Adam Torres, Jeff Bowler, and Michael Becker discuss investing in entertainment.
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Listen to the Mission Matters Future of Investing in Entertainment Dialogue coverage. In this episode, Adam Torres interviews Jeff Bowler, Emmy Award-winning Film and Television Producer, Michael Becker, Founder & CEO at Imprint Entertainment, LLC, explore investing in entertainment at the Mission Matters Future of Investing in Entertainment Dialogue.
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Full Unedited Transcript
All right. So ready to have some fun tonight. My name is Adam Torres and I’m the host of the Mission Matters podcast, a top 2. 5 percent rated podcast. Myself and Chirag, we’ve been working and built this company last decade, over 6, 000 interviews in, and you get the privilege of hosting events like this and bringing together people in community.
That’s a big part of Mission Matters. And I’m particularly. Interested and excited about today’s panel because I haven’t really talked that much about investment and finance in a while and just for quick context, especially for some that are at home that my viewers at home, you already know a bit of this, but for the new friends we have here today, I was in finance almost 14 years and I spent a lot of time talking about investments, talking about like products like that Goldman Sachs offered, Charles Schwab offered a lot of the big brands when I was managing money for many, many years, and I’ve been in media now full time for last 10 years or so, as I mentioned, but it’s interesting and fun and exciting to have these pros up here from entertainment and film and film finance to kind of pick their brain for everybody in the room, of course, but for myself as well, and of course, for the audience at home and speaking to the audience at home if you haven’t, if you’re not in the, if you’re not in the audience it’s probably because you haven’t subscribed to our newsletter or our event calendar, which to do that just head to missionmatters.
com and subscribe to that calendar so you can stay up to date and you can get your butt in one of these seats next time as well. Alright, so that’s my commercial. Thank you. Gotta get that one in. Let’s get into the program. So, first off, some bios. Let’s start it off. Jeff Bowler. Jeff. Hello. This is a, this is a fun one.
All right. Emmy award winning film and television producer. Jeff is he’s done a whole lot as a financier with a diverse career in the entertainment industry. He began as director of business development for Bandai, then served as vice president of business development at WWE, where he helped launch WWE films and co produced the Mummy franchise and the Scorpion King.
From 2012 to 2017, Jeff was head of acquisitions and production for The Exchange contributing to over 100 films, including Dear White People Two Guns, he created the hit TV series, Inked. And in 2005, and has produced over 250 million in films and more than 300 hours of television content as co owner of Wonderful Film, or excuse me, Wonder Film Media, which, hey, it’s Wonderful Films too, but Wonder Film Media, so again, for Jeff.
Thank you so much for coming out. Alright, Michael. So, Michael is founder and CEO of Imprint Entertainment, LLC. Michael has a 25 years of experience working in the entertainment industry. He began his career as a talent agent, representing writers, directors, cinematographers, and producers. Throughout his tenure as an agent, Michael orchestrated numerous high profile deals for his clients, including working on iconic projects such as Sex and the City, iRobot, The Notebook, Nip Tuck, Panic Room, and The West Wing, among many others.
In 2008, Michael founded the production company Imprint Entertainment and has overseen more than 1. 8 billion in worldwide box office success. So a whole lot of box office success. Notable credits under Imprint Entertainment’s banner include the Twilight Saga franchise, as well as films such as Stepfather, featuring Penn Badgley and Amber Heard, Pawn, starring Forrest Whitaker, Ray Liotta, Common, and Michael Chiklis, and more.
And The Vault, starring James Franco, Taryn Manning, and Worth, starring Michael Keegan and Stanley Tucci. Give it up for Michael!
I told you we were going to have some fun tonight. I was like, oh, this is a good panel. So, just kind of opening it up to both of you entertainment. Was this always something you wanted to get into? Is this a business that you were thinking like, that’s what I want to do? For me, yeah, entertainment entertainment started for me when I was young.
I was always the narrator in the school plays. But I also would go to my dad’s office and watch him do business and be a businessman. And so at, at like, you know, 16 or 17, my dream was to come out here and get into the entertainment business. I like being creative, but I also like the deal making. I really enjoy yeah, the art of the deal and then seeing it come through.
And then you get to see on the big screen or today now on the little screen with 90 percent of all the movies going to streamers, which is great. It’s, it’s, you know, it’s it’s a dynamic and ever changing industry. And, you know, streamers took place of the DVD business. Yeah, really? So I moved out here in the, in the late nineties and got kind of a late start in entertainment and I was doing real estate on the East Coast and came out here and thought I’d do real estate.
And of course, you catch the entertainment bug in L. A. And didn’t want to be an actor, but got a job as, in an agency. And, and realized that really behind the camera and producing and financing was, was where I wanted to be. And so it didn’t necessarily start out, but you know, since I came out here, definitely the direction I wanted to go.
I got a tip before this started from Justin. Justin said, Hey, we got a, we got a great storyteller up here. So we’re going to start with, man, just, just tell me a story. I was like, he said, Justin told me, Adam, this can’t be a boring, just finance presentation. He said, you got a great storyteller up there. So thank you, Justin, for the shout out.
Tell me a story, man. There’s a lot of good ones. The one that me and Justin, we’re just talking about, you know, it’s I like to say that, you know, deals come and go. They’re always there when I say deals, movie deals for financing. So the one that got away, the one that got away. So, you know, we see 20 deals a week that are all financeable.
