Transcript

ALEX HAMILTON

Let's imagine this. You're a producer. You make a budget up for a film. You've got various actors. You've managed to get them. You've got a financing structure in place, and part of that financing structure is that you need to sell that film in various places in the world. So what will happen is you can hire a sales company, a film sales company. Now the film sales company will give a sales estimate for the value of that film broken down by each territory in the world. It might say, for instance, the UK rights are worth $2 million dollars, the French rights are worth $2 million dollars, the German rights are worth $2.2 million dollars, Spain is worth $300,000.

It will provide a value based on its knowledge of all of those markets and what the likely value of that film, that package, is in each of the territories around the world. That will help the producer figure out whether that budget is realistic, whether it can be financed by the market as it were. Quite often a film is budgeted and is budgeted at a level higher than the market can take. Now if that's the case quite often, they seek equity. So they'll seek somebody who's prepared to put the gap. The market the market is telling you that this film is worth $20 million dollars in its global value, but your budget is $30.

You have to find that $10 million dollars from equity, which is someone saying, I believe that film is going to be successful enough that actually it's going to be worth more than $20 million dollars eventually, because what will happen is one of two things. One, the film will arrive at the marketplace and be sold for more than the sales company is estimating, or two, it will sell that way, but it will earn so much money in its distribution and its exploitation, that more money will ultimately come back to the producer of the film, the equity partner on the film. Now if you invest in Star Wars as an equity financier, you will have made unbelievable amounts of money.

But most of the time, it's the first one that plays out best. You probably want to get the budget of your movie covered from a combination of underlying equity and the sales around the world.