ROI is the return on investment for the producer in terms of minimum guarantees USERRAT is the rating the movie received by the audience, varying from zero to ten on a sliding scale
REVIEWS = total number of critical reviews a film received RELTER is the number of release territories for the film
AWARDSWON means the number of awards the film won at several festivals AWARDSNOM is the number of award nominees the film gained
AWARDS it the sum of awards won and award nominees
AWARDSPAST is the number of award winnings and nominees the director and actors of a film received in past performances
MG is the minimum guarantee (the amount paid by distributors to exploit the rights for a film for a specific territory for a specific period of time)
BUDGET is the production costs of films BOGRO is the box office gross
ROI_BOGRO represents the return on investment rates by dividing the box office gross by the budget of each film
G, PG, PG13, and R, are dummy variables for rating.
A_DIR = dummy variable if the director has an A status
A_STAR = dummy variable if one of the cast member is an a-actor
B_STAR = dummy variable receiving a one if the members in the cast has no A status, but do have a B status
COR, DRA, AA, HOR, SCIFI, KIDS, THR, or CRI, are dummy variables for genre.
See the discussion in the text for an exact definition
WINT, EAST, SUMM, AUT, or CHRIS, are dummy variables for the time of release.
See the discussion in the text for an exact definition
THREL is a dummy variable receiving the value of one if the film has a theatrical release
USTHREL is a dummy variable receiving the value of one if the film has a theatrical release in the United States
ENGLANG is the dummy variable for language receiving the value of one if it is an English spoken production
Appendix B Sample
Selection independent film productions
18 Shades of Dust Dish Dog Loop Small Time Crooks
20:13-Thou Shalt not Kill Downtime Lost Highway Soft Fruit
51st State End of Violence, The Love and Action in Chicago Somebody is Waiting
Abduction Club, The Enigma Love The Hard Way Spanish Judges
Accelerator Everybody Loves Sunshine Man Who Sued God, The Stormchaser
Air Bud Exhuming Mr Rice Manor, The Sunset Heights
Alegria eXtremists, The Married 2 Malcolm Sweet Deception
Alice Through The Looking Glass Fear Runs Silent Masked & Anonymous Take Away
All About My Mother Fever Max Taking Sides
Amazons and Gladiators Fogbound Mem ory & Desire Teen Monster
Aria & Pasta Forever Lulu Mem ory of Water, The Tempted
Bad Way, A Ghost Dog Milk Terminator 3
Bank, The Gods and Monsters Muggers There is only One Jimmy Grimble
Beneath Clouds Gypsy Woman Mumbo Jumbo Thomas and the Magic Railroad
Betrayal Habla con Ella My Kingdom Thunderpants
Better than Sex Hard Rain My Life Without Me Till Human Voices Wake Us
Between Strangers Hard Word, Mystics Titus (Andronicus)
Blood and wine Harpist, The New Adventures of Pinocchio, The Tommy and the Wildcat
Blues, The Help I'm a Fish New Year’s Day Totally Irresponsible
Blurred Hide'n Seek Newcomers Tripfall
Boat Trip High Explosive Newsbreak Triumph of Love, The
Bodywork Hole, The Nostradamus Twins Effect
Britannic Hollow Reed Not Afraid, Not Afraid Under Suspicion
Brother How to Kill your Neighbour’s Dog Nowhere Land Vector File, The
Brylcreem Boys, The Hurrah Nugget, The Victory
Captain Jack Hurricane Streets Nurse Betty Virus
Career Girls I am Dina On The Nose Visit, The
Caught I Will Remember April One Hell of a Guy Warriors of Virtue
Celebrity Ice Princess Opportunists, The Wedding Planner, The
Chasing Destiny Informant, The Paper Bullets Whale Rider
Cherry Pink Investigating Sex Paradise Found Where Eskimos Live
Chill Out Investigation, The Partners Where the Money is
Company, the It was an Accident Peril Women is a Hell of a Thing
Contender, The Jack of Hearts Play it to the Bone Women Talking Dirty
Crash Joe and Max Primary Colors You Stupid Man
Crash and Burnes Just One Night Private Eye Young Adam
Crocodile Dundee III Just Sue Me Psycho Beach Party Zookeeper, The
Crow, The: Salvation Justice Quiet American Zoom
Cucaracha, La K-19 The Widowmaker Rabbit-Proof Fence
Cut Kika Radical Jack
Darkness Falls Kimberly Red Team
Appendix C Director
Appendix D-1 A-actor
Appendix D-2 A-actress
Appendix D-3 B-actor
Appendix D-4 B-actress
Appendix E Survey
In order to determine the relevance of the research, with regard to forecasting future revenues, the following questions were formulated for three CAM managers:
- Why is forecasting the producer’s revenues and return on investment of an independent movie production relevant for FH?