They all make sense. Sometimes we can move fast enough. Sometimes we can’t. So on one project called meet cute with Kaylee Cuoco and Pete Davidson. It came to my desk on a Monday from my old company, the exchange. And they, the whole budget was three and a half million dollars. On paper, we do a full analysis, and Brian, our, you know, who does sales and distribution, an old friend, he knows his numbers as good as I do.
And on paper, maybe that’s five or six million dollars sale out of the world. But, there was only a three million dollar investment that was needed. Okay, so you can double your money. They needed it by Friday. And there’s due diligence and stuff that we do, and I just couldn’t move that fast. So an hour later, they called me and said, okay, we went to someone else and a week later, they sold it for 22 million, 11 million for international to Amazon, 11 million to peacock for domestic.
And, but again, you know, I’m in the business of hitting singles and doubles. So when I see five or 6 million in sales against the 3 million budget, I get excited. We just couldn’t move that fast because we didn’t have our own fund. So I’d have to call the banks, the banks do closings, you know, it’s months and months and months.
Or you call a private investor or a private lender within Hollywood and they charge you 20 percent flat, even if it’s a 90 day bridge. So you know, so we, we lost that one. But again, there are deals every week that come across your desk, maybe not that good. And I don’t think anybody saw that coming anyway, but yeah.
Michael, you didn’t know this was coming, but man, you were an agent. You’ve been 25 years and stuff. Tell me a story. Tell me an entertainment story. Come on. I know you know that. You didn’t know that was coming. I didn’t. Jeff and Justin are to blame on this one. Jeff and Justin, but I know you got the story.
I could go the opposite of Jeff on this. I was involved in a film and, and some investment bankers out of New York were funding Funding the project. And again, it comes down to to me. It comes down to business to other people. Sometimes the investment bankers will get wowed or or investors and they start putting their money into the wrong places.
And they brought me on. Salt come on board, executive produced the movie and you know, their their thing was their investors on Wall Street. They know what they’re doing. Nobody can tell them anything. I told them they’re making the movie for way too much there. The talent doesn’t support the film of the budget.
And they said, Don’t you worry, we’re gonna show Hollywood how to Do this. And so they did it. They went and spent 7 million and put 7 million into the movie, which you should never do. And you could make a 30 million movie for that. And they did it all in cash and ended up yeah, losing. Absolutely everything.
By the way, they, they, they didn’t make a penny. I’ve got a good follow up to that one. I just thought, get in there, get in there, get in there thinking now, thinking now that you, you just triggered one with your friend Jake. I always talk about, I always give this one story. So I tell people before you get into the movie business, especially if you know me or you’re my friends, call me or call someone in the sales and distribution that knows their numbers and say, Hey, I’m thinking about doing this movie with this actor and this director at this price.
Does it make sense? Most of the time, it so but a friend of mine didn’t call first. He called me after and says, Hey, I made this 10 million movie in London. Will you look at it and potentially sell it for me? I said, Of course. Great. You’re you’re you’re a great guy. He put up his own money. And I watched the movie and it was, it looked like a 20 million movie, so the production value was there.
Shut down the streets of London, shot it over Christmas and it was called Breaking the Bank. And, for two minutes? Yeah. For two minutes? And it was Kelsey Grammer, you know, who’s known, not as a leading man, as more of a character actor, which decreases the value of your film, it is what it is and it was called Breaking the Bank.
And, I watched the movie and we sold it for 600, 000. He spent 10, 000, 000 on it. And I said, Jake, you should have called me first. Don’t say that with a smile, man. I said, you know, but, you know, it’s, it’s I told him, I said, call me first. I told everybody that. Don’t spend a dollar until you call me.
Because some people call and say, hey, look, I want to make this movie for 20, 000, 000. I said, it’s worth 3, 000, 000. So if you really want to, go for it, but you’re going to lose 17, 000. And that’s pretty much what I spend most of my day doing. And a lot of my friends and producers out there, there’s one right there.
And I, we do this all, all day for each other, you know, and so kind of, kind of staying along that, that line of thought and logic. A lot of people, I mean, investors in here that maybe you’ve invested in like traditional investments or maybe some alternatives, but haven’t really thought about movies or film.
You’ve obviously just given both a couple of horror stories. How is investing in film like different from your experience? You know, it’s it’s funny because when I started 25 years ago, my first movie was called across the hall. It was Brittany Murphy’s last movie. I didn’t know what I didn’t know at 24 years old.
Oh, how old 25, you know, and I found a great script and a great young filmmaker and became good friends with Brittany and she was willing, she thought this was going to help resurrect her career. And a friend of mine who was an NBA basketball player, same age, we partnered up and he’s like, Jeff, let’s make this movie.
I’ll put up the two million. You make it, you get the stars. I said, great, we’re gonna make a hundred million. That’s what everybody thinks. I had no clue at all what I was doing. I knew how to make a good movie. I didn’t know how to sell it. I didn’t know how to market. I didn’t know how I didn’t know the value of it.
We sold it for a million and my friend lost a million. And from that day on, I promised myself to learn the business as good or better than anybody and never ever lose another dollar of my money or any of my friends or any investors money. And that’s what we’ve done now. You know, almost 200 movies later.
So, so Michael, we hear a lot about about the box office, right? Like that’s what gets the headlines. That’s what like opening weekend, opening box office receipts, like how many people went to see it? Like, there’s that. So I always think about the investors on the back end of that. If something doesn’t do good at the box office, is that kind of like a tale to where the investors are kind of sunk?
