How Ryan Kavanaugh Transformed the Entertainment Industry with Investing Models

Ryan Kavanaugh, one of the most influential businessmen to come into the entertainment industry in many years, revolutionized the filmmaking industry by applying quantitative, data-based risk management techniques previously used only in the world of investment banking & high finance.

Anyone on Wall Street can tell you how big of an impact that recent advancements in technology and computer modeling have had on the investment world. The investment world is a numbers game, basically high stakes math, but the film industry has always been more closely categorized as art, not hard science. How are numbers & data-modeling techniques supposed to provide a reasonable indication of how well a piece of music, a film, a painting, or a TV series is going to perform against the fickle and ever-changing tastes of consumers?

Until recently, the entertainment industry did not view its risks as calculable, due to its identity as an art form. The overall success of movies, music and television shows seemed to be completely subjective, left to the mercy of the masses, whether their producers thought they had a hit on their hands or not. Very often, movies that seemed to have every ingredient for a surefire recipe for success would flop without warning.

Ryan Kavanaugh was the first person to see that a movie’s success did not have to be completely subjective. His now famous approach to producing film, a spin on the Monte Carlo Method, was a practical and objective approach to movie-making. Choosing to avoid reaching for big blockbusters, Kavanaugh was happy to mitigate risk and still get a return on every project he was involved in, leading to a number of very successful movies that built out his overall portfolio, such as “The Social Network” and “Paul Blart: Mall Cop.”

Today we will dive deep into how Ryan Kavanaugh built his career around approaching old industries with new ideas, and the lessons that young entrepreneurs and investors can learn from his example. He is proof that making smart, calculated choices in investments and taking risks can lead to great success. We will also discuss how diversifying his portfolio and looking to achieve small wins along the way have led him to billionaire status.

A New Approach to Investing In Films

The computer model Kavanaugh built to predict the success or failure of a film was not simple by any means. It took into account every minute variable that could affect a movie’s success, including each individual actor’s prior success at the box office, among countless others. This obsessive and detailed depth of analysis allowed his model to predict the potential success of a movie more reliably than any other method in existence.

Before entering the world of movies, Kavanaugh got his start in investing and brokering big business deals by starting his own venture capital firm, investing in the businesses and creating partnerships with startups and other entrepreneurs. This experience led to Kavanaugh’s role in implementing some of the biggest deals in Hollywood, leading to a greater reputation and further reach and influence.

In 2004, he founded Relativity Media, a move that would become a legendary step in his career. In Relativity Media’s first year, Kavanaugh helped to broker the seven-year deal that helped Marvel Studios create the Marvel Cinematic Universe, resulting in funding that was over $500 million, and a film franchise now worth over $25 billion. In addition to this, Relativity Media continued to be a part of numerous other Hollywood deals that involved entertainment big-hitters like Warner Brothers, Sony, and Universal.

Kavanaugh was also involved in creating the Streaming Video on Demand model that would push Netflix to the forefront of the now booming streaming industry, at a time when no one in Hollywood thought it would be profitable. Always looking to continue to grow his portfolio and expand his presence, Kavanaugh also created a partnership with Richard Branson and his company, Virgin Mobile, and created a cross-platform deal with Clear Channel Radio.

In his mid-30’s, Kavanaugh continued to diversify his portfolio and find additional streams of revenue. Relativity Media filed for bankruptcy in 2015, and Kavanaugh stepped down as CEO in pursuit of other opportunities in the entertainment industry. Since his iconic time at Relativity Media, he has continued to find immense success in challenging old ideas and bringing a smart mind of investing to everything he touches.

Beyond the World of Film

In addition to film, Kavanaugh has left his mark in television as well with his company Critical Content. His innovative approach to producing television shows completely in-house led to the creation of forty reality television shows across nineteen different networks, including MTV’s hit “Catfish.” Critical Content went on to sell for over $200 million.

He is also responsible for building Independent Sports & Entertainment, now the second largest integrated sports agency in the US, representing over 300 of the top athletes from the NFL, NBA, and MLB, and over $2.5 billion in player contracts on the books.

Throughout his time blazing a path through the entertainment and media industries, he continued to find success as a venture capitalist in the tech and biotech sectors. Some of his greatest successful investments include Noventus, a payment platform similar to PayPal and Apple Pay that recently sold for close to $400 million, and Juno, the largest biotech IPO of 2014 that later sold for north of $10 billion.

Ryan Kavanaugh’s story is a phenomenal example of how investing with calculated risks, diversifying your portfolio, and never being satisfied can lead to a billion dollar empire. His ability to push the boundaries of every industry he’s been a part of has sealed his reputation as a revolutionary thinker, businessman, and investor.