Germany’s regulations stipulated that investing in the film industry could result in tax deductions, and there was no requirement for the film project to be produced locally or to hire local creative personnel. The tax deduction amount could also be deferred. This tax loophole was quickly exploited by German investors and Hollywood alike. Hollywood studios could sell the copyright of a movie to a German company and then "rent" the film back for about ten percent less than the selling price, allowing both parties to profit from the tax incentives. However, after the turn of the century, the overseas pre-sale market began to decline. In the 1990s, Hollywood film projects could obtain up to sixty percent of their budgets through overseas pre-sales. By 2005, this figure had dropped to just thirty percent or even less. Coupled with the closing of the German tax loophole, Hollywood financing began to face some difficulties and was in urgent need of new funding sources. At the same time, due to a sluggish stock market and very low bank interest rates, Wall Street had an abundance of capital, with some private equity funds raising more than ten billion dollars. Wall Street financial capital was eager to find new profit outlets. The stable market performance of Hollywood caught their attention. They discovered that Hollywood films had promising prospects between 1990 and 2000, the total U.S. box office revenue increased by nearly sixty percent, and the overseas market experienced an explosive boom. Moreover, with technological advancement, Hollywood films had diverse revenue sources, offering considerable return on investment. In addition, an analytical method based on probability and statistical theory called the "Monte Carlo Simulation" began to be widely adopted and trusted by investment institutions. They found that portfolio theories applicable in the stock market could also be applied to the film industry. When the number of invested film projects reached twenty to twenty-five, the volatility in investment returns became relatively small. Thus, Wall Street capital’s "portfolio investment" in Hollywood movies emerged. Two companies were most typical of this. One was Paramount Pictures, infamous for the "Melrose" portfolio plan. In 2003, under the leadership of Paramount’s Vice President of Business Operations, Isaac Palmer, Merrill Lynch and others collaborated with Paramount to establish a private equity fund named "Melrose," planning to invest massive funds into Paramount’s 2004 and 2005 scheduled productions. But Hollywood companies had many tactics for dealing with outside funds. While Paramount succeeded in the portfolio plan, it also failed. Through various industry practices, Paramount managed to smooth out most of the profits from the portfolio investment projects, directly causing the collapse of the cooperation. Several Wall Street investors, including Merrill Lynch, filed a lawsuit against Paramount Pictures in Delaware Chancery Court this year. This lawsuit is bound to drag on endlessly. Although Paramount gained considerable profit in the short term and seemed to be the winning party, it lost an important source of financing. This could be considered the turning point marking Paramount’s decline from its peak. The other was Relativity Media. In 2004, a young Wall Street investor named Ryan Kavanaugh founded Relativity Management Company, dedicated to creating a channel for Wall Street funds to enter Hollywood. He constructed a model based on factors like directors, leading actors, genres, and release dates to predict a film’s market success probability. From 2005 to now, Relativity Management has raised over two billion dollars to invest in portfolio projects at major studios like Warner Bros., Sony, and Universal, pushing Hollywood’s portfolio investment to a climax. One of the major funding sources for "Transformers" was Relativity Media. Duke even met Ryan Kavanaugh in Los Angeles. His investment in the project could be as high as one hundred million dollars. After the film generates revenue, Warner Bros. will first deduct about ten percent as distribution agency fees, then deduct print and advertising costs, Duke’s share, and Hasbro’s profit share. The remaining income will then be split with the fund according to the investment ratio. According to the agreement between both parties, the allocated revenue is not limited to box office earnings but also includes income from home video distribution, TV licensing, new media rights, and even merchandising. However, since funds usually have limited lifespans, while a Hollywood movie’s full revenue cycle may take five to ten years to complete, the two parties won’t wait until all income is fully accounted to proceed with the distribution. Once "Transformers" finishes its theatrical run, both parties will estimate future revenue from other channels based on box office performance and distribute accordingly based on the forecasted figures. To retain full ownership of the film rights and ensure the fund’s timely exit, major studios like Warner Bros. use future film earnings as collateral to secure loans from banks to pay fund managers, who then take a portion as dividends and distribute the remainder to investors. Although the investments involved are rather complicated, given Duke’s current status, he holds absolute control over the entire project. And he is also following the trend—setting up