Film Investment Model: Making Profit From Low Budget Films

By Robert Graham

Posted: 27th June 2016 07:49

As explained in my previous article, a film is a business and has all the compliance trimmings of any other business. Whilst an art form in itself the art needs to be tailored to what the market really wants. Putting what we have outlined into practice in terms of reverse engineering our route to market is secured before we spend any money.
 
We know the production of low budget films on an almost industrial scale works and minimises the risk of higher budget films made with little thought of who wants them.
 
We are creating a unique film fund based on what we know works. Our seven previous films have made between 78% to 1057% net returns to the company. These are not box office returns, which are misleading, but net returns after all costs have been met. The following are a few titles that made no money for participants:
 
Star Wars: Return of the Jedi. 
Forrest Gump
Harry Potter and the Order of the Phoenix. 
 
David Prowse, the actor who played Darth Vader, told Equity Magazine that he still received letters informing him that Lucasfilm had no profits to share with him:
 
“I get these occasional letters from Lucasfilm saying that we regret to inform you that as Returnof the Jedi has never gone into profit, we’ve got nothing to send you. Now here we’re talking about one of the biggest releases of all time. I don’t want to look like I’m bitching about it, but on the other hand, if there’s a pot of gold somewhere that I ought to be having a share of, I would like to see it.”
 
The risks investing in one large budget film are enormous. We are creating a film fund of £500,000 that will finance 15 films over a 3 year period. The fund will feed into 5 films a year. Each film will be a separate limited company pre qualified as an SEIS. That means from the £500,000, £250,000 can be returned to investors through tax relief. The additional 20% film tax relief provides a further £100,000 guaranteed.
 
In total just 30% or £150,000 would be at risk and for higher rate taxpayers loss relief takes that down to 16.5%. If investors have capital gains to invest there are additional significant risk reductions. As the investment is spread across 15 companies and 15 films the risk drops considerable. All returns will be tax free with an opportunity to exit after the qualifying period and to reinvest in further films enjoying the same tax breaks again.
 
Each of the selected films will be tailor made to meet market demand meaning we already have distribution and having listened to what the market actually wants the results on each film can be much higher.
 
The fund is held in a specific clients account. Then for each film the budget will be held in another separate film specific clients account each managed by multiple award winning and regulated International Accountants who also manage the budget and make payments themselves. This completely eliminates the risk of overspend on a film.
 
When royalties come in they are ring fenced into the same film accounts where everything is transparent and accounted for with integrity. In place is a proven, trusted team of director, producer, writer, cinematographer with cameras and sound equipment. A team that can produce low budget films that have production values 10 times the actual cost. In essence, it is a studio with none of the studio overheads.
 
Low budget horror films are always in demand and generally the most successful genre. They are also the most durable. Such films can be released again later as box sets.
 
We have 4Digital in place for UK and Ireland and through them Sony Pictures and Shoreline for US and rest of the world. We have eliminated the expense of festivals and expensive screenings to try and sell films as the distribution is secured.
 
Sony owns many retail shelves that need to be filled and a steady stream of low budget, yet high quality, titles from non competing producers is needed
.
The team is made up of producers, distributors and financial managers with a proven track record. This team has identified the first 3 films two of which have scripts in place. All have distribution with no upfront costs.
 
Before the films are made we create art work and DVD covers to present to retailers to ensure they will be taken. Our latest production `The Curse of Robert’ is being stocked by ASDA, Tesco, Sainsbury’s and Morrison’s in the UK and through Sony, Walmart, Redbox and all major outlets in North America. Many higher budget producers simply cannot sell their films, they make no money because they have not done the market homework. What we have now is a unique, proven global model of making low budget films in partnership with the very market that wants them.
 
Robert Graham is a director of Graham Associates (International) Ltd a multiple award winning firm of International Accountants. He is also a director of Independent Moving Pictures Ltd that finances and produces features. Robert is also an Executive Producer and has been involved in over 40 completed films with a further 15 in development and production.

Robert can be contacted on 0207 917 1727 or by email at robgraham@gai.uk.com

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