Or is there another other narratives? There is there, there is another narrative on it. And it depends where you, where you sit in the waterfall of the film. So. So we, we say if you, if you want your money to be secure and you want the best outcome, and what Jeff and I are doing is, is put your money into the senior position, to the debt, to the debt position or to a gap or to you know, a position that, that, that’s first out in the waterfall.
So when you sell the film. You’re it doesn’t matter if you’ll see if you’ll see a film that comes out and you’re in it does, you know, you know, was made for 10 million or 12 million. It does 3 million at the box office. That doesn’t mean at all that the that the senior the senior investors lost any money.
As a matter of fact, any of the investors. Or maybe it doesn’t matter if any of the investors will have lost money, but, but it depends where you are in the waterfall. You get your money back, you’re making a percentage on it and it may have, it may have already made all of its money back internationally by the time it even, by the time it even comes out here.
And so when we come in, we look at it and we’ll, we’ll analyze it and work with the sales companies to make sure that, that when, when we put money in that the sales are, are above. Yeah. Absolutely. What the investors are putting in and just to follow up on that, you know, what, what Michael is saying is, you know, we’re a, we’re a, a B2B company.
We’re not, the consumer business doesn’t drive, doesn’t drive the narrative for our bottom line or our investors. Bottom line. We licensed the movies as a commodity. Think about that to the UK, Brazil, Spain. You know, Latin America, Germany on and on and on for a flat fee. So we get out then that whoever bought the rights to that territory has, has the right to distribute market, exploit, make a whole video of it.
Whatever they want to do, they’ve paid us. We’re out. We’ve recouped. Now it’s up to them and their territory to drive business for themselves. But we recoup based on all the territory sales around the world. And then the U. S. Domestic sale of rights. And you know, those rights range from 10 years. We licensed them to 25 years and then they come back and our investors get another bite of the apple.
We recycled the rights again worldwide. And that’s the part of building a library as well, but it also reduces a lot of risk because we’re not beholden to the consumer going and spending 20 in the box office. We’re using some terminology here that maybe some of the people in the audience may be familiar with because they’ve invested in things like this.
But, and maybe some of them at home watching this on YouTube or the podcast, but we’re saying things like bridge loans gap, like get a little bit into the technical side of that just to give some context to some of this vocabulary we’re using up here. Okay, I’ll start. So yeah, some of the. We’ve never hit home runs.
It’s singles and doubles for us. And, you know, a few of the different types of loans that we like to do that are very secure you know, bridge loans. You know, and I was telling a few people out here before this started that, you know, we pay 20 percent flat kind of as an industry even if we’re borrowing money for 90 days.
And, you know, I don’t know, I’ve borrowed between both of us, we’ve borrowed at least a half a billion dollars in the last 20 years. And paid, you know, very high interest rates. And we both know our numbers in business as good as anybody in the business. So now we want to become the bank and be the third party lender charging everybody 20.
So us and our investors can make the arbitrage based off of our discipline and our knowledge. So we’ll do bridge loans, which might be, you know, for an example I made a movie with Morgan Freeman three or four years ago. I did a personal bridge loan for 400, 000. The budget was 7, 000, 000 and it was Morgan Freeman, Kohlhauser, and someone else.
And the net budget after the, the budget was 10, 000, 000, the net budget after the tax credit was like 7, 000, 000. I did a 400, 000 bridge loan to Morgan Freeman to hold him. He signs his contract. Then the sales company can now have the right to go sell, you know, That film with his likeness worldwide now say they go do five million in in presales internationally We’ve now just reduced that seven million dollar exposure down to two So then we sold then you said then you pre sell, you know, the domestic rights for three million that wouldn’t be today That was three years ago.
That’s now cut in half probably a million and a half, but now you’ve laid off your whole budget So that was a bridge on I put a four hundred thousand. I took a lean on the whole movie So if someone didn’t pay me back in the 90 days, I would have taken over the movie, made it, financed it, bonded it, and I would have owned a Morgan Freeman movie for 400 grand.
And I would have made a couple million bucks. They paid me back, we made the movie, I made 20%, everybody else was happy. So a bridge loan is one. Sometimes we’ll do You know, a cast deposit if it’s the right film and it makes more sense. But then there’s a thing called gap lending and it’s not gap lending in the traditional accounting world.
It’s, you know, we have a sales sheet that has every country and then what we hope to sit license it for and what our minimum license fee is in order to make the movie and the financials work. So maybe you sell 20 percent of those pre sell 20 percent of those territories and maybe some of the bigger ones, the UK and Germany.
Maybe you hold those back and then a lender like myself would come in and say, Okay, Germany’s worth a million dollars on the low end. I’ll lend you 600, 000, but I’m now taking a lien on Germany and that’s called gap lending in the film business. So we do a lot of that. And it’s a good secure way because now we’re actually holding the distribution rights to the UK to Germany for a very discounted amount.
We’ll also do senior lending. So in your traditional debt lending. So if, if I can, I have a film going right now, we did 12 million. It’s, it’s worth 12 million internationally. The sales company took it out and we’ve so far sold 2 million of the 12 projected on purpose, on purpose. So we will pre sell it to get in some money and use that as part of the, the whole bit, the whole finance plan for the film.
And. And on the two million, we’ll, it’s paper from Germany or, or Russia or whoever, Russia. I mean, we, believe it or not, we still sell, sell all the territories and, and And they they give us a contract, they give you a deposit, and then we go off to, normally, a lender, and, and the lender charges us, you know, anywhere from, you know, 12 to 18, 20%, just to bank the contract.
