Hollywood financing tips: Capital income runs through the entire industry chain

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In addition to the completion guarantee protecting 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 recycling channels. In Hollywood, private equity funds require completion guarantees when they invest in film projects or banks provide loans to film projects.

financing is a basic part of the film, and the ten financing tips practiced by Hollywood have provided strong capital support for its popularity all over the world.

original title: 10 financing tips for Hollywood movies Movie screening income is only a small part

Film is a high-input, high-risk industry, and financing is its basic link, how much investment and how to allocate it can decisively affect a film. The reason why Hollywood films can continuously produce blockbusters and achieve success in the global market is closely related to the strong capital support behind them.

1. Platter investment

movie platter investment refers to the establishment of a film fund by a bank or investment company to raise money from private or institutional investors. The fund is then used to invest in a large number of film projects for a particular production agency within a certain period of time. The general film platter investment project will involve 10 to 30 films, while the investment quota is between 10% and 50%.

II. Window release period

the profit of the movie mainly depends on the success of the box office operation and the price of other distribution windows. The profit margin varies with the distribution window, and it also affects the distribution order of the film.

windowing strategy is a kind of price discrimination, because the price of the same product sold to different consumer groups is different, and the reason for the price difference has nothing to do with the cost. In fact, windowing strategy is not only aimed at groups of different channels, but also includes two aspects. First, groups in different regions formulate strategies for content providers to maximize the value of content, and develop and utilize their own broadcast rights and other rights as much as possible around the world. Overseas market is an important window for TV and film programs. with the emergence of new media, network video and mobile media have become new transmission channels.

three, two eight Rule / Marlet

Film Entertainment Marketing needs to follow the "two eight Rule". Such as the rule of two or eight stars. It is less than 20% of stars who bring 80% profit to a film company. Because of this, Hollywood uses the star center system. Twenty-eight rules, 20% of strong brands, 80% of the market share. 28 business rules, no more than 20% of literary films and more than 80% of commercial films. 28 marketing rules, marketing is greater than the film, production 20%, marketing 80%. According to the 2008 sideline rule, film and television itself accounts for only 20%, and related commodities account for 80%.

4. The box office revenue of locomotive theory

generally accounts for only 1x3 of the total revenue of a film. In addition, the income is the income of copyright and post-film products such as television, which is the so-called "three-three system" of overseas film input and output. Post-film products include the development of video tapes, VCD, LD discs, music, theme song tapes and other products. Take 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 financing

Intermediate 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 after the senior debt, the investor has to bear greater risks, but the return is also higher. This method of financing is favored because borrowers' financial statements can be treated as shares rather than debts, so that borrowers will not be affected in terms of access to bank loans, etc.

VI. Share financing

investors occupy the corresponding shares according to the proportion of their invested funds in the whole platter. When 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 return is also the highest, mostly from private equity funds, individual financiers and some institutional financiers.

VII. Cross-mortgage

Cross-mortgage is the fundamental guarantee for the existence of platter investment, that is, using profitable film projects to make up for loss-making film projects and making use of large-scale investment to generate income. Take the Gonhill Road 1 fund as an example. In January 2006, the fund was launched by Relativistic Media, which agreed to invest US $400m in 11 films produced and distributed by Sony Colombia within two years, accounting for 40% of the shares. Another US $200m was invested in 6 films produced and distributed by Universal Pictures, accounting for 50% of the shares.

of these 17 film projects, 7 lost money and 10 made a profit. On average, the net profit per film is $7.6 million. In two years, investors received a short-term return of $150 million, with an internal rate of return of 13%. If you take into account revenue from other sources over a period of three to five years, you can make a profit of $25 million.

VIII, pre-sale financing

pre-sale financing mode carries out financing through the pledge of pre-sale contracts of rights such as issuing rights and audio-visual publishing rights. In the form of loan guarantee, it uses various ways such as pledge of accounts receivable, unlimited joint and several guarantee, guarantee, insurance and so on.

the copyright of a film often comes into effect only after the film has been made: the producer, as the copyright owner of the film, only transfers the distribution right of the film to the distribution company when the film and television copyright is formed, and obtains some funds accordingly to recover the production cost.

the innovation of the presale financing model is that this method makes it possible for the production company to pre-sell and pledge the implied copyright of the film before it starts production, so that the copyright can play an early role and achieve the purpose of financing.

IX. Film completion Insurance system

in Hollywood, when private equity funds invest in film projects or banks provide loans for film projects, they will require them to obtain film completion guarantees. The company that provides the guarantee for the completion of the film shall bear three responsibilities: first, to ensure that the project can be completed and submitted for distribution, and to provide overspending funds when the film exceeds the budget; second, if the producer of the film project is unable or unwilling to continue the project, it shall be taken over by the film completion guarantor; third, when the film completion guarantor decides to give up the completion of the film project, it shall compensate the film investor for the funds already invested.

the guarantor of the completion of the film plays the role of a "bad face" in the production process, which can really ensure the implementation of the production management system and clearly present the flow of funds in front of the investment, so that the investors can safely hand over the funds to the producers.

X, multiple recovery mechanism

in addition to ensuring the completion of the production project, another major factor in maintaining the confidence of investment funds in Hollywood films is that although Hollywood films invest a lot of money, they can effectively resolve risks through multiple recovery channels. This multiple recycling mechanism includes two dimensions, one is the distribution of the film itself, and the other is the development of derivatives based on the film.

the screening income of Hollywood films is only a small part of its economic value, and more of its income comes from film franchise goods, which refer to the goods based on film theme elements that the film copyright owners authorize merchants in a certain field to produce.

Edit: jessica