An investment primer for highly net-worth investors looking for movie finance

Okay, so one day you woke up, checked your Swiss bank account, called your family office planner, had breakfast with your private customer service manager, called your tax accountant, and the three of you decided to invest. The revenue from the merger or acquisition of your last company is not in some dubious hedge fund or new biotech enterprise, but in the financing of Hollywood movies because you think you need public tax credits, federal tax write-offs like that! beautiful fence. income from several films.

For now, it may not sound like a good idea to contact your hedge fund manager in Connecticut or your oil and gas investor friends in Bahrain or Dubai, but aren’t these the same guys who fund Hollywood blockbusters? And the only question for you is how do you get into the game without feeling like a film student’s uncle writing a $ 1,000,000 voucher to his nephew for a movie starring his classmates ended up being a free download on youtube? com?

So, after doing your homework, here is what you have discovered that can be an opportunity to spice up your rich but boring life.

* Sergey Brin և Larry Page of Google, Fred Smith, CEO of Federal Express, Norman White, co-founder of Gateway Computers, Jeff Scholl of Ebay, Todd Wagner և Mark Cuban (formerly broadcast.com); Max Lևchin և David Grodnik of PAYPAL, Mark Turtletob of The Money Store, Roger Marino of EMC Corp., Jim Stern, former co-owner of the Chicago Bulls; Real Estate Developers Tom Rosenberg, Bob Yari; և Financiers Robert Sturm, Sheikh Walid Al Ibrahim, Zayed Masri from SilverHaze Partners, Michael Singer, Mark Esses, David Larcher, Michael Gauguin, Richard Landry, Michael Riley, Rafael Fogel are just above Phil. who successfully entered the business of film finance and production.

* There are various state, federal, and international tax credit incentives for sale that will offer a premium based on equity position. Suppose there is a film worth $ 10 million, of which 50% is equity and 50% is pre-release through international distributors. Now suppose that there is a 20-25% tax credit on the total amount of 10 million dollars, which will immediately turn into an investment loan of 2-2.5 million dollars.

* Lots of hedge funds like Reed, Conner & Birdwell (DISNEY), Legendary Fund (Warner Brothers), Melrose Fund (Paramount Pictures), Ingenious Media’s $ 700 million Float on London’s AIM, Benjamin Waisbren Investments, and more Foundations և Fund managers enter the film finance arena.

* The explosion of international DVD, pay-per-view, home video, cable, megaplex cinemas, the future of multilingual Internet video downloads և inter-market digital distribution, including low-cost digital theatrical projection, the film industry is growing at an unprecedented rate.

* The 2004 American Job Creation Act, which amended the 1986 Internal Revenue Code, was signed into law. The law provides for three tax breaks that apply directly to motion pictures, one of which is Article 181 of the Internal Revenue Code, especially for independent filmmakers and their passive investors, for films with a budget of less than $ 20 million.

* Other areas of entertainment are always exceeding analysts’ expectations in terms of growth.

* Movie Investor’s earnings can be more favorable, more marketable, than just having a shareholding position in public entertainment, other public companies, real estate investments, and other alternative investments.

* There is a huge demand, audience և growing distribution structure for specialized independent, crime, horror և other low budget films like Brokeback Mountain, Sideways, Capote ապ Capote. Garden State »,« Napolean Dynamite »,« Y Tu Mama Tambien »,« My Big Fat Greek Wedding »,« Memento »,« Crash »,« Saw 1 & 2 », Friday The 13th», «Halloween», «Texas Chain »: “Saw Massacre”, “Hostel” և “WOLF CREEK”, which was created for $ 800,000, bought for about $ 4 million before the release by Dimension, as well as “Hustle and Flow”, which was made for $ 2 million և bought for $ 16 million from Paramount Pictures.

* Except for big blockbusters like “King Kong”, “Harry Potter” and other large-scale studio films, most of the studio-produced films were presented at the box office. The films that were successful for the studios were all externally funded or co-financed with the studios, sold 2-3 times their cost, most of them reserved the right to sell abroad to maximize revenue.

So after seeing all the great benefits, how do you actually go about finding a deal or a movie project where you are sure that half of your money will not be used by the Hollywood producer as a down payment for a new Pacific mansion? Palisade?

The key that separates successful film financiers, new oil tycoons who come to Los Angeles with a pocket money and leave with half a pocket at the end, is called a few things: structural finance, leverage, risk reduction, and many exit strategies. , tax benefits և ethical awareness of the film director / producer.

What does that translate to for you in the real world? Suppose you want to get 100% of your $ 1.5 million low-budget film, the worst-case scenario of which is a DVD release միջազգային profit from international sales և, possibly some other stock sweeteners for the stock conversion you subscribed to as part of the program. : deal. Well, if you write a $ 1.5 million check, և the film is shot in a state that has 30% tax credits, you get back $ 450,000 in tax credits + under Section 181, you can write off that amount Federal- according to: So you already have a good income before you start making a profit. Then you imagine that you are selling the film in 50 countries, if you are really successful, you are selling the film 3-4 times for an expensive studio, which takes place during a luxury festival. like Sundance, Toronto, Cannes, etc. Do it for more than 5-10 movies և you can make a very lucrative name among the Hollywood elite.

But let’s really take a step back and see how older guys invest in movies, because they can get a bigger star, which can have more sales overseas. Let’s say the filmmaker / producer has a $ 10 million film, you want to take part in the action. You would invest $ 5 million, you would get a $ 20-30% tax break of $ 10 million, which would be $ 2-3 million, the producer would get the biggest star he could, he would get a studio that would hit the remaining $ 5 million, you do not worry, that you will never see a penny from a theatrical release, because you know that the profits of your DVD և international sales will cover the position of your own capital. Meaningful?

Now use this for different budgets, genres, stars, distributions, places where you can get high tax credits (ie Puerto Rico makes up 40%), other exit strategies where you can find your shares in London AIM և you are in your new. career path as a sophisticated, educated filmmaker. Of course, if you want to go further and guarantee 100% of your capital, there are tricks for that.