And so, we’ll get those 2 million banked on the, on the paper. And then when we deliver the film, the, the territory pays the lender back. And that’s really easy debt lending, and, and, and every, every film does it. every every independent film for sure. And it’s like cashflow and a purchase order and retail.
That’s it. And then, and then since, so that’s, so if it was 12 million in pre sales and so take that down. So now there’s 10 million left that we sell internationally when the movie’s done or throughout us making the movie we could take a gap loan against a percentage of that 10 million that we know we’re going to sell.
So if we took another 3 million from somebody as a gap loan, that’s a really easy loan for somebody to do because they know we’re going to sell back. That portion. We still have 10 million left and then they’ll charge us a ton of money for that. So that’s why, you know, us, we’re, we’re, we’re becoming more of the lender side now because that’s really, you know, that that’s, that’s really where the business is.
Now that we’re becoming lenders, we’re not just making our own movies. We’re supporting other filmmakers, building better relationships, you know, building more opportunities for more people that creates more jobs. And it diversifies, you know, we, we’ve done well making our own movies, but, you know, you know we have friends here in the audience that have better movies than ours that if we had a few extra dollars we could get in on and also supports them and their families and jobs and also gets us, you know down the road building a library with a diverse group of filmmakers.
So Jeff, I think you answered this when you talked about the Morgan Freeman movie, but I want to kind of make this connection between film and maybe some of the traditional investments that people have done in the past. And one of the closest ones I could think of would be like real estate. So when you think about Real estate, there’s always collateral behind it, right?
You have the physical product and you have the property, you have the land, have something when you think about investing in real estate. So can you kind of make, help make that connection of how that works? And maybe even if, has anybody ever defaulted? I don’t know. Oh, plenty of people do. Yeah, so you’re right.
I kind of covered that with the Morgan Freeman analogy. But yeah, so when we come in, in any position, the collateral that we take is either the entire film’s rights. Which have a value and we, that value is not just made up in ether from us. We have you know, bankable bonded sales and distribution companies.
That’s, that’s all they do. They give us guidance. So every film project has a comp just like real estate. You know, you, you, you build a house for 5 million on a street that all the houses are 2 million, you overbuilt. You know yeah, you don’t want to be in that position, right? You don’t want to be in that one.
So you want, you want to build for a million six, right? So that’s what, that’s the analogy that we use. It’s kind of like a commodity. Every film, you know, we’ve made a lot of movies with Nick Cage when, you know, you can make these 10 million action films, you know, and get a tax credit for 2 million, make them for nine, make a million bucks.
You know, three or four people, we split a million bucks. It’s a nice little day at the office. You know, but that’s the discipline. They didn’t, they may not be the sexiest movies, but we’re not losing money and we’re not getting rich, but we’re, everybody’s doing okay. We’re having fun doing it. But yeah, so we, when I go back to the gap lending, we take a lean on the territories.
That’s the collateral. So it’s not, you know, when you put up equity in any business, it’s speculative, it’s risk, right? You’re buying points, hoping that you’re going to hit a home run. We actually never, ever do equity. Yeah. We did our first movie. We lost. That was 25 years ago. We’ve learned. But now it’s just that, you know, we take collateral in every single movie and it could be a combination of rights.
It could be a singular territory. You know that we heavily discount also we never put in more than 70 percent of the lowest estimates of the entire worldwide sales. So then you have, you know, you have a good 30 percent coverage and then there’s other coverage and maybe there’s equity that sits behind it.
You know behind us. So yeah, that’s that’s how it works. Michael How do you he mentioned like the valuation of this in movies and obviously you get a lot of things that come across your desk I’ve looked at a lot of films like how do you come up with the valuation and make that ultimate decision of like what you’re Gonna back we work with all the top sales companies and all the top, you know Well, first of all, we’ve been doing it for a long time.
So we have a really good idea Anyway, if the film comes in we know You Right off the bat, we could tell you if it’s overpriced, if we think we’re gonna be able to get the money back internationally, because that’s sort of where we’re looking. We may add in a domestic deal if we can do it like a pre sale or something.
But but for the most part, you know, we’ve been doing it for a long time. So, so, so we know, but we do work with all the top sales companies and then we turn around and we take a look at at their estimates and and a lot of and a lot of these sales companies have been doing it for for we a long time and they’re bankable sales companies.
So, so we know, we know going in, we analyze it into us, into us. We, we may love a project. I had a project in with Channing Tatum recently, and I loved the project. I thought it was great as a producer. He was an actor on it. And we just, we, we ended up making an offer, not what they wanted. And it was, they ended up making the movie.
But you know, it, it just on, on, on, you know, I loved it one to do, but it’s a business for us too. And so we had ultimately had to pull out of it. And we, we didn’t do it, but it just didn’t add up number wise. Now, that movie still may come out and do, you know, big numbers, but it’s risky and, and we’re kind of risk adverse.
And so you know, unfortunately we, we didn’t, we didn’t get in on it. Hopefully it won’t turn out like that. He’s right. We, we, we pass and miss a lot of deals because the numbers just don’t make sense. And maybe they’re very close or, you know, we think it’s going to be okay. But if we’re, that, if we’re thinking splitting hairs, we’re out.
Can you give an example of maybe a film that was, you know, a fail, it was a bust and, and investors lost money and maybe if they would’ve been working with you or if you would’ve been involved in this, like it may have, it may have been a different outcome. Yeah, I’m sure there’s tons. God, I mean, there’s a list of not our movies because we actually do them.
