By Matthew Coman

New York City's media and entertainment bankers have found the deal-making environment as tough as any other industry this year --- and maybe tougher as the soft advertising market has spooked many investors in media deals.  But the city's myriad entertainment financiers say tighter conditions have benefited bankers and brokers who can offer innovative financing solutions.  And the wide range of funding options in New York has allowed the city to keep its status as the money capital of show business regardless of the market environment.

"You have to say the climate is cool to cold," says Hans Vogel, venture-capital and hedge-fund manager of Vogel Capital Management and a veteran observer of the entertainment sector.  "A year or two ago you could have an idea about an idea written on a napkin and bankers would throw a million at you.  Now, they just throw the napkin."

Aside from the advertising downturn, perhaps the factor slowing media finance activity most in New  York has been the bursting of the dot-com bubble, which saw many Silicon Alley firms wind down and took the steam out of the new media venture-capital market.

But finance is not just a business for boom times, and just as the IPO market and funding lines for start-ups have subsided, activity has been picking up in the areas of financial advice and consulting.  As the slowing economy takes hold, companies that had once aggressively guarded their independence are now looking for strategic partners to bolster their balance sheets and diversify their dependence on narrow niches.

Consolidation has created increased opportunities for bankers in merges-and-acquisitions work.

"There are opportunities, but not with a fast turnaround.  You have to spend time with companies," says Vogel, whose Vogel Capital Management has taken equity stakes in several new media ventures this year, including L.A.-based rights-management service RightsLine.

The film finance industry is also working harder to make deals, a fact that has caused the Manhattan-based Foundry Capital to switch its focus from funding individual film projects to building corporatewide finance facilities for media and entertainment companies.

Jon Ein, CEO of Foundry, says the international market for rights to indie fare is in a dramatic slump, but there is growing demand for reliable sources of ongoing entertainment content such as owners of film and TV libraries.

"There are good opportunities for us because banks and equity markets have been pulling back," Ein says.

Financier David Pullman is another who has seen this year's volatility bring opportunity.  Pullman says the product he invented --- a bond that enables artists and content creators to raise funds secured by future royalties from their work --- has become more attractive as access to equity markets become more complicated.

Pullman created these first entertainment and intellectual property securitizations in 1999, originally known as Bowie Bonds, after a $55 million private placement he arranged was secured by the royalty stream from British singer-songwriter David Bowie's catalog.  Pullman now dubs them Pullman Bonds to reflect his intellectual ownership of the deal structures.

He has now raised about $200 million from 10 such transactions and says interest in further deals is high.

Late last year, Pullman inked a deal to securitize the music royalty from Marvin Gaye's estate; it was the first Pullman Bond issued to raise funds for the heirs of a deceased artist.

"It's been an unfortunate year for markets, but it's been great for us," says Pullman.  "Equity was so cheap before, but now that that market has virtually closed down, there is demand for more innovative financing."

Pullman, who, to date, has worked almost exclusively with songwriters, envisions his concept extending to owners of TV and film libraries, writers of film scores and all other content owners who seek sustained income from royalties.

Pullman felt that New York City's concentration of financial expertise made it the obvious place to base his business.

"Los Angeles and London are great centers for my business, but the major banks, ratings agencies and accounting firms are all here," Pullman says, surveying sweeping views of Central Park from his midtown Manhattan office.  "New York gives us our edge."

Vogel agrees that no matter how uncertain the outlook of financial market is, New York City retains its status as the financial capital of the media and entertainment businesses and pretty much any other business that comes to mind.

"Companies from out of town almost invariably come to New York in search of funds," Vogel says.  "In a two-mile radius, there are hundreds of potential funding sources."

The Hollywood Reporter, June 2001 New York Special Issue