I always like to see film production and film financing out of Texas and I hope this one succeeds. But I've known several groups trying this over the years and none have worked out (yet). This one might have the right ingredients though based on the below article. You have true money managers running the investment fund (with an existing client base), and then "movie" people running the production side. It could work...
So you wanna be in (independent) pictures? Now you can, for $50,000
Fort Worth money manager launches fund with hopes of hitting upon the next 'Juno’
By JIM FUQUAYjfuquay@star-telegram.com
By some estimates, 7,000 to 8,000 independently produced films are completed each year. Most never see the light of a projector bulb.
But some do, and a few, most recently Juno, go on to pull in millions of dollars at the box office, video store and syndication. Now a Fort Worth money manager wants to give well-heeled investors a shot at participating in a winner without taking too much of a bath on the inevitable losers.
Riley Hutto Wealth Management said it has created Independent Film Capital Llc., in partnership with Los Angeles-based IndieVest, a 2-year-old firm that will review scripts and oversee film production and distribution. Riley Hutto’s job is find people with at least $50,000 to invest in independent films.
Bill Riley and Greg Hutto started their firm in January after working together in the investments industry for a decade. They are the first in what IndieVest founder Wade Bradley hopes will be a stable of investment advisers who will offer his company’s films to accredited investors, generally described as individuals whose net worth exceeds $1 million.
Investing in movies
Riley said the path to Independent Film Capital started when he was looking for alternative investments — instruments other than stocks and bonds — to offer his clients.
Big foundations and endowments put sizable portions of their assets in real estate, commodities and private equities, he thought, so why not offer something similar to affluent investors?
Movies got into the picture when he met Bradley, a venture capitalist who was looking for financial support for his company. Bradley’s concept is to take some of the risk out of film investing by forming a kind of "one-stop shop" that connects investors with film projects that he has screened and — perhaps most importantly — can assure distribution in theaters.
Do indies make money?
How many independent films actually make money?
Hard numbers are difficult to come by, because although box-office receipts can be had, movie budgets and distribution expenses are rarely public. Likewise, ticket sales are only a part of a film’s earnings. Video rentals and sales, plus TV licensing, can far outearn the original box office.
In 2007, 751 newly released films played in theaters at some time during the year, according to The Numbers, an industry news service. Right in the middle of those films, as ranked by box-office receipts, was Broken English, a romance distributed by Magnolia Pictures, the company owned by Dallas entrepreneur Mark Cuban and partner Todd Wagner.
Broken English played in 41 theaters at its peak and grossed just under $1 million during the year, according to The Numbers.
Cuban, in an e-mailed response to the Star-Telegram, said that as challenging as it is merely for an independent film to get produced and distributed, "doing any box office at all . . . is even more difficult."
Distribution in the nation’s more than 5,000 theaters is a huge hurdle. About 600 films a year are rated by the Motion Picture Association of America for U.S. distribution. Big studios produce 200 to 250 of those. Independents vie for the rest of the spots.
IndieVest, as part of its pitch, guarantees distribution. Bradley said his strategy is to first place a film in 25-50 theaters the first week. That keeps down his distribution costs, the biggest being production of prints and advertising, collectively termed P&A.
"At the end of the day, we decide whether it’s gaining traction," he said of a film’s early screenings. If it is, he ups distribution to perhaps 200 theaters, then 500, up to as many as 1,500 theaters.
Starring Steve Buscemi
IndieVest principals include Mark Burton, who was executive producer for Water, nominated for an Oscar last year in the foreign-language-film category.
Its advisory board includes actors Don Cheadle (Hotel Rwanda, Crash, Boogie Nights) and Liev Schreiber (The Painted Veil, TV’s CSI: Crime Scene Investigation).
Bradley said the company is about to start filming its first project, titled Saint John of Las Vegas, featuring Steve Buscemi, the hapless and horny kidnapper-turned-murderer in Fargo.
The film has a $10 million budget. That’s considered relatively low in the business these days, but enough to provide a shot at bankable personnel and a competent script.
A "moderate" scenario detailed in investor materials envisions the film bringing in $21.6 million in net revenue and returning about $6.5 million to investors. Under a "low" scenario, it brings in just $3.4 million and returns nothing.
Cuban said in his email that he tries to improve an independent film’s economics by distributing it via his own Landmark Theaters, Magnolia Video and HDNet, the high-definition television channel he launched in 2001. He just started a new strategy of releasing films first on HDNet’s video-on-demand service, hoping to build some buzz before the film’s theatrical premiere.
"Leveraging the promotion of the VOD on cable and satellite allows us to be more precise in our P&A spending, which in turn leads to profitability on not all, but more of our releases," Cuban wrote.
Harold Vogel, principal of Vogel Capital Management in New York and author of Entertainment Industry Economics, said investing in movies is not for the faint-of-heart.
But he thinks IndieVest is going about it the right way.
"I admire the innova- tiveness of their structure," Vogel said, because it provides the equivalent of a reality check on a filmmaker’s hopes.
Riley Hutto added its own wrinkle to risk management by packaging investments in units that include five different films. Averaging out the returns of several movies, Riley said, should lessen the chance of suffering a total loss while boosting the chance of landing a hit.
Vogel also liked that idea.
"That’s the correct approach," he said. "Never invest in just one film. The smart way is to get a portfolio of projects that spreads the risk.
Riley said his Independent Film Capital project has been well received by clients.
"They know it’s risk capital, and it’s fun," he said. "If you’re an investor, your name is on the credits as one of the producers."
Click here to see actual article at Fort Worth Star-Telegram site.
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