Right. But, you know, but we’ve, but we’ve advised. Yeah, actually, here’s a good one. I don’t know the exact good one. So I’m a producer on the movie Lamborghini and there’s someone else out here from the company there that runs that company. But they made the, the, the financiers are very well known.
Alcohol a multi billion dollar alcohol family and from Europe and they wanted to make Lamborghini for different reasons, governmental, political, things like that, access to, you know, whoever, the Pope and so I advise against spending 20 something million on it because on paper, to me, it was a marginal script with an okay director.
I’m just being honest, not to defend anybody who knows the project or the, or who’s friends with Bobby or anybody, but you know, on paper to me, I’m like, I wouldn’t put money into it at all, which we didn’t, but I helped put it together. I put the cast together and help with some of the sales. And I don’t know my guess is they lost 20 million of the 25 million.
I, it doesn’t make any sense to me, but they had other motives for doing that and making that investment. And, you know, it’s not a movie I would make or advise anybody to make. But, they did. And I’m sure there’s, you know, 50 more behind that. 500 more behind that, I don’t know. All right, so this is my last question I’ll be asking and I’m giving you a heads up here because I want to open this up for everybody else to ask some questions.
So if everybody like, now’s your time to start thinking, I can keep asking them, but I want to get the crowd involved. This is definitely a fireside chat moment. And if you’re at home watching this on YouTube, throw in some comments and who knows, maybe they’ll answer them. I don’t know, we’ll see, but throw in some comments in the comments section and and throw in those questions as well.
So my final question you mentioned hitting base hits, maybe hitting some doubles. Do you expect to hit any home runs? Yeah you know, look, we don’t go in thinking that we’re going to make a home run out of this. You know, you, I think you go in with hoping for the best, but, but I know when we go in, we know that we’re not going to lose.
And we know that we’re going to at least make back the money plus the interest. And you know, if we can grab a couple of points in the film, that’s great. But look, my friends put money in the long legs. And they didn’t know that was going to be such a success that it was. They put in not even that much, I think under a million dollars.
And it was a home run for them. It was a grand slam for them, actually. And they were in this position. They were in a senior position. I think they grabbed a couple points in the back end. Also from doing the deal because the movie really needed some money. And they’re going to make well into the seven figures on that because the movie became so successful.
You know, we don’t go in Thinking that, you know, I think in the back of your mind, you hope, but Michael, Michael’s got a good point. That’s another type of loan that will do a lot of films will will run out of money in post production, but you can see it. I can at least screen what they’ve shot and say, okay, we have something here.
And then, you know, unfortunately the position that they’re in. Is they need money. So like a long legs, they needed whatever, roughly a million dollars. Well, someone already spent 10 million in front of you, you know? So it’s safe to say you’re going to get your million back if you’re at first position. And like you said, if you can get a few of the backend profit points, even better.
So we will definitely do those, what they call finishing fund deals, because we can see that I can bring in my sales team. We can sit, we can evaluate it. And it’s usually extremely safe because we’re going to take a lean on as much as we can of the movie. If we can take a lead on the whole thing, we will but we’ll definitely be in the waterfall in the first position to be made first before anybody else.
And we get out and hopefully everybody else gets out, but we’re concerned with our investors that we put in. All right. Let’s open it up for some questions. There we go. I’m an award winning film documentary director and writer. And how do we reach you guys? You can call my agent. You’re more rarefied than most other people that you need to make it.
Thank you. How can I get you live? Great. Alright. Short and sweet. Who else? You guys have all been in the game for a long time, and you guys know your shit, that’s for sure. But we know the industry has been in like a really big major disruption for quite a while. Studios, streaming companies AI in the front and, Finding some games changing we are looking at fast shells coming on the rise.
It’s a big equation to the new market. How do you guys look at where the heyday of where you are? Cause I, I know your whole careers, you guys have done such a job, you know, and what you might be looking back at the newsflight conference, some of these things survive until 2025. Yeah. My hair sprites, everybody was struggling to just get through this.
Is anything going to change for you guys in your thought process and your business model to address what’s the onset, you know, what everybody’s been struggling with? Yeah, I mean, things are definitely changing and evolving by the minute. I mean, you know, I tell people this analogy all the time. A couple years ago, I could sell a Mel Gibson movie where he’s in it for a week for three million dollars at Lionsgate.
That’s now maybe a million and a half dollars. How do you make that movie? You know, we’re trying to figure that out. You know, you have to bring the budgets down. Talent has to reduce. You know technology. We haven’t done a lot of deals with the 2Bs of the world and stuff yet, but I think we will.
It’s just they’re not, the, the, the movies that we’re making, they’re not really able to pay the license fees we, we need. The good thing is we’re playing a little bit, you know, above, I don’t want to say the riffraff, but it’s really hard. When you’re making a three or four million dollar movie and you’re.
You know, like I saw a few weeks ago an Aaron Eckhart movie sold for 400, 000 for domestic rights. And I’m like, three years ago, we were looking at 8 million out of the world and you know, you have to adjust. And I think we’re all doing it on the fly a bit. Fast channels are definitely interesting, but none of them have money to spend on license fees.
So it’s like, do you, do you do a straight distribution deal and a revenue share maybe? But again, if we’re lending money, I can’t take a chance on, then we go into the consumer business. You know, and, yeah, so, so here’s one thing we didn’t talk about. I’ll, I’ll bring up briefly. Yes, definitely brands like we’re, we’re partners with an Australian creative agency that is going to be financing a digital show for us.
