Successful development/production companies such as Imagine, New Line Cinema, Icon Productions, A24, Amazon Studios, Netflix, Apple, Hulu, and Lionsgate to name some of the best, clearly understand the “green light” criteria that leads to profitable films. This “green light” criterion allows other development organizations to duplicate this procedure and allows the producer the ability to evaluate proposed pictures strengths before any meetings take place with Hollywood and foreign territory distribution executives.
Seattle Film Group LLC will engage in direct relationships with the marketing departments of the major studios, and the top foreign distributors, to develop movies that a distributor wants to distribute and their audiences want to see. There are several key principles and practices identified by John J. Lee Jr., formerly with Entertainment Business Group that successful development companies use and that Seattle Film Group LLC will also follow in creating each of its projects
Understanding a studios green light system enables other producing companies to duplicate this process and evaluate the strength of a film project before approaching any studio/distributor. This process also points Seattle Film Group LLC to which studio distribution team will most predictably extract the greatest earnings for each picture.
Many film production companies fail due to under funding. The development process is lengthy and can be expensive, but is very necessary in the formation of a successful motion picture. Seattle Film Development One, therefore, must have its own development funding sufficient to fully develop a series of motion pictures independent of a major studio. This allows each picture to move forward through development in a careful and predictable manner without relying on studio funds.
This gives the advantage of low interest rates and the copyright ownership of each film allowing it to be fully exploited to its greatest profitability and leverages the investor funds. Even more importantly, bank financing allows producers to engage in global distribution relationships on each picture. These relationships are essential to acquire presale collateral (distribution contracts) for each picture and just as important insures each movie made has a solid, worldwide distribution not only in the domestic market (US and Canada), but also in the eight major foreign markets: United Kingdom, France, Spain, Germany, Italy, Australia,China, and Japan and the other countries.
The next step is to have “internal green lights” confirmed first with a US studio and then with a major distributor in each of the eight major foreign territories. This marks the beginning of a close, creative, and marketing collaboration. With an average of 70% (seventy percent) of all global income being earned outside the US the foreign markets are essential in this process.
This technique is beginning with the endgame in mind. By planning in advance the profitable ancillary sales areas and the rights sales, this allows the producer to substantially increase profitability for each picture as well as advancing each movies distribution power. This is important to protect each picture and gives it a better assurance of profitability.
By knowing the film’s target audience and with the distributor directing media related advertising to that market the company can more readily anticipate each pictures opening weekend with a greater understanding. The major studios are rarely surprised by the opening weekend box-office grosses of their films.
These three things must be balanced properly. One cannot be emphasized to the detriment of the remaining two. This gives the pictures greater stability as they move progressively through development, production, and distribution.
To produce and release three, or four, audience driven films budgeted between $20 million to $65 million dollars and distributed globally across all revenue streams. These films will be funded by Los Angeles entertainment banks using non-recourse bank loans guaranteed by foreign territory distributor pre-sales as well as additional funding from pay-cable contracts, tax credits, rebates, private equity, and product placement.
The three keys in reducing the risk of a film investment to less than twenty percent is to first invest in development funding of motion pictures and not invest in their production funding. Second, to make sure the film has a major US distributor before the movie is made. Third, motion pictures have multiple streams of revenue for each film which lowers the risk and increases the profits to investors unlike other investments that do not have those additional revenue streams.
A motion picture development fund is very much like a real estate feasibility study conducted by a real estate developer to determine the merits of proceeding with a proposed real estate venture. If the venture pencils out the developer will then proceed with the project. If it does not pencil out, then the real estate developer will drop development of that project and move on to develop some other real estate project that does show potential profits.
We do exactly the same thing with a film development company. We develop several film projects of which only the best three, or four, are put into production and distribution. If a prospective film investor understands a real estate investment then they most certainly will understand how a film development company operates.
TARGET: TO PRODUCE THREE, OR FOUR, MOTION PICTURES
To form a writer centric film development company comprised of top writers from Seattle and Los Angeles.
To produce three, or four, audience driven films budgeted at $20,000,000 to $65,000,000 million dollars distributed globally
To partially finance these films through Los Angeles entertainment bank loans fully guaranteed by foreign territory presales.