L. Plukker: The Fintage fees is based on a percentage. The higher the revenues the higher the collected income for Fintage House.
A. Vet: Being able to predict future revenues will increase the understanding off the market.
M. Melchior: The results could be relevant for Fintage House, but also for the external environment of Fintage. When one is able to predict future revenues, the future selection procedure of Fintage could be improved.
- In what way is the outcome of the results relevant for Fintage House?
L. Plukker: To analyze the sales estimates of the sales agent in terms of worldwide revenues.
A. Vet: Better film selection lead to higher earnings for not only Fintage House, but perhaps also for external clients.
M. Melchior: The results indicate that Fintage House has to aim at films with higher budgets and appearance of a- and b-stars. All the other results could be commercialized for future clients and deals. Perhaps publication of the results will increase the brand awareness of Fintage House, but this remains to be seen.
- Concerning revenues for Fintage House, how long is the average life cycle of an independent movie project?
L. Plukker: From the first day forward, collecting revenues about two to three years.
A. Vet: From the first day revenues collected around 1,5 till 2 years till the life cycle is ended. Most payments will be handled than.
M. Melchior: About three years.
- What date is the most accurate to monitor the collected revenues?
L. Plukker: To take the Signature payment date as a start date.
A. Vet: Take the date where the first revenues are collected. This is also called the Signature Payment or execution date.
M. Melchior: Start date PP
- Why this date?
L. Plukker: First payments are often made before the start date of PP. The monitoring will take place from the first payment. From this date forth all revenues will be collected. If the start date PP will be used, the signature payment has been made and could be a substantial sum.
A. Vet: The period before the shoot of the movie takes place will take about six till nine months; the most accurate date.
M. Melchior: Payments are linked to this date, like the payment start date PP. Of this date forth it is the first date that the movie will be produced for sure.
- Is there a second relevant date? If so, which one and why?
L. Plukker: Start date PP; first locked date in the process. Even the signature payment isn’t a locked date. The signature Payment can be made prior to the start date PP, but can also be paid during the start date PP. If an estimation has to be maid concerning payments during the process of a movie production this would be the following: 20%
Signature Payment, 40% Start Date PP and 40% Delivery Payment to the Sales Agent.
A. Vet: Yes, the start date of PP; the first secure date in the production process.
Disadvantage of this date is that the Signature Payment could already have been paid.
M. Melchior: Yes, Signature Payment date. Disadvantage of this date is that long time prior start date PP payments could have been maid, but also one party that made a payment a long time in advance. This makes it a subjective date. Revenues for respectively Signature Payments, Payments start date PP and Payment delivery to SA are 10-20, 10-20, 60-80 %.
- What percentage of the total collected revenues can be expected in the first year of a movie production when using start date PP and Signature Payment as start monitoring date?
L. Plukker: 20% of revenues when using Start PP prior to this date and 50% during the first year from starting PP forth, making a total of about 70%. When using Signature Payment as start date, about 50% of the total revenues will be collected during its first year.
