Hollywood dealmaking heavyweights are becoming increasingly worried that President Donald Trump’s actions against the terrorism regime in Iran and the unrest it is causing in the Middle East will impact Arab investment in U.S. entertainment projects.
The Gulf states have directed billions of dollars into the entertainment sector in the USA. Qatar, for instance, has pumped $150 million into one Hollywood production company, and Saudi Arabia threw in one billion into one company and another $29 billion into another. In addition, a conglomerate of three Mid East wealth funds invested $24 billion in Paramount’s acquisition of Warner Bros. Discovery. And those are just a few of the big deals by Middle Eastern companies, according to The Wrap.
But industry insiders are starting too fear that this pipeline of ready cash just might get shut down as the president’s actions in Iran continue, The Wrap said, adding that “a prolonged or escalated conflict is poised to drive up financing costs and could cause delays in Gulf-backed transactions that have been signed but not yet closed, or see terms change.”
The experts worry that some deals with “material adverse change” clauses could cause investors to simply walk away without further negotiation, and deals that have not been finalized could be cancelled altogether. And other deals may end up on hold for the foreseeable future as investors overseas wait out the military actions.
If Middle Eastern investors turn skittish it would come at the worst time possible for Hollywood which is already experiencing a loss of jobs, and the shuttering of producers and studios.
“The current conflict only reinforces pre-existing inflation concerns and amplifies credit market volatility,” said Dr. Christopher Kummer, an economist and finance professor at Hult International Business School. “This pushes interest rates and borrowing costs higher, making the leveraged financing required for most large transactions significantly more expensive.”
“This is often what stops an M&A wave,” Kummer added.
One problem that may crop up with the various sovereign wealth funds is that Mid East authorities may turn them toward rebuilding efforts internally rather than investing outside their borders in sports or film projects.
The biggest factor, of course, concerns just how long President Trump’s actions against Iran will last. If it is all over in a few weeks to come or a few months, nothing may change at all in the Mid East’s investment plans. But if this drags out, damage increases outside Iran, and the unrest continues, it may cause the Gulf States to pull back on exterior investments.
The burgeoning deal between Paramount Skydance and Warner Bros. Discovery is a perfect case in point. Investment in the merger deal by the Gulf States was a key part of Paramount’s offer to Warners. It is possible that if Trump had moved against Iran a month earlier than he did, the Gulf investment in the Paramount takeover deal may not have materialized, and Netflix would have remained the top bidder for the studio.
So far, at least, the various investors in the Middle East and their governments have expressed their commitment to past plans to engage with Hollywood. But things may change depending on how long the conflict with Iran continues and whether that conflict expands outside Iran’s borders any worse than it has already.
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