It’s our first digital show we’ve ever done. I got 40, 000 an episode. It’s ridiculously cheap. But they’re gonna be fully financed. It’s Coca Cola. It’s a whole new thing for us, right? But we’re also our new fund that we’re putting together has an exclusive first deal. First, let’s deal with a company called Platinum Dunes, who’s Michael Bay’s production company makes a quiet place to purge.
You know Friday the 13th, 9th and Elm Street, Jack Ryan. So we’re going to be, and we’re very close. We’re both on the board of the company as well. So they’ve never allowed independent financing to come into their studio deals. So we now have that ability to come and start co financing with, right now there’s a first look deal with Universal, an output deal with Universal for theatrical.
And then a second look deal with Sony. And a lot of companies films were with Paramount, and I think aligning and the more and more you read in the indie world, you need to be making better films at a not a crazy price, like Platinum Dunes still is 30 million and under, really 20 is the is the sweet spot and like the new Purge that that we’re starting in the summer, maybe gonna be a 10 million budget.
That’s it. But it’s gonna be released on 4, 000 screens with a 50 million P& A budget with Universal. I think independent pro there’s a, there’s a market for independent producers like us, and there’s a lot of you guys out there that I know to partner with studio distribution. It’s gonna be a lot less films, it’s gonna be condensing and collapsing, but it’s gonna be higher quality.
And you’re going to get to see more theatrical films, I think, in 2025 and 2026 than we’ve seen in the last few years. But I think independent producers partnering with studios to make better movies, but less movies. Yep. At least for us. That’s, that’s, that’s our business. Well, I think, I think that’s the way it’s going.
And I’ll just follow up on that too. I think we’re going to see or we’re starting to see on the higher end because the distribution market is just shrinking in the U. S. And so you’re not finding a lot of people that you would normally go to for an advance to help finance your film. They’re like, go ahead and make it first, then come back and see us.
They’re not going to put it up in advance anymore. So, you know, you’re seeing more of a, of a filmmaker driven. Market where more quality picture is better filmmakers and really the market of, you know, Just just going out there and putting an actor in for a day and working them for 14 hours and wrapping the whole movie around it.
And it’s it’s terrible and and taking it out that those days are just kind of they’re over and and then or you’ve got the lower budget films that you’re going with, like maybe a two B or something. And and you’re selling those. You’re making those you’re You’re doing those for half a million dollars and just flipping them.
That’s not really our market at all, but I, the mid level is just sort of gone on these you know, two, 3 million films. It’s difficult.
Also a documentary filmmaker just how, would you add or change anything in terms of what you’ve been talking about? Thank you for sharing all this cool information, but how does sale distribution of docs or doc series change? That’s a really good question. I’ve made a bunch of docs. I didn’t talk about them, but I’ve made a bunch of docs.
I won my first Emmy for best documentary in 2017. And our sales company, we’ve sold Little Biggest Farm. We just did a few years ago what was the, the Sesame Street one? And we sold it for a record at HBO. I already forgot the title. But I’ll tell you, Docs it’s hard to make money at Docs, I’m sure as you know.
I’ve made a bunch and I’ve maybe made money on two. You know, and I got a nice statue on my desk. That was the only one we wanted. We made a hundred grand on it. But it was a passion. It was a labor of love. Docs are having a resurgence right now. Like, I’m partnered with Mark Wahlberg and his company on a doc.
Mike is too. And, you know, we’re looking at making, you know, I think you should be making these high end docs for no more than two million. And that’s the market. That’s what I’m seeing every day with distributors and studios, financiers, two million ish. And You know, but like, I don’t know. We’ve, we’ve got one that’s going to sell for like 4 million.
We made it for two. Just a 90 minute doc on a person. I think docs, quality docs, like you got to stay out of the 200, 000 docs. I did one of those for my old high school a few years ago. There’s a Catholic school, one of the oldest in the country that was getting shut down. They asked me to do a doc.
We spent 300 grand on it. We sold it for 50 grand. The school paid for it. It was a good advertising campaign for them. You know, and it worked for their purposes, but you got to stay out of that 200 to 500, 000 docks because you’re just, for the most part, you’re just going to get a straight distribution deal in a rev share, not a license fee.
I think you should be in the seven 52 million if you actually want to sell it for network quality control, you know, at that level. I think at 2 million you can make something really nice and really special that could break out into that four or five, six, 7 million sale. You know, I’d say 10 years ago or so, those, those numbers.
We’re far in between. There are a lot more of those deals out there now. What are you seeing on Doc series? Like limited, like, like ongoing or limited eight, six, eight episodes. Yeah. Or ongoing. Or like high on the hog. Yeah. You know, I can tell you what the, like, I would have seen their sales 700 an episode.
500 to 700, 000 an episode. That’s kind of like the license fees I’m seeing for, for hour long episodes, 45 to an hour. You know, it’s you gotta have for, for a, to get a network order for a docu series, it’s gotta be really special these days. It used to be a lot easier to sell them. But you know, if you come in and you’re co financing with a network or a fast channel or someone there’s a lot of room.
For that, you know, everyone would love a co finance partner, right? Nobody wants to take all the risk, especially on the distribution side. Yeah, you bet. This is very interesting, thank you. Can you elaborate on what the project looks like when it comes to you? It sounds like it’s kind of a Good question.
scope, and they’ve got a script, and people attached to it. And then, I’m curious, like, how does it get to that point? You know, can you talk about the evolution? Yeah. Familiar with the numbers that you are, like, you’re rattling them off, like, why can’t we do this for 700? How does it even get to that stage?
