One of the most important things that a producer needs to know when he’s searching for investors is what kind of financial engagement he’s looking for: Because financing comes in many different forms and shapes, with different kind of engagement. Most people might think of equity investment, where the financier partners up to take part of the revenues, as long as the movie will continue to generate revenues – but there are other types of investments that’s not structured like equity and are more dependent on the exit strategy (how and when, the investor can exit from their financial engagement).
Product Life Cycle
Since most any pictures revenues correlates with the distribution, and most distribution agreements runs over periods of 10-15 years, it might feel natural that investments should be made with this cycle in mind as well. However, most investors have a more limited timeframe for their investment and because of this they might not be looking for long term profit participation, but rather a quick exit after they’ve recouped their money with some more limited profit. This usually then structured like a venture capital investment (which is very different from equity), since most movie will not break-even over a short period of time – as just producing the movie might take about two years, and there’s might be another year or so before anyone sees any money from sales and distribution. Structuring a venture capital investment in a movie project usually works according to a “last in, first out” policy, where the VC investor (which is usually a “top financier”) – is offered to be the first to recoup their money when the revenues are received and distributed. This is often tied to a profit margin that might be quite high, depending on the risk. For a smaller investment, the profit margin is smaller. For a larger it’s larger – and it might be up to 60% or more. When the VC investor (which is then first in line of all investors) – has recouped their investment plus for e. g a profit of 60% they will do an “exit” and their financial engagement in the picture is terminated.
Revenue reports
With any investments it’s important, to make sure the investors are confident trusting you with their money, to establish good procedures for handling distribution and sales, and how this is accounted for to the investors. When and how often reports and/or royalty statements are sent out, becomes an important issue – As if there should be a separate collection account, where all investors are able to observe all transactions, or not. Another important issue will be if the investors will have the right to review the legal documents – and most importantly if the producer and his investors will have the right to review the distributors and sales agent agreements (so they all know that the revenues reported are correct). Since it’s quite common for distributors and sales agents in many cases are slow with payments, there can be a lot of work for a producer to track down revenues from old pictures, while most producers would rather focus on development of new pictures. Because of this some producers prefer to outsource the work with collecting and distributing revenues by entering into a so called Collection Account Management Agreement (CAM-Agreement) – with companies like Fintage House or Freeway Entertainment. Companies like Royalty International can also help with reviewing the distribution agreement upfront, and assist with accounting and payrolls – and if it would perform audits if needed.
Print 
PDF
Senaste kommentarer