Money Matters

Money Matters/ While Hollywood remains the movie capital of the world, New York is where media and entertainment bankers and analysts track the dollars that make it run.

By Matthew Doman

New York's role as the world's financial capital remains firm, crossing all industries, including media and entertainment. But the maintenance of this long-established status quo hardly means that there haven't been changes in financing show business.

Indeed, the last year has seen several major moves in both the entertainment-banking community and its closely allied brethren of research analysts who follow media and entertainment stocks.

Several factors are driving this rapid change -- not the least of which is the convergence of traditional and new media -- as online and digital worlds continue to create a plethora of opportunities for the players who can establish leadership positions in this space.

To date, the defining deal of this process has been January's announcement of the $160 billion merger of America Online Inc. and Time Warner Inc., which, along with last year's megadeals -- AT&T Corp.'s $63 billion acquisition of MediaOne Group and Viacom Inc.'s $41 billion merger with CBS Corp. -- also did much to determine the ranking of the media and entertainment sector's major bankers.

In the area of merger and acquisition activity, Merrill Lynch & Co. and Goldman Sachs & Co. continued to jostle for the leadership position. According to figures from Thomson Financial Securities Data, Merrill Lynch took the pole position in 1999, financing and consulting on transactions worth a combined $96.3 billion compared with the $91.5 billion of deals in which Goldman Sachs was involved.

In both 1999 rankings and 2000 year-to-date figures, Morgan Stanley Dean Witter has ranked a close third behind Merrill Lynch and Goldman Sachs, working on deals worth $83 billion last year and $194.1 billion so far in 2000.

Jessica Reif Cohen, media and entertainment analyst for Merrill Lynch & Co. -- who has topped Institutional Investor magazine's ranking of entertainment analysts for five consecutive years -- says there is a race among financial institutions to gain and maintain a prominent role in show business finance.

"There is a huge amount of interest in this area because the companies are getting bigger and more dynamic, and the deals are getting much more complicated," Cohen says. Cohen, who travels extensively to Los Angeles and is renowned for the breadth of her Hollywood contacts, has nonetheless abandoned a previous practice of maintaining a West Coast office. "New York is where the money is, and the investors are generally [East Coast] based."

While