slate. A slate is usually comprised of at least one potential blockbuster, plus several other films of varying profit potential.

In fact, the operation of the fund is simple. Just like private capital or bond-bill packages, it is possible to become an investor by paying a participation share in the cinema TV venture capital fund. As with bonds, the fund manager who manages the investments, will invest in movies and series with the money collected. And after a certain period of time, the investor will obtain a profit according to the success rate of the investment.

The size of the Azimut Portfolio's fund is not yet known. But, taking into consideration that the company manages investments worth TL 4 billion in Turkey, even 2.5 percent of the total amount would equal to TL 100 million, a relatively high figure for the industry.

According to Hürriyet, the Turkish film industry was worth TL 470 million in 2017. That figure was just TL 50 million, only a decade ago. The number of cinema tickets sales increased from 21 million 10 years ago to 71 million. The sector has experienced continuous growth. Despite its magnitude, the film industry remains the only to not enter the capital market. Some productions were financed either via sponsor or a one-time investment model. Thus a fund with continuity is being set up for the first time.

Besides profits in Turkey, the fund also plans to provide its investors with profits from sales abroad. Thus, it opens a big door to an area where a normal investor cannot directly invest.

Meanwhile, the Culture and Tourism Ministry is preparing a new support mechanism for the Turkish TV series, which have seen phenomenal global success in recent years.

With the Cinema Law, incentives will be introduced for exported Turkish TV series. It was expected to be brought up at the Grand National Assembly of Turkey (TBMM) soon.

The current regulation, which supports only films, will be amended to provide financial support to domestic or joint productions that can contribute to Turkey's promotion abroad.

The draft law also envisions a reimbursement of up to 30 percent of the amount spent in Turkey on foreign cinema films and series to be shot in Turkey partially or with the entire content in order to make Turkey a "film shooting center."

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