12 June 2014

Malaysia Needs to Overhaul Its Filming Industry


The industry is becoming popular amongst investors fraternity in the United States (“US”) as the growth in the international entertainment market is huge - best illustrated by the fact that the international box office is growing at a much faster rate than the US’s. Hollywood studios have shifted focus to large films (USD200 million each).

ILMING industry seems to show a great deal of money - both from production side as well as economic profit side. We hear Hollywood boasts its films across the globe like a phoenix full of inferno. When we turn our heads to the local (Malaysian) scene, the fire extinguished. What has happened? or rather, what did not happen? Surely Hollywood is not the only success story? I even heard that Hollywood is not  ranked #1. I was told that #1 goes to Bollywood. #2 goes to one of the African nations,... cannot remember which one. Hollywood is at #3. Other nations are also performing far better such as Hong Kong, Korea and even our neighbouring Indonesia and Thailand. So what can we do to make Malaysia as awesome as those countries as far as the filming industry is concerned?
Recently I was privileged enough to visit Hollywood. Apart from the themed rides and the photo with the HOLLYWOOD sign on the hill, I took quite a considerable amount of time talking to many people from the filming industry in Hollywood. They include studio producers, independent producers, bankers, lawyers, insurance guys, distribution companies, talent agencies, private equities and Emmy Award winners (directors/producers). It was a rewarding experience. I now understand what is in the ecosystem in Hollywood that is not in ours (Malaysia). These missing components are quite critical that they carry with them the role of bricks to a wall. So, I would like to share the salient points that I have gathered and most of it are behind the scenes matters - the boring stuff that happens behind the actors and the cameras but without them, there will not be any filming industry (funny enough that without them, Malaysia still has a film industry - hmmmmm.... ) Oh well, here goes:



Studio producers manages from A to Z – Pre-production, production, post-production, sales and distribution, financing, legal, accounting, licensing and merchandising. Their primary focus is making $$$. Independent producers are more passionate with the artistic and cultural perspectives of a movie. They are more conducive for a nation’s identity building activities. Both studio and the independent producers agree on one thing : "The road to success (whether financially or artistically) would be a strong story telling."


Gap and bridge financing for Government rebates is a necessity in the industry to fill in the gaps caused by timing of cash injections. Both bridge for rebates as well as gap financing works on Last in Last Out ("LIFO") basis for its recovery. It is also used to pre-finance pre-sales. Typically at an interest of 10% and fees of 2% totaling 12% annualised for a tenure of 12 to 18 months. Government rebates need to secure investor’s confidence. Often the banks will require a consultant to ensure that criteria for rebate is adhered to as many cases suggest that Government keeps on changing the rules. This may cause an issue of Government not honouring the rebates.

Completion Bonds are only entered into when all financing is secured. Risks can be reduced when there is involvement of a re-insurance party. Essentially the bond is an underwriting for any sort fall if the budget is blown and pay all parties if movie not completed. A cross between underwriting and insurance on completion. Other insurance such as the ones for actors comes out from production costs.


Private Equity is the most conducive way to equity-finance a film. It gives some level of comfort on the control over the operations of a production. The typical outcome (cut-off of 7 years) for a slate of projects for equity funding consideration would be:
  • 25% movies breakeven
  • 50% with IRR 20% to 25%
  • 25% mega profits! 
The industry is becoming popular amongst investors fraternity in the United States (“US”) as the growth in the international entertainment market is huge - best illustrated by the fact that the international box office is growing at a much faster rate than the US’s. Hollywood studios have shifted focus to large films (USD200 million each) reducing the number of films made. Hence, plenty of room for private investors to finance smaller movies. They can do so by putting in place variables that can reduce risks. These are the factors that can help reduce the risks of production activities:
  • Slate of projects rather than just into 1 project - diversification
  • Deep industry access (projects and talent)
  • Experienced team members and crew with proven success
  • Higher reliance on debt financing (75% minimum)
  • Maximise non-recourse Government rebates
  • Maximise bankable pre-sales
  • Minimal overheads
  • Do co-productions instead of sole-productions

