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).
- 25% movies breakeven
- 50% with IRR 20% to 25%
- 25% mega profits!
- 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
- 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)
ACCOUNTING THE FILM COLLECTIONS
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
- Completion Bond Underwriter
LESSON FOR MALAYSIA
- Strong reinforcement of the IP valuation framework and IP market place.
- Strong reinforcement of the film rebate system
- Government incentives to encourage investors/angels on filming funds.
- Legal profession to establish services for IP management.
- Accounting profession to establish services for IP cash flow management.
- Insurance sector to establish underwriting of film projects.
- Re-insurance sector to widen scope of industry to include filming.
- Banking sector to establish entertainment division.
- Exchange filming ideas vs financiers.
- 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."
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