There’s a good conversation going on at the always excellent blog of Jon Taplin. Entitled “Who Will the Next Fool Be,” the short piece, which I’m taking the liberty of quoting in its entirety, critiques the recently announced deal in which India’s Reliance may be financing Dreamworks.

Here’s Taplin’s post:

The movie business reminds me of that old Charlie Rich Tune, “Who will the next fool be?”. The news that a unit of one of India’s largest Conglomerate, Reliance, is contemplating starting a new Dreamworks 2 in what the Times article hints could be horrible terms. OMG! When will the world of finance finally learn? Two kinds of people make money in the movie business:Top Talent and Distribution. Everybody else, including off balance sheet finance, get screwed. First it was Wall Street (Steve Ross Era up to about 1982). Since then it has been British and German Tax Shelters, French (Canal Plus & Warner) TV partners, Japanese and Korean equity,Australian Equity (Village Road Show), Tech Moguls (Paul Allen), Hedge funds (recently badly burned & very under reported). Everyone of them thought they were the coolest kid on the block. But they all quickly retreated from the business.Hollywood is off bounds for most Arab investors, unless they had gone secular like Dodi Fayed of London and Princess Di fame. So all that’s left is the Indians and The Chinese .

Who will the next fool be?

The comments thread is already heating up with posts from people who obviously know something about the film biz. Rachel writes, “I think of it as the dinner party factor. It’s so much more interesting to be able to talk about the film you just financed than it is to talk about the expansion of your infrastructure fund. Well, maybe not more interesting, but of more interest to non-financial people. Plus these guys might get to meet [insert star du jour] at the premiere, or even at Cannes/Sundance/Berlin yada yada.” Another poster, Ken B., writes, “In addition to the ego factor, there are other factors that can bring in the piece-of-the-action investors: for some it’s a tax shelter guaranteed to make a controlled business loss, a few use inflated production budgets as a money laundry that can process large amounts of cash, and then there have always been those who get caught up in the high stakes casino aspects.”