Backstop is a method where a procurement party values a particular Intellectual Property (“IP”) and buys the option to purchase the IPs before the producers shop around for buyers. A pre-sale so to say – a Backstop broker. They are also heavily involved in subsequent sale and distribution activities including licensing of rights and securing Minimum Guarantee (“MG”). If sold to another distributor, the latter distributor recovers all expenses and MGs paid to the Backstop broker with the surplus (“overges”) shared between the Backstop broker and the distributor based on a predetermined split. Typically, the revenue streams involved are as follows:
  • Theatrical - Ticket sales split slightly in favour of exhibitors
  • Home Entertainment - DVDs, pay-per-view, license fees
  • TV cable & Broadcast - On air exclusively (Pay-TV) or syndication (Free-to-Air)

Legal Counsel specific for the industry is important. Normally each movie is parked under a separate Special Purpose Vehicle (“SPV”) to limit the exposure of each movie. The lawyers look after the legal matters of these SPVs inclusive of the licensing arrangements. Collateral for financing is also a legal matter. Normally the original IP is not collateralised and only the derivative IPs are collateralised (e.g. licensing rights). Other forms of collaterals would be assignment of Government rebates and MG from distributors.

“6 charged in $5M movie fraud scheme” was reported in the Los Angeles Daily News on Friday, 28 February 2014. This shows how important the involvement of a law firm is for the industry. Fraud is everywhere. Protection and prevention is required.


The first USD100,000 to USD200,000 comes from the Producer after having formed up the preliminary team of main casts, directors and script writers. Release of funds for production is done when a 3rd party accounting firm confirms all monies of investment is in escrow with the lawyers. Waterfall distribution of recovery is the method used when collections are in. The accounting firm acts as a de facto credit agency for collection and the recipients of recoveries are categorised and prioritsed as follows:

       Recovery of Investment plus Profit
  • Priority 1: Distributor Financier (MG + 15%-25% fees)
  • Priority 2: Gap Financier and Banks
  • Priority 3: Limited Partners (Incl. actors/writers/directors profit share)
  • Priority 4: General Partners
       Fees only
  • Completion Bond Underwriter
  • Lawyers
  • Accountants


For Malaysia to grow further in their filming industry, the below critical 10 steps must be introduced in the film ecosystem:
  1. Strong reinforcement of the IP valuation framework and IP market place.
  2. Strong reinforcement of the film rebate system
  3. Government incentives to encourage investors/angels on filming funds.
  4. Legal profession to establish services for IP management.
  5. Accounting profession to establish services for IP cash flow management.
  6. Insurance sector to establish underwriting of film projects.
  7. Re-insurance sector to widen scope of industry to include filming.
  8. Banking sector to establish entertainment division.
  9. Exchange filming ideas vs financiers.
  10. Open the market to investors/financiers and service providers to experts from other countries

So, yeahhh,.... can we make this happen? I was told that relevant Government agencies have already started efforts on some of the above. I cannot wait to see the result of those efforts upon achieving the desired state of ecosystem.

Both studio and the independent producers agree on one thing : "The road to success (whether financially or artistically) would be a strong story telling."

* kopihangtuah

| mcmlxxv:viii:xxix |

So That I Can Try To Do Something


This poem was extracted from the blog www.buanaseni.blogspot.com. Hopefully whoever reads this will have the urge to do something:



My name is Shahar.
I am a 7 year old kid.
My Daddy says that I am a smart boy.
Because I ask too many questions.
He said I ask questions that no other kid would normally ask.
Of course I will ask those questions.
Because I cannot understand why certain things are as what they are.
Because it seems the adults also do not really understand.
But they pretend they do.
Had they understood it, they wouldn't have allowed certain things to happen.
Because if they had understood it, they would have tried their best to stop it.
I see all the adults ignoring things that happen.
I see those things and I feel I understand what is happening.
How do I know that I understood what was happening?
Well, because I feel the urge to do something to stop what was happening.
So I asked my Daddy to bring me to Syria.
So that I can try to do something that can stop the other kids dying.