A. Vet: 80% of the revenues will be collected when using start PP as a start date and about 20% of all the revenues will be collected during its first year when using the Signature Payment as a start date
M. Melchior: Using start date; 1e year35%, using Signature Payment; 1e year 10- 35%.
- What percentage of the total revenues will be collected by CAM during the second year of the movie project?
L. Plukker: Start date PP, 20% prior, 50% first year and finally in the last year about 30%. When using Signature Payment, about 40% of total revenues in the second year.
A. Vet: Start date PP, 20% in the second year. Signature Payment, 80% in the second year.
M. Melchior: Start date PP; 2e year 50%. Sign. Payment; Second year 40-50%.
Appendix F Fintage House BV
Fintage House is a leader in the field of providing financial solutions to the global entertainment industry. Their goal is to maximise and secure the revenues derived from the exploitation of entertainment assets, such as film or television productions, music compositions and rights in image and likeness.
The basis of Fintage House (“Fintage”) was established in 1986 in The Netherlands and today it is the leading independent financial service company in the global entertainment business (specializing in Film, TV, Music, Fashion and Sport). Over the past 16 years, Fintage has worked with most of the independent producers as well as a majority of the leading sales agents, distributors and broadcasters. The clients of Fintage House include top international actors and actresses, performing artists and athletes.
The annual business volume exceeds Euro 800 million and Fintage House worldwide has a staff over 60 employees. The principal offices are in The Netherlands and Hungary. Fintage House Netherlands houses approximately 25 full time employees.
Furthermore Fintage House BV has representatives in Japan, Australia, USA, Italy and Spain. Fintage House BV is present at the major film and TV markets (Film Festivals) such as American Film Market (AFM), National Association of Television Program Executives (NATPE), Cannes, Milan Film Market (MIFED), London Screenings and the Berlinale as well as music markets such as MIDEM.
1.1 The divisions of Fintage House BV
Film & TV consists of five departments situated in the Netherlands and Hungary, which are the following:
- Collection Account Management (CAM):
This service ensures that any party who has a financial interest in a film, from financier to profit participant and from actor to producer, will actually receive their share of the revenues. Over the years Fintage has distributed revenues on hundreds of film and television productions. As soon as Fintage becomes involved in a project, a collection account (bank account) is opened in which the worldwide revenues of the film must be paid. The parties, but in any case producer, sales agent and Fintage, enter into a collection account management agreement, which instructs the sales agent to
have all revenues paid in fore-mentioned account and it instructs Fintage on the allocation and distribution of those revenues. This service has several advantages:
1. Reporting: from the first day that payments are received in the collection account, specifying:
- The balance of the collection account;
- The sources of the revenues;
- The allocation to the beneficiaries;
2. Disbursement: correct and timely disbursement of the entitlements by Fintage as independent trusted third party, responsible for the interests of all beneficiaries;
3. Financial protection: an effective shield against the usual economic risks of the audiovisual industry.
Over the years Fintage House has collected revenues on over one thousand major feature films, and counting.
- International Licensing:
This service entails the exploitation of intellectual property rights for clients of Fintage House who exploit these rights internationally. The service is designed to achieve the most efficient way of distributing the intellectual property rights from a legal, commercial and tax point of view.
Fintage Magyar (based in Hungary) and Batrax Entertainment (based in The Netherlands) buy and sell/license film, TV and other intangible property rights for specific territories.
- Ancillary Rights Collection (Music Rights and Secondary Producer Rights):
As a result of the application of copyright laws in various countries, film and television productions can generate substantial music and secondary rights royalties (such as cable re-transmission royalties and blank tape levies). Producers, sales agents and studios often do not have the resources to collect all the royalties due to them.
instrument for secure settlement of entertainment deals worldwide. It can, amongst others, be used between talent and producer, in co-financing situations and in transactions between sales agent and distributor.
