Where we like to invest:
Consider the 2009 hit comedy “The Hangover,”which cost $35 million to make, and earned a cool $242 million after production costs.
Other, low profile films that generated a hefty return on investment, ROI, according to Baseline Intelligence, a Los Angeles market research firm which tracks the industry:
“The Blind Side,” which cost $35 million and earned $221 million at the US box office.
“The Blair Witch Project,” which cost just $300,000 to make, and earned an eye-popping $141 million domestically.
And then, of course, there’s the holy grail of low-budget independent films, “My Big Fat Greek Wedding,” which was produced for $5 million and had gross worldwide revenue of $369 million.
Mockingbird takes the multi film investment strategy and will establish Mockingbird Film Fund 1 as its first investment vehicle. The company intends to raise and invest $50 to $100 million in a pool of new films that our advisory group will analyze to have the potential like some of the above mentoned films.
Motion Picture Libraries/Catalogs
Once again, content is king. Mockingbird is looking to acquire large motion picture catalogs or libraries.
The members of the advisory board have strong backgrounds in valuation and monetizing movie catalogs, including children's content, old classic catalogs, TV and Cable show catalogs and purchasing advance rights in new productions.
FILM INDUSTRY INVESTMENTS
Typically, revenues are first used to repay investors all of their investment and debts incurred. The process is akin to a return of basis or of the investment. Next would be profit sharing, or the return on the investment. Often, the split is even between the producer and investors. The film's stars, writers and director are paid from the producer's profits. Any investment proposals should be in writing and contain an arbitration clause for a more cost effective dispute resolution. Filmmakers would do well to have such a clause when dealing with financially stronger distributors in order to protect the former's interests.
The producer should have secured a completion bond which is a surety bond that kicks in to pay for cost overruns rather than having the investors shoulder the burden. Different fundraising options should be considered, depending upon the script and budget. Tax incentives properly pursued are another revenue generator, so long as the incentive tail does not wag the movie dog. The filmmaker should escrow funds during the fundraising stage of the film. This helps to ensure transparency and accountability. If insufficient funds are raised, then they should be returned to investors. All of these considerations point to the need for any investor to work with a professional with experience in the film industry.
As an asset class, film would appear to be uncorrelated to the other types of investments and somewhat recession resistant as people still go to the movies or rent them. Slate financing is the hedge funds' approach to risk management and return generation. This approach simply entails investment in a portfolio of films, rather than a single production. Through diversification comes a more proper balance of risk and return. What films are included in the portfolio may be a function of how the fund's co-financing efforts with the production and distribution company work through the film studios. Part of the challenge is untangling opaque financial accounts through due diligence in the quest for greater transparency.
The movie industry plays in the form of common shares, and is available to individual investors, who need to understand where in the chain of production the companies lie and to what risks those companies are subjected to. For example, is the investment in a studio like Lionsgate (which nearly doubled its share price since the beginning of 2012) or distribution like Netflix or Coinstar?
Have movies been commoditized? Consider how easy it is to access a favorite movie. The theater is but the first of several distribution channels which include cable television, Internet and rental outlets. Ready availability of content has stolen a march on the movie theater experience and created more revenue streams and greater profitability.
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