* kopihangtuah

| mcmlxxv:viii:xxix |

11 June 2014

Proforma Monthly Household Budget


Groceries was getting painful when you have to buy diapers and formula milk for the baby. Not to mention the fees they charge for nurseries. Mobile phone bills arrive every month with a shocking bottom line - the shock recurs eventhough you see the same thing every month. Of course that was before Whatsapp was created. SMS do cost money.

UDGET is not an easy thing to do, let alone to follow it. I started my single life earning RM1,500 per month way back in 1997. I struggled my way up to cope with the financial stress from the high cost of living in the metropolitan area. Like many others, I got married. Our household income increased significantly but soon, the expenditure also ballooned (with the introduction of new family members - babies!). Life was tough but we managed to pull through. We were lucky that both, my wife and I, had 0% interest study loan that we were (still are) paying. Our education background is quite decent. I think. If not, we won't have reached a Manager level at our workplace.
Each of us has a car. After 13 years of working, we could only afford locally manufactured automobiles. Petrol, parking and tol take up quite a bit of our income but what can you do? You still need to reach your work place. Or else, how do you earn a living? It certainly did not help when one works in KL and the other in PJ. Car pooling could not have worked. Groceries were getting painful when you have to buy diapers and formula milk for the baby. Not to mention the fees they charge for nurseries. Mobile phone bills arrive every month with a shocking bottom line - the shock repeats even though you see the same thing every month. Of course that was before Whatsapp was created. SMS do cost money.
As the kids grow, some basic entertainment had to be installed. We had Astro, Internet and of course, a bi-weekly family outing to TGIF or Chilis with a movie that the first son chose becomes a ritual. That same son was also subjected to the torturing life of going to tuitions. How else can he pave his path to a future life with sufficient financial resources? That cost money - to us - the parents. At mid age, if we have not even started owning a property, we might as well sell our souls to the landlord - and so, we bought a 20ft x 70ft intermediate double-storey linked house. A heavy burden but at least with an asset - our very own asset-backed obligation.
Once we passed the age of 30, we soon realised that we can no longer waste time living a life where the expenditure is equal or higher than the income. Fortunately, our honest work paid us handsome promotions over the years. It was then possible to start on savings - a pathetic 9% of the total gross household income - but savings nonetheless. We procured life insurances, education insurances, unit trusts and many more. There were some equity investments but limited to the conversion of ESOS that the employers were generous enough to give us.
Today, after working for almost 20 years, we have a comfortable life - neither rich nor poor - just nice for an average modern Malay family of 4 that goes for vacation occasionally and moderate level of entertainment and luxury shopping. Looking back, I understood how we had survived. It was the strong education that we had started with and the honest and focused efforts we had invested in our careers. The combined commitment from both husband and wife certainly helped reduce the pain. Perhaps, in this modern and dynamic world, working class citizens cannot afford to live without double-income earners in a household.
I feel compelled to share my experience with Gen Y as most of them are commencing their "wonderful" world of working after having studied for 4 to 5 years in tertiary institutions. Well, what was mentioned earlier gave a rough feel of how life would be but a more systematic mechanism needs to be in place to guide you with benchmarks and parameters. I have therefore taken the liberty to formulate a Proforma Monthly Household Budget (below) assuming a mid-age family. This should give you a fair idea on how to manage your financials wisely. As you can see the bottom line says RM11 - just nice to buy a pack of cigarettes and a lighter a month - so I quit smoking :)

* kopihangtuah

| mcmlxxv:viii:xxix |

10 June 2014

Half a Dozen Reasons to Consider Before You Change Jobs


What is a reasonable expectation of a job differs at the different stages of a person's life or career. It is a relativity goal post that moves parallel to time. It becomes more complex when one compares him/herself to their contemporaries. There can never be equality. But there can always be equity.