- Neighbouring rights:
Performing artists have certain rights to their performance in an audio recording (neighbouring rights). These rights can generate interesting revenue streams, on top of revenues paid by the record companies. The revenues from those rights are disbursed by local artist collecting societies, such as Adami in France. They work in a similar way as the composer’s rights collecting societies (like Sacem), but they disburse remuneration to performing artists instead of to composers and publishers. The worldwide collection of neighbouring rights royalties is a relatively complex and labour-intensive process. If not done properly and timely, money is lost forever.
1.2 Role Fintage House in the independent movie industry
In this research the focus will only be on the collection account management (“CAM”) service. The process of the allocation, without a collection account management, of the revenues is as follows:
Figure A.1 Allocation revenues
In this classic way the Sales Agent receives the worldwide revenues. Than, after deduction of expenses and commission, the remainder is paid to the producer. The producer in its turn is to pay all those parties that financed the project. Financing may
Other Debt
Post production facility Co-producer(s)
Completion guarantor Public equity
Bank
Film Fund(s)
Sale & Lease back Private Equity Producer
Sales Agent
Distributor Distributor Distributor Distributor Television station(s) Guilds
Talent
be paid during production, but not enough cash is available and are therefore paid out of the revenues of the film. After both cash investments as well as deferments have been paid, break-even has been reached. That is the moment when profit participants should start to get their share of the revenues.
The risk that all these parties are facing, are the usual ones in the financing industry in general. But also a risk, that in recent years even the biggest companies in the world have not been able to avoid, namely discontinuity. If this would happen to the sales agent and / or the producer, this would potentially hurt most of the parties involved.
Both sales agent as well as producer would normally not like their business partners to take on this risk. When all the revenues are paid to the collection account manager these risks can be eliminated, therefore, quite often, a disbursement agent or collection account manager is engaged as a trusted third party to deal with the revenues. It works as shown in figure A.2;
Collection Account Management Agreement
Figure A.2 Disbursement or collection account management
The parties that have a direct financial interest in a film project appoint a collection
Producer
Sales Agent
Distributor Distributor Distributor Distributor Television station(s) Financiers
Co-Producer(s) Talent
Deferred Beneficiaries Profit participants
Completion Guarantor COLLECTION
ACCOUNT MANAGER
Already before a contract is signed with the parties who have a financial interest in a movie project, the cam department will open an account. The minimum guarantees that will be paid by the distributors will be collected in the collection account.
Subsequently the overages, if there are any, will be collected by the collection account manager. The overages are the amount that is left after the distributor has recouped all his expenses on minimum guarantee and prints and advertising costs. Due to the difficulty to decide when or whether the distributor has recouped its costs, the producer, or other parties with a financial interest, have to engage an auditor to look into the books of the distributor. Due to fraudulent behavior in this industry the distributor has to be monitored very closely. For instance; when large revenues are made at the box office, an audit may be very useful from the financiers’ and investors’
point of view. An audit may be needed to discover whether the reports of the distributor are correct and to decide what the exact amount of overages is.
The revenues for the CAM service are the collection fees. These CAM fees differ between projects. In the beginning of the process Fintage House has to negotiate a fee with the producer; this part is crucial for the revenues of the CAM department, and consequently for Fintage House. A small change in the percentage could have an enormous effect on the gross for Fintage House. For example, the revenues, of a certain agreement, on the collection account reach a total of 10,000,000 dollars. If Fintage House had bargained a 0,5% fee, they earned 50,000 dollar, but if they had bargained a 0,6% fee they would have earned 60,000 dollar. That is 10,000 dollar extra income as a result of a better fee arrangement. The negotiations are generally based on the sales estimates, which are made by the sales agent. Fintage House negotiates a certain percentage, which is to cover the expenses, and should result in a profit. When the minimum guarantees are lower than the sales estimate, which is not rare, this will have a negative effect for Fintage House, but the other way around would have a positive effect for Fintage House. Variation between the sales estimates and the actual sales (minimum guarantees) occur frequently. For Fintage House it is essential to obtain the most accurate sales estimates and to properly assess them