Hollywood financing tips: Capital income runs through the entire industry chain
Financing is a fundamental part of movies. The top ten financing secrets practiced by Hollywood have provided strong capital support for its popularity around the world.
Original title: 10 financing secrets for Hollywood films Film broadcast revenue is only a small part
of the film is a high-investment and high-risk industry, and financing is a fundamental part of it. How much investment is and how it is distributed can decisively affect a movie. The reason why Hollywood films can continuously produce blockbuster films and achieve success in the global market is inseparable from the strong capital support behind them.
1. Platter investment
Film Platter investment refers to the establishment of a film fund by a bank or investment company to raise funds from private or institutional investors. The funds are then used to fund a larger number of film projects for a particular production agency over a certain time frame. A general movie platter investment project will involve 10 to 30 films, and the investment amount is between 10% and 50%.
2.
The profit of movies during the window release period mainly depends on whether the box office operation is successful and the prices released in other distribution windows. Profit margins vary according to release windows, and this also affects the order in which films are released.
Windowing strategy is a kind of price discrimination, because the same product is sold to different consumer groups at different prices, and the reasons for the different prices have nothing to do with cost. In fact, the windowing strategy is not only aimed at groups in different channels, but also includes two aspects. First, for groups in different regions, content providers formulate strategies to maximize content value and develop and utilize their own broadcasting rights and other rights as much as possible on a global scale. Overseas markets are important windows for TV and movie programs. With the emergence of new media, online video and mobile media have become new transmission channels.
3. The Twenty-Eight Rule/Marlette
movie entertainment marketing needs to follow the "Twenty-Eight Rule". It's like the rule of 28 stars. Less than 20% of stars account for 80% of a film company's profits. Because of this, Hollywood has adopted the star-centered system. The 28th blockbuster rule is that 20% of the strong brands account for 80% of the market share. The 28th business rule is that no more than 20% of artistic films and more than 80% of commercial films. The 28th marketing rule is that marketing is greater than videos, production is 20%, and marketing is 80%. According to the 28th sideline law, film and television itself only account for 20%, and related products account for 80%.
4. Locomotive theoretical
box office revenue generally only accounts for 1/3 of the total revenue of a movie. The other income is the income from copyright and post-film products such as TV. This is the so-called "three-three system" for overseas film input and output. Post-film products include the development of video tapes, VCDs, LD disks, music, theme song tapes and other products. Taking American films as an example, 20% of the total revenue of the American film industry comes from screen marketing, and 80% comes from non-screen marketing, that is, the development of post-film products.
5. Intermediate level financing
Intermediate level financing is usually a mixture of debt and equity financing. That is to say, if the repayment obligation is not completed on schedule, the borrower has the right to convert the debt into shares, and its repayment time is in priority After debt, investors have to bear greater risks, but the return is also relatively high. This financing method is favored because it can be treated as shares rather than debt in the borrower's financial statements, so that the borrower will not be affected in terms of obtaining bank loans.
6. Equity financing
investors occupy the corresponding shares according to the proportion of their invested funds in the entire platter. When all the debts of the project are paid off, the profits corresponding to these shares can be obtained. The risk is the greatest, but the possible returns are also the highest, mostly from private equity funds, individual financiers and some institutional financiers.
7. Cross-mortgage
Cross-mortgage is the fundamental guarantee for the existence of patchwork investment, that is, use large-scale investment to make up for loss-making film projects, and use large-scale investment to generate income. Take the Ganxierlu Phase 1 Fund as an example. This fund was initiated by Relativity Media in January 2006 and agreed to invest US$400 million in two years to participate in 11 films produced and distributed by Sony Colombia, accounting for 40% of the shares. Another US$200 million will be invested to participate in 6 films produced and distributed by Universal Pictures, accounting for 50% of the shares.
Of the 17 film projects, 7 were in losses and 10 were in profits. On average, net profit per movie was $7.6 million. Over two years, investors made short-term gains of $150 million, with an internal rate of return of 13%. If you include the revenue from other channels over the past three to five years, you can obtain an additional $25 million in revenue.
8. Pre-sale financing The pre-sale
financing model provides financing through pre-sale contract pledge of rights such as distribution rights and audio-visual publishing rights. In terms of loan guarantee, it uses pledge of accounts receivable, unlimited joint guarantee, guarantee, insurance, etc. Various methods.
The copyright of a movie often comes into effect after the film is completed: the producer, as the copyright party of the film, transfers the distribution rights of the film to the distribution company when the copyright of the film and television is formed, and obtains part of the funds accordingly to recover production costs.
The innovation of the pre-sale financing model is that this method allows the production company to pre-sell and pledge the relevant copyright implicit in the film before the film has even begun production, allowing the copyright to play an early role and achieve financing. purpose.
9. Completion Insurance System
In Hollywood, when private equity funds invest in film projects or banks provide loans to film projects, they require these projects to obtain completion guarantees. A company that provides a completion guarantee must bear three responsibilities: first, it must ensure that the project can be completed and submitted for distribution. When the film exceeds the budget, it must provide overspent funds; second, if the producer of the film project is unable or unwilling to continue the project halfway, the completion guarantee party will take over; third, when the completion guarantee party decides to abandon completing the film project, it must compensate the film investor for the funds already invested.
The completion guarantor plays a "black face" role in the production process, which can truly ensure the implementation of the production management system, clearly present the flow of funds in front of investment, and enable investors to safely hand over the funds to the production side for use.
10. Multiple recovery mechanism
In addition to the completion guarantee to protect the production project, another major factor in maintaining investment funds 'confidence in Hollywood films is that although Hollywood films have huge investments, risks can be effectively resolved through multiple recovery channels. This diversified recycling mechanism includes two dimensions, one is around the distribution of the film itself, and the other is the development of derivatives based on the film.
The broadcast revenue of Hollywood films is only a small part of their economic value. The larger revenue comes from the licensed products of the films, which refer to products based on film theme elements authorized by film copyright owners to produce by merchants in a certain field.
Editor: jessica