ANY of us complain about our jobs. It seems that it is never up to expectations. Of course in many of those cases it may be true. However, there is also a significant degree of laziness amongst us to justify first what we, as an individual have contributed to something larger than us. What have we put on the table to bring meaning to our family, our country, the humanity; and, the most important beneficiary, ourselves?
What is a reasonable expectation of a job differs at the different stages of a person's life or career. It is a relativity goal post that moves parallel to time. It becomes more complex when one compares him/herself to their contemporaries. There can never be equality. But there can always be equity. A person earning RM20,000 a month may pay home loan of RM3,000 per month whereas a person earning RM4,000 a month may pay home loan of RM700 a month. Whilst the quality or the size of the properties can be guessed without reasonable doubts for the two scenarios, the fact remains that both achieved their objective of owning a house.

If relativity is a given function to which the outcome will always differ, what is left for us to ponder are the variables to which we, as individuals, are able to honestly contribute. Only when we have contributed fairly will we be entitled to decide whether we have been compensated fairly and thus, consider changing jobs or not. If I may suggest, in my humble opinion, those variables ought to be as follows (not in any particular order or priority):

CONVICTION to one's role in an organisation is of utmost important. If you believe in what you do, you will naturally do what is necessary to achieve what you believe - if that makes sense. When someone lack the passion with what they are doing, they become robots. They simply do things just because. Many organisations that are overwhelmed by numerous checklists and forms and all sorts of governance structural mechanism experience this. Their staff simply fill up forms and tick and bash structured instructions. There needs to be a balance. Governance is good but too much of it is counter productive. On the flip side, absence of governance results in disciplinary problems that destroy effectiveness and efficiency. So, as an idividual, we must have that feeling that what we are doing is a part of something larger in life that brings good. A bit like the Floyd sayings, A Brick in the Wall. If you do not feel that, there are three possible reasons: Either you are the wrong person for the job, or the job is not suitable for your, or you are simply a lazy bastard who never honestly put effort to contribute to that larger than life purpose.
WORK LIFE BALANCE is almost like a myth especially when everyone is working like a mad dog in a developing country. It seems that working long hours is a benchmark for a superlative performance. This is a misconception. Firstly, we all agree that the workload is most of the time unavoidable. In order for us to complete the work, we are left with no option other than to burn the midnight oil. Or else, the work will be piling up with new work keep on landing on the in tray. The onus is on you to discuss the matter with your boss. Too much work will just burn you out. To little work will just deteriorate your agility to coupe with the dynamic work place. Both you and your boss must come to a consensus on how to tackle this. It may not necessarily end up with reduced work load as many organisations face severe knowledged worker shortages. A solution can be in a form of an agreement with the boss that certain days of each week you need to leave work early for non-work related matters such as going to the gymnasium. For staff who are parents, they may strike a deal to go home early on some days taking turns with their wives/husbands who should also seek similar deals with their respective employers. I am sure many bosses do have their own families. They will understand if reminded. 
PROGRESSION is not what you deal with currently. It is what opportunities you will pave for yourself by doing whatever it is you are doing now. Only when meeting current objectives will you be able to aim for something higher. This require strategic thinking. There is no use being content with whatever you are doing and merely rely on annual salary increment and the bonus that does not carry the attributes of a bonus any more as it is highly expected - might as well call it the 13th and 14th month salary. You must aim to progress up the ladder. Aim for significant jump in the salary. When you open your eyes for this, you will realise what competition you will face and what opportunities you can identify. From thereon, you can device tactics on which projects to be involved in and what office politics you are willing to participate in. It makes it a more meningful assessment whether to remain or leave a particular job as the continuation of the ladder, upwards, may well be in another organisation. In any case, it is always easier to progress at the same place as many factors are within your comfort zone. In some other cases, a fresh start rejuvenates your career.