a film fund through the Cayman Islands. However, unlike others, this film fund has not invested in any movie to date. Duke’s purpose in establishing this fund is not to invest directly in films, but to act as a "bag holder." For someone of Duke’s level, combined with some preconceived insights, while he may not be able to predict the exact time of the outbreak, it’s not hard to see that the financial storm is already showing signs. This storm would deeply affect Hollywood and the portfolio investment plans mainly funded by Wall Street. Back in those days, Duke had already made a name for himself in film crews across the ocean, and his perspective had broadened, leading him to pay attention to this area. After the 2008 financial crisis, Wall Street’s portfolio investment in Hollywood fell into crisis. Coupled with Hollywood’s rather unprincipled treatment of outside investors, Wall Street capital gradually withdrew from Hollywood, even prompting Steven Spielberg to repeatedly seek funding from Indians for DreamWorks’ $200+ million capital injection plan. Investment banks started selling their shares in film investment plans at thirty to fifty percent of their original value, even giving rise to several companies specializing in acquiring such assets. What Duke’s fund was preparing to do was exactly that. He had people specifically investigate this field. Among the films financed through portfolio plans, there were quite a few high-profile projects. The rıghtful source is 𝔫𝔬𝔳𝔢𝔩·𝕗𝕚𝕣𝕖·𝘯𝘦𝘵 For example, the portfolio plan between 20th Century Fox and Dune Capital included "Avatar" and the "new X-Men" film. Disney’s projects included "Alice in Wonderland" and "Pirates of the Caribbean 4." If the financial storm broke out, and his fund could acquire Wall Street’s shares in these projects at thirty to fifty percent of their value, the potential profit would be obvious. Of course, Duke and his team had worked in Hollywood for more than fifteen years and were themselves important figures in large film companies. It wouldn’t be so easy for Hollywood to treat him the same way they treated Wall Street. Moreover, the projects Duke has set his sights on are not merely package deals with box office revenue splits. As early as 2005, Warner Bros. had compiled statistics showing that the profit from box office revenue of the films it produced and distributed accounted for less than fifteen percent of its total income, while the money earned from television, cable TV, DVDs, videos, and other home entertainment, as well as various peripheral products, made up eighty-five percent of the total revenue. It’s long been an industry consensus that Hollywood doesn’t make money from box office revenue. Today’s Hollywood is no longer a "dream factory." In essence, it has become a service institution—a marketplace for the exchange of copyrights and capital. Duke has always had people watching this area closely; he knows that opportunities vanish in the blink of an eye. Once the financial crisis is over, it won’t be long before capital from emerging markets like India, the UAE, and across the Pacific will turn its gaze toward Hollywood. Investment projects in Hollywood will start increasing again. In fact, capital from across the Pacific has already set its eyes on Duke’s new project—after all, his films are practically guaranteed box office hits over there. "Duke, this is Mr. Wang from the China Film Group." Inside the newly established "Transformers" studio at Warner Bros., Jamie Johnson introduced the man to Duke. "He visited Warner Bros. Studios with a delegation last year." "Hello, Director Rosenberg." The man extended his hand, and Duke gave it a firm but not overpowering shake and said, "Hello, Mr. Wang. Please, have a seat." This was his director’s office, filled with materials related to Transformers and looking a bit messy. An assistant quickly tidied up, and once the three were seated on the sofa, brought in coffee. "On behalf of China Film Group, let me first congratulate Director Rosenberg. ’The Dark Knight’ has grossed over $1.1 billion globally." The middle-aged man named Wang looked this way and spoke in fairly fluent English. "’The Dark Knight’ also did very well in our domestic market, grossing 385 million RMB. You are the most popular director." Duke gave a polite smile. "Thank you." As he spoke, his eyes shifted to Jamie Johnson. He wasn’t naive enough to believe that the other party had come all the way to Los Angeles just to say a few words of congratulations and express the affection of China Film Group and moviegoers from across the ocean. Mr. Wang seemed to want to beat around the bush a little more. Duke was no longer used to this kind of negotiation style, but he couldn’t say much either. After all, every country and region has its own characteristics. Jamie Johnson, understanding Duke’s working style, took the initiative to say, "Mr. Wang, representing China Film Group, is interested in investing in ’Transformers.’" "I have no objections." Duke himself wasn’t involved in the investment of the film, so he said, "This matter is mainly up to you." A smile appeared on Mr. Wang’s face—clearly, a basic consensus had already been reached with Warner Bros., but without Duke’s nod, this investment would still carry significant uncertainty. He glanced at Jamie Johnson, then said, "China Film Group hopes to carry out more collaborations with Director Rosenberg..."