The Young Moguls

When director Paul Thomas Anderson began working on “The Master,” a thinly veiled critique of Scientology, he proposed shooting it on 65-millimeter film—a costly option that delivers unusual depth and clarity.

Rather than seeking clearance from a phalanx of movie studio executives, Mr. Anderson needed to convince only one person: 26-year-old Megan Ellison.

Ms. Ellison, the daughter of billionaire Oracle Chief Executive Larry Ellison, single-handedly financed the $42 million project and signed off on the request without hesitation.

“Most studios now, you have to fight to shoot something on film,” says Daniel Lupi, who produced the film with Ms. Ellison. She said, “‘Great, let’s do it.’ Basically, all of the decision making is with her.”

Over the past two years, Ms. Ellison has emerged as an important source of financing for Hollywood’s most high-profile, and high-risk, projects.Through her independent company Annapurna Pictures, she fully financed “The Master” as well as the $45 million “Zero Dark Thirty,” the film about the hunt for Osama bin Laden that is nominated for five Academy Awards. She backed this year’s Prohibition-era drama “Lawless,” and has movies in the pipeline from directors including Spike Jonze, David O. Russell and Bennett Miller.

She is also reviving “The Terminator,” one of the most lucrative film franchises ever, paying $20 million for the right to make future installments and signing Arnold Schwarzenegger to star.

Ms. Ellison is part of a new crop of young scions with deep pockets who are changing the way Hollywood makes movies. Among the others: Teddy Schwarzman, the 33-year-old son of billionaire Blackstone Group CEO Stephen Schwarzman; Michael Benaroya, the 31-year-old son of a prominent Seattle-based real-estate family; John P. Middleton, the 29-year-old son of Philadelphia Phillies part-owner John S. Middleton; and Ms. Ellison’s 30-year-old brother, David, whose company has a $350 million co-financing deal with Viacom Inc.’s Paramount Pictures. The younger heirs join Jamie Patricof, 37, son of a private-equity pioneer, and Andrew Lauren, 43, son of designer Ralph Lauren, who are also involved in film production.

The road to Hollywood is littered with wealthy young financiers who lost their fortunes in starry-eyed quests to make movies. Newcomers with money “can tap out quickly because if you’re not smart about it, it’s a very expensive game,” says “Silver Linings Playbook” director David O. Russell, whose next movie, about a 1970s FBI sting, is backed by Ms. Ellison.

What distinguishes today’s crop, and in particular Ms. Ellison, is the depth of their pockets. On her 25th birthday, Ms. Ellison gained access to as much as $2 billion of her father’s fortune, according to people familiar with the matter.

The new Hollywood investors are also determined to be less star-struck and more practical with their checkbooks. “The idea is for dumb money to be smarter,” said Mr. Schwarzman, who founded Black Bear Pictures at the start of 2011. His company’s first major theatrical release, “Broken City,” about a former police officer (Mark Wahlberg) hired to investigate the wife of a New York City mayor (Russell Crowe), opens Friday.

Mr. Schwarzman says his company has made a concerted effort to avoid the appearance of dilettantism. For instance, Black Bear has a formal policy that it will respond to all scripts within a week. “It’s bringing a diligence and respect to the process that we think is deserved,” he says.

The argument for why these producers are a boon to Hollywood is that they are filling a void. In recent years, major studios have largely shuttered their art-house divisions, concentrating instead on producing big-budget, special effects-laden movies which have a higher likelihood of big returns at the global box office. Even when studios do get involved in serious dramas or smart comedies, they often try to limit their risk by partnering with financiers or buying films after they’re finished, in what is called a negative pickup deal. Meanwhile, banks, where independent producers once turned to finance their films, have backed away from lending for projects with questionable returns.

That leaves an opening for the new batch of producers who can pick up the tabs for ambitious, small- and mid-budget movies that can be financially risky but offer potentially rewarding payoffs.

“I think we’re in a really good time for opportunistic financiers,” said Mr. Benaroya, whose Benaroya Pictures produced 2011’s “Margin Call,” starring Kevin Spacey and Jeremy Irons and made for $3.5 million. “There’s not a ton of money out there, especially not equity, and there’s not a lot of people who are writing significant checks for independent film.”

Mr. Benaroya said he emphasizes sensible budgets and making effective use of tax credits and foreign pre-sales. Over the next two years, Mr. Benaroya’s company plans to release more than half a dozen films, including a drama starring Kristen Wiig and Guy Pearce.

Ms. Ellison’s brother, David, gravitates toward big budget mass-market Hollywood fare. His recent films include the Tom Cruise vehicles “Jack Reacher” and “Mission: Impossible—Ghost Protocol.” He will executive produce the latest installment of the Star Trek franchise, “Star Trek Into Darkness,” set for release in May.