ECONOMIC well being has always been everybody's primary concern when assessing a job. In fact, many has it as their sole determinant. I guess in a developing country, money means everything. Without money, nothing else matters. It is quite a difficult myopia to get rid off. When you are faced with financial stress, money will prevail as the single most important determinant. So I will say this, if possible, make an informed decision about money. Look at a longer horizon. Some jobs get paid very low in the beginning but once you achieve a certain level, it will shoot up and grow significantly at the later stage of a career. Lawyers and Accountants are amongst them. Some jobs get paid really high now when you are young but when your physical conditions exclude you from continuation, you will be roaming the Earth seeking for jobs that often pay less. I wouldn't want to give an example. There are many examples in life. So how do you assess whether at a particular stage of life or career, your pay is at a reasonable level? There is no formal rule to this. I have my own benchmarking. For me, it is not what you earn, but what you keep at the end of the month. Take your salary, net of taxes and superannuation/pension contribution, and less your financial obligations such as home loan, car loan and study loan. Deduct your recurring expenditure such as groceries, kid's schooling stuff, etc. The remaining should be channeled to investment activities such as life insurance premium or kid's education insurance or any form of low risk investments such as unit trusts. That investment activity should account for 10% of your salary. The investment activity coupled with your housing loan (a house is also an investment) should be approximately 20%. That is the bare minimum. In fact, many believe that 30% is the new benchmark as we approach high income and developed nation status.

NETWORKING is the buzz word for the new millennium. Everything is about interaction. With the introduction of social media and globalisation trends, people are communicating across boundaries. We have discussed earlier points that are somewhat "selfish" in nature. Networking is the opposite. Networking is inclusiveness in nature. You cannot live in this world alone. You need to interact with people. If your job does not present you with the opportunity, you are bound to evolve into an introvert and pretty soon you will lose all interpersonal and people's skills. That is detrimental not only from work perspective but also from the basic human nature perspective. I remember watching some movie where Sir Anthony Hopkins lived in the jungle with the gorillas. He had no interaction with humans but had plenty with the gorillas. He ended up to be a lunatic. Unless you aspire to end your life as a gorilla, I strongly advise you to start talking to people. If your job is lacking this, then you ought to change that. It is natural for people to build their portfolio of friends. Each time you make friends in a particular work place for a considerable duration, you will end up forming up many groups of informal alumni. This can be rewarding. Over time you will have many friends, unless you are a weirdo whom everybody hates wherever you go - that I cannot help.
KNOWLEDGE acquisition is neither selfish nor interpersonal in nature. Knowledge is a single factor that transcends all struggle one may face in his/her work life saga. Knowledge remains with you whether or not you are working or what your income levels are. It is noble. It is devine. It is sacret. In your quest to do what you believe in, juggling between career and personal life that simultaneously accrues to you reasonable financial rewards and building up a network of camaraderie, you subconciously store a wealth of knowledge. Knowledge is not necessarily on technical matters only. It can also be soft skills and the awareness of critical factors that complete your ability to digest, analyse and conclude in the many branches of decision making you will have to endure in your work life. Make an assessment whether that knowledge that you have absorbed or potentially to absorb can be of significant use in the future for your progression in life. The last place you want to be is where you do not learn anything. As I mentioned earlier, we do not want to be a robot. Our DNA is organic enough to suggest that we are a thinking being. With that hardware, we need the software, i.e. knowledge.

So, are we ready to charge forward with our careers? Think through these half dozen points (above) thoroughly and thoughtfully. Digest and relate to your work life and your surroundings. Project it to the future that you aspire to own. You owe yourself that much. After all, there is no you if you don't mean anything. Once you are ready and fully informed of the necessary variables, make the decision. To leave or to stay.......

* kopihangtuah

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