Category Archives: Financing

The Importance Of A US Theatrical Release

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I was catching up on my reading and caught this from one of Anne Thomson’s blog entries she wrote from Cannes last week. Thompson wrote that “[v]ideo drives everything. I know I’m supposed to already know this, but it really drives it home when you hear the would-be buyers discussing the way they put these deals together. They do crunch the numbers and when video doesn’t crunch for a black and white or foreign title, it doesn’t make people comfortable, no matter how much they love a movie.”

While I agree that video accounts for a substantial portion of the gross on pictures and I am sure that Anne and the people she speaks with know their stuff, video is (and has been) imploding in very much the way the music business is getting whacked with CD sales though for different reasons. Video is down because there is a great deal of content out there with no distribution – lots of supply vs. demand. CD sales reportedly have gone in the toilet due to online access to tunes though I understand there are other reasons for this as well.

The best way to maximize foreign sales – and increase the likelihood of covering a picture’s budget – is with a US theatrical release. If a client is trying to sell the foreign rights for a movie about paint drying or a smart, material-driven movie and the paint drying movie has a guaranteed US theatrical release, the buyers will usually if not always take the former over the latter.

Why this is so probably has more to do with the credibility Hollywood has over the movie going public the world over than the quality of the material. Higher movie revenues in foreign territories are generated by the consumer’s preference for titles released theatrically in the US. Back in the day, a producer could four-wall his movie and call it a US theatrical release to satisfy the conditions of a foreign sale. But foreign buyers won’t accept anything less than a genuine commitment from a distributor – even with a platform deal – to theatrically release the picture in the US.

Cannes Do Bankers

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Yesterday’s New York Times had a great piece written by Liza Klaussmann about all the bankers attending Cannes this year. Wall Street, hedge funds and foreign investment all seem to want to jump into the movie business. However, such investments are very risky. An old saw in the movie business is that you can get a better return on your investment by throwing money in the street than putting it into movies.

All that being said, there are less risky ways to invest in movies. By financing a slate of pictures instead of one to cross-collateralize the investment; choosing a reliable producer and production company with a good track record; using reliable “ultimates” and bankable sales estimates; and off-setting the risk in each picture with other investors you can increase the odds in your favor.

The piece also profiled Halcyon Entertainment, the production and financing venture backed by private equity and Relativity Media. Halcyon recently acquired the rights to “The Terminator” franchise and Relativity is a major player behind such movies “Mr. Brooks” and “The Pursuit of Happyness,” among others. Both companies are and will continue to be players in the foreseeable future.