Even within this rarefied group, Ms. Ellison stands out for her staggering wealth: Her father’s net worth is $41 billion, according to Forbes, making him the third-richest American, trailing only Bill Gates and Warren Buffett. “She’s in a different financial stratosphere than the rest of us,” said Mr. Benaroya.

Beyond her lavish budget, Ms. Ellison’s willingness to take on creatively ambitious but risky material regardless of its profit potential has caught the attention of many filmmakers. With no formal business education and very little filmmaking training—she spent less than a year at the University of Southern California film school before dropping out—she nevertheless calls the shots on projects herself.

In a famously flashy industry, Ms. Ellison shuns red-carpet glamour. Her signature look, even in business meetings—a vintage T-shirt emblazoned with an AC/DC or Led Zeppelin logo—is invariably one of the first things any studio executive mentions when discussing her. She avoids Hollywood hangouts like the Beverly Hills Hotel and Chateau Marmont, and attends her own premieres in a demure black pantsuit and flats (or sometimes Converse sneakers).

She has never granted a formal interview and declined to comment for this article.

“You would never know that Megan Ellison, if you met her on the street, is behind all of these films,” said Mark Duplass, the actor and director who has a brief role in “Zero Dark Thirty.” “Your first guess would be that she’d be hanging out at a 7-Eleven, smoking with her friends—and that she might ask you to buy beer for her.”

Whether Ms. Ellison can translate her taste in movies into a viable business remains to be seen. She is known to offer directors generous terms that can jeopardize a film’s profitability. She also tends to grant coveted “final cut” privileges to filmmakers to entice them to work with her, a liberty that can frustrate distributors.

“The Master”—distributed by Weinstein Co., which has released three of her films—has earned just $16 million at the domestic box office. It cost about $42 million to make, according to people familiar with its budget. (A spokeswoman for Ms. Ellison says it cost closer to $32 million.)

Some of her other films have fared better. “Lawless,” starring Tom Hardy and Shia LaBeouf and written by Nick Cave, took in $37.4 million in domestic box office receipts on a budget of $26 million. Ms. Ellison financed two-thirds of the film.

But getting “Lawless” into profitable shape was a struggle. After Weinstein Co. executives and other producers on the film first viewed a cut, they decided it needed to be re-edited. Ms. Ellison resisted the suggested changes, arguing that director John Hillcoat’s cut shouldn’t be altered, according to people familiar with the matter. Weinstein executives ultimately won out, these people said.

With “Zero Dark Thirty,” Ms. Ellison’s biggest bet to date, she appears likely to turn a profit. The movie grossed $24 million in its first weekend in wide release, with $34.7 million in cumulative domestic earnings. The distributor, Sony Corp.’s Sony Pictures, expects it to bring in more than $90 million.

Still, the movie is a significant gamble. Ms. Ellison is on the hook for the entire budget, although she has recouped some of it through foreign presales.

The film’s prospects are complicated by a national debate about whether it condones the use of torture as an interrogation technique, as well as whether it falsely depicts torture as having produced information that resulted in the CIA’s ability to locate bin Laden.

While director Kathryn Bigelow and screenwriter Mark Boal won Academy Awards for directing and writing 2008’s “The Hurt Locker,” they are also famous for making the lowest-grossing film to ever win a best picture Oscar. That distinction didn’t deter Ms. Ellison, who last week became one of the youngest producers to be nominated for a best picture Oscar. “A lot of financial entities would have backed the film but demanded a more vanilla product in exchange for this risk,” Mr. Boal said.

At the movie’s premiere in Los Angeles in December, Ms. Ellison shied away from the party’s glitterati, lingering with the smokers on the patio. Meanwhile, her father held court by the bar, engaging in a boisterous conversation with actor Jason Clarke, who plays a CIA agent in the film.

Her indifference to business formalities occasionally surfaces, such as Annapurna’s notice on its website that it doesn’t accept unsolicited material, for “very super-boring legal reasons.”

When Ms. Bigelow failed to secure an Oscar nomination, Ms. Ellison took to her Twitter account, which is typically populated by inspirational quotations from Shel Silverstein or Muhammad Ali, to declare: “Kathryn Bigelow was robbed. So f— up.”

Ms. Ellison’s office is a “hippie palace,” as a recent visitor put it, a compound of homes nestled in the Hollywood Hills. Employees of Annapurna work out of two houses, both with sweeping views of Los Angeles. (One of the homes is on the market for $15.5 million.)

When her filmmakers are finished shooting, they sometimes come to the complex to complete work on their movie in postproduction.

The process is often a relief to directors like Mr. Jonze, who is finishing his next movie, “Her,” starring Joaquin Phoenix, with Ms. Ellison now.

Mr. Jonze’s last feature film, “Where the Wild Things Are,” spent years mired in development at a major studio, Time Warner Inc.’s Warner Bros. Pictures.

His experience with Ms. Ellison has been a sharp departure. “I finished the script, I sent it to her, she said she wanted to make it,” Mr. Jonze recalled. “It feels really simple, working at this company.”