And how, how much disconnect is there in the market where they put together a budget for 17 and you’re like, oh, this is only going to sell for 5? I feel like we planted you. This is unbelievable. I mean, these are, these are some of the best questions. Yeah, so I’ll, I’ll start. I’ll start from the back end.
So yeah. So, you know, I, I, weekly we both get this. It’s like, yeah, we did a budget. It’s 22 million. I’m like, and what is that based on? And they’re like, oh, it’s just, you know, that’s what we think it costs. I’m like, okay, well, we’ll start there. Your film’s worth 4 million. So now let’s reverse engineer it.
And if you can’t pass but yeah, you know, when we both started 20 something years ago, we would look at, it was, it was, you know, the slow boat. Yeah. So we would get a script or maybe an idea, then we would go spend 20 grand and hire a writer to write the script for that idea. And it was a passion project, like my first movie with Britney Spears was Britney Spears, Britney, I did a documentary with Britney Spears Britney Murphy.
And, you know, it was, it was, took us a year to write the script. And then, yeah, I got it made, but, you know, we’ve done that 10 other times, and, you know, got a two page outline in a year and never got anything made. So, And it’s you know, we call that development, you know, I think it’s, I think it’s also, it’s, you know, it’s, I think it’s also educating, you know, and, and who, and kind of who you’re working with.
If you’re working, there’s, there’s a, there’s a certain there’s, there’s people that have been around that, that that give you scripts and projects and they, they sort of, you know, they know their numbers or they know, they know who makes sense. And, but, but on all day, I mean, every day we get, we get projects in and, and, and, And it’s, it’s what Jeff said.
It’s, it’s kind of educating then the, the, you know, the individual bringing you the project and letting them know they may, they may have like he mentioned Kelsey Grammar. Kelsey Grammar is a great for a series. It’s your home run. You put it, you know, for, for a film, it’s, it’s difficult on, on sales. You know, they may see a great television actor and and and have a couple people say we want to make this for 15 million and and you just kind of have to educate them.
And if you really love it, you can work with them and and see if you can lower it. And if not, for the most part, you just Pat, you’re gonna have to pass and move on. But the answer the bulk of your question. So, yeah, we used to just work on just scripts. Now it’s we look at just fully packaged things that are ready to go.
That we can move because now it’s a business. It’s a cog in the wheel and we have to move business. You know, I think in 2021 to 2023, even during COVID between the two of us, we made almost 30 movies. You know, it’s so yeah, so now it’s if it’s just a script, I tell people don’t send it unless it’s from an A list writer.
It’s coming from our agent or one of the other big agencies. Don’t send it to us because it’s, we’re not going to get to it. But tell me who’s the director? Is there a cast attached? Okay, so maybe there’s a really good director and a good script. We have the relationships to put the cast on. And based on that cast, I know what the value of it is.
Then I can back in the financing. It’s all reverse engineering it. But yeah, so now we look for only, you know, we probably get 20, what we call packages a week with cast, directors, some level of a budget, if it makes sense or not. And you know, someone’s passion behind it. Justin. It sounds like you guys, I mean, when I think of film, I usually think about, someone throws in money, and it’s a low chance, low odds of success, and then once in a home run.
But it sounds like you guys have a formula, and you really want to hit the downside. But as an investor, if I’m like investing in your fund, like, what type of returns are you guys Yeah, so for us, we’re So like I said, we, we’ve been the borrower for so long, borrowing hundreds of millions of dollars and paying 20 percent plus fees and setup fees and legal fees and finance fees and all of this nonsense on a very collateralized, safe investment.
When I say safe, cause we know it’s safe. The bank knows it’s safe because the, the films that we’re doing, we could go to bank of America and borrow from, and you know that they’re conservative or bank of California. It’s just that they move slower. So we’re going to lose the opportunity. If we go wait six weeks, eight weeks, 10 weeks to borrow from Bank of America at a lower rate you know, so you know, these are, these are all very bankable.
So we get in on the debt side, people put in, you know, equity and it’s, it’s unfortunate a lot of times. But the returns for us, you know, like I said, it’s, it’s single and double. So we’re talking to investors. We’re going to guarantee 12 and a half percent annually. We’re going to charge as a company 20 on average.
And then we’re going to split. We’re going to give the investors a third of the profits, which the difference between the 12 and a half that they’re putting in and the 20, they’re going to get a third of that on top of their 12 and a half. And then we’re going to take back end points. So if there is anything that has some level of success that pays out profits, they’ll get a third of that too.
So, but at 12 and a half percent, so it’s kind of a flat annual we think is good and fair, you know, and I can usually turn that money. One and a half times a year, so it’s a blend of different loans, bridge gap, you know, so we do a bridge loan at 90 days and we’re making 20 percent of our money. We do three or four of those a year for, you know, a couple million then we do a gap, you know, a couple of gap loans.
We take territories as collateral, you know, depending where the film is. If it’s in the middle of filming and it wraps in 90 days and it’s, it’s going to be sold in another 90 days, we’re out in six months. Those are the deals I like, you know, I don’t want to wait around 18 months, 24 months, which we never would but yeah, so we’re, we’re, we can turn the money one and a half times so there’ll be some decent profits.