To maximize film profits and build audience awareness by hiring name directors, actors, and actresses.
To recoup 120% of the investors investment within three years before the films are all made or distributed.
To thereafter split profits from all revenue streams 50/50 with investors and exit the investment in 3 to 5 years.
The five major Hollywood film Studios and parent companies are: Comcast-Universal, Disney (20th Century Fox), Viacom-Paramount, Sony-Columbia, and ATT- Warner Bros. They all have an insatiable appetite for acquiring and distributing motion pictures. Their films are very costly to produce, (eighty million to two hundred fifty million dollars), and market (twenty-five million to seventy five million dollars). They can no longer develop in-house enough quality movies with mid-range budgets to feed their “distribution pipeline” for theaters, cable, pay-tv, online streaming, VOD, and DVD/video. They now look more to outside independent companies to supplement the development and production of their movies. Currently, twenty percent of Universal studio’s releases are developed in-house while the remaining eighty percent are picked up from independent production companies.
The riskiest way to invest in feature films is to first fund the production of an individual movie, then submit the finished film to a major distributor and hope they like it enough to release the movie. The risks are unacceptable with that all too often used method. The safest way, which reduces investors’ risk to less than 20% (twenty percent) and is used by the most successful major independent film companies, is to invest in a film development company creating multiple pictures financed by Los Angeles entertainment banks, tax credits, rebates, private equity, and product placement. A completion bond company insures these bank loans. The production loans are fully collateralized by foreign distributor presale guarantees and licensing rights with a major domestic cable company (HBO/Cinemax, Showtime, and Starz/Encore) and online streaming with Amazon Studios, Netflix, Apple, Hulu as well as tax credits, rebates, and product placement. The development company works closely with the five major U.S. studios and the top eight foreign territory distributors (United Kingdom, France, Spain, Germany, Italy, Australia, China, and Japan) in developing these movies. This creates a business collaboration that assures each picture's maturing in the major global markets over several months preceding its production, and just as important almost guarantees each film the major distribution that is so essential for profitability.
Seattle Film Group LLC and the up to five active accredited investors will equally own (50/50) Seattle Film Development One LLC. The same executives and personnel at Seattle Film Group LLC will operate both companies.
The investment in this writer centric development company, Seattle Film Development One LLC, is $9,000,000 divided into twenty units of $450,000 for three, or four, films. The minimum purchase per investor is four units, or, $1,800,000. This funding will last approximately five years. The up to five active accredited investors receive:
50% (fifty percent) ownership of the development company – Seattle Film Development One LLC
100% (one hundred percent) of the gross cash receipts received by Seattle Film Development One LLC paid to the investors until they have recouped 120% of their original investment, $10,800,000, from the licensing of three, or four motion pictures worldwide. This milestone is typically reached by the third year from full subscription of the investment
Thereafter, investors will participate 50/50 in all gross cash receipts returned to the company from each of the motion pictures released in all media both domestic and foreign. These multiple revenue streams include: theaters, video-on-demand, video-DVD, pay-per-view, pay cable, satellite, TV network, syndication, video/computer games, music, publishing,online streaming, and merchandising, etc.,
The $9,000,000 raised will fund development of several potential projects of which the best three, or four, are “greenlighted” and financed by multiple entities for $20 million to $65 million dollars each. This leveraged amount totals between $60 million to $195 million dollars or more in actual production value. These loans are fully guaranteed by foreign territory distributor presales, tax credits, rebates, pay cable contracts, and licensing fees.
Other investments, such as biotech, high-tech, and dotcoms, frequently rely on an exit strategy of Initial Public Offering, or Merger & Acquisition, to generate a return on investment. Often this can take five to seven or more years to execute. Unlike them, Seattle Film Group’s plan is NO IPO, or M & A, but instead to create positive cash flow incoming to the active accredited investors during the course of globally releasing three, or four, motion pictures over three years or less. Profits earned will continue to flow to investors for several more years from successful films. Upon completion of these three, or four, films the investors are done. Seattle Film Group LLC will then initiate Seattle Film Development Two LLC and interested active accredited investors from the first development company may return and reinvest in the second development company. Subsequent development companies will create from three to seven films each.