Abu Dhabi Puts More Cash on the Line in Hollywood

Last September, Abu Dhabi Media Company, an arm of the government in the city-state capitol of the United Arab Emirates, reached a $1 billion deal to make movies and video games with Warner Brothers, the big Hollywood studio owned by Time Warner .

A year later, the two partners have announced just one movie: “Shorts,” a family-friendly adventure film by the director Robert Rodriguez and starring William H. Macy.

But that has not stopped Abu Dhabi Media, flush with oil cash, from spreading even more money around the movie business.

The company, which was created last year by the government of Abu Dhabi, is starting a new subsidiary that will spend about $1 billion more over the next five years making feature-length films in partnership with three American producers, said Edward Borgerding, the chief executive of Abu Dhabi Media Company.

At the same time, the new company, called Imagenation Abu Dhabi, will manage Abu Dhabi Media’s side of the partnership with Warner Brothers. In addition to movies, Imagenation will also create shows and short films for the Internet.

“We certainly want to be in that business and see how it works and take advantage of how the media world is evolving,” said Mr. Borgerding, who added that the company would announce its American partners during the Toronto Film Festival, which will run Thursday through Sept. 13. “There’s a lot of creative destruction going on.”

The deal, to be announced Wednesday, comes amid a flurry of partnerships being created between Hollywood studios and outfits in Abu Dhabi and Dubai in the U.A.E. But many of those have been aimed at creating studios, theme parks and multiplexes in the U.A.E., and in supporting Arab filmmakers.

Direct investment in films is a little trickier: Abu Dhabi Media is controlled by the government, and media companies in the United States do not like to be seen making such deals. The new name, Imagenation Abu Dhabi, gives Warner and other film companies a more politically palatable name to put on promotional materials for jointly financed movies.

Each of the three American production partners will open offices in Abu Dhabi, Mr. Borgerding said. While the focus will be on producing Hollywood-type films for English-speaking audiences, Mr. Borgerding said the company also would like to cater to the Arabic-language audience by making movies with Arab stars and Middle Eastern filmmakers.

“We’re not just writing the checks,” Mr. Borgerding said of his partners. “These are people who will be matching us dollar for dollar.”

While Hollywood was awash in hedge fund and private equity money a few years ago — both MGM and the Weinstein Company, the film company started by the brothers Bob and Harvey Weinstein, were recipients of private money — that flow of Wall Street cash has since slowed, though it has not stopped.

Some hedge funds that invested in slates of films found themselves stung when movies flopped at the box office. Other funds have been hurt by the credit crisis.

But entertainment executives, by and large, do not consider money from the oil-rich Middle East as a replacement for slowing hedge fund dollars. Because of cultural and religious issues, financing from the Middle East, especially those from a government used to controlling the media, is unlikely to come without restrictions.

In a statement, Mohamed Khalaf al-Mazrouei, the chairman of the Abu Dhabi Media Company and director general of the Abu Dhabi Authority of Culture and Heritage, a government agency, said: “Abu Dhabi has established itself as a major player in the global economy, as evidenced through recent activity in the energy, real estate and transportation sectors. Media is no different, and Abu Dhabi Media Company is fulfilling its ambition to become a global player in the media industry.”

Abu Dhabi is also becoming a cultural and media center in the region. Last year, Abu Dhabi Media started The National, an English-language broadsheet newspaper in Abu Dhabi edited by a former editor of The Daily Telegraph in Britain. The government has also enticed the Louvre and Guggenheim museums to establish outposts there.

So why is now a good time to pump money into Hollywood?

“Primarily because you are kind of buying in at the bottom of the cycle,” Mr. Borgerding said. “The subprime thing hit a lot of those hedge funds. There was a glut of films because a lot of money was chasing a finite amount of creative talent and good stories.”

Mr. Borgerding, who grew up in Cleveland and now divides his time between Abu Dhabi, London and Los Angeles, said Imagenation would make six to eight movies a year, with budgets of $10 million to $50 million a film.

“We’re not going to be making the Hollywood blockbuster type,” he said, which typically can have budgets of more than $100 million.