It’s not, it shouldn’t be home run money, but it’s 12 and a half percent plus, plus something, you know. Alright, maybe one or two more and then we’ll I have a related question for the moderator here. For context, I’m a private equity investor, long job. So clearly my question is about valuation. And clearly you utilize your institutional knowledge to basically precedent transact.
Correct. So, but do you look at the cast, and this one is a box office draw, this one’s a has been, this one’s a cover, and there’s obviously a lot of subjectivity in that, who’s the director, what is the script, what’s the genre. Can you describe kind of, and I know it’s very subjective, what do you do, what is, how do you mix that together?
Yeah, that’s a good, that’s a good question. Your evaluation is, you know, 10, 20, 30 percent too high. Yeah, that happens all the time. There’s, you know, that’s where you really want to work with bankable bonded sales companies. When I say a sales company, this is all they do. They have a sales team that does a global analysis 24 seven on every movie that’s coming and going in every country and domestic.
And you know, the market doesn’t change. So like when I say, you know, I’ve made Nick Cage movies, Bruce Willis movies, that was in, you know, where, where a lot of people were doing them. You hire Nick Cage for a week and it gives you a valuation of Roughly 10 million gross sales worldwide. A million from the UK, 750 from Germany, and we have a price sheet.
And this is based on all of the comps, the historicals, of him with that level director in that genre. And it’s not like it changes 50 percent overnight or 20 percent overnight. These comps stay, yeah, they can change over a year, 18 months, a couple years, value goes up, value goes down. Nick Cage’s value now is up.
It was down for the last five years. I made a movie with him seven years ago when it was up. But yeah, so every pack, it’s not really about it. It is about the combo, right? If you have a new young director, but you’ve got you know, Robert Pattinson from Twilight starring in it. And it’s, it’s offbeat, quirky film.
It’s a 10 million budget. I’d probably pass. If it’s a rant, a comedy with him and you know Kaley Cuoco, and it’s a decent director or, you know The decent director and the budget’s 10. I think that’s a home run. Yeah, genre really does matter as well. And in it, so it’s like, yeah, if you have Robert Pattinson and it’s you know, it’s a straight up drama.
On the international side, it’s, it’s just difficult. It’s, it’s worth a lot less. You know, if it’s him and it’s a cool thriller you know, you’re, you’re talking a lot more. Yeah, and different genres sell better than others. And, and as you said, in sort of every actor. You know, if you look at them like I mean, it’s just kind of crazy, but it’s, it’s Is a commodity.
They all have their value. And so people wonder why do actors get paid so much? And you know why now? It’s because some actors really they know their value and how much they mean for getting your film made. And so even on the independent side studios studios, no, but studios are thinking, Okay, what? What people need?
It puts people in, in theaters or, or, you know, or pushes the streamer. We look at who’s sort of you know, who’s valued not only well, international and, and domestic, but more on the independent side and, and everyone has their value and, and, you know, and, and a lot of times like the newcomers, like, you know, the cast of stranger things or some of these big hit shows, outer banks you know, someone will come to me and say, okay, I’ve got this 5 million film starring the lead of not Millie Bobby Brown, but you know, someone else in stranger things.
Because she has a ton of value for, for a young woman right now. And they’re like, you know, it’s a five or six million dollar film, but Stranger Things is the number one TV show in the world. I’m like, they haven’t opened up movies in Germany, this cast, you know, they haven’t opened up movies in Spain.
Yes, it’s a big show. And sure. Could you take a risk and go make it for 5 million? And it’s a monster hit. Absolutely. That’s not our business. I don’t want to take that risk. I, we use, you know, proven commodities. It’s usually the older actors. They’re proven. You know, I just, you can’t make investments being emotional either, you know, you have to.
It’s all about the numbers. At the end of the day, we have our sales sheet. I look at the bottom line. There’s two columns, the minimum that I need to sell these license fees for in every country and what I want to sell them for. And if I can’t make the film for at least 20 percent less than the worst case number, we’re not interested.
All right, last question, and then Sharaga, come up and close this out. Last question. Don’t go in, nope. With the industry changing so much, what are the biggest opportunities for independent producers, and what, what are the things that the juice is no longer worth the squeeze? What was the last part? Or like, what are the side of things that are no longer worth the squeeze?
That just are not going to give the producers the big bang for their buck. Yeah Going back to, I think there’s a big opportunity for independent producers to align themselves with the major studios for distribution, because we’re seeing it on a daily basis on our Platinum Dune stuff. It’s there’s so much opportunity because a lot of the independent producers, unfortunately, are going to fall by the wayside if they can’t adapt, or if they don’t have those relationships with the distributors.
I mean, even like the Lionsgates nobody’s buying anything right now. And that used to be our bread and butter. So you have to pivot, you have to know where to go or you have to have the right level of product that cuts through all the noise. But aligning, you know, aligning yourself with a film fund, a debt fund like ours, and then having the studio relationships for distribution is really key.
And I think there’s going to be massive opportunity for the Indies. Like, you know, I, we’ve done a handful of studio films ourselves where we just produced it in the studio’s finance and put them out. But there’s going to be now the opportunity for people like us and the other independents to come in and say, look, we’ll bring some co financing.
We want to own a piece. We want to build our own little library and we want to do three of these a year and you set up an output deal for yourselves and your independent company now becomes almost like an independent studio with a distribution deal with X, Y, Z. I think that’s going to be a massive opportunity over the next five years.
Yeah. Yeah. All right. Well, let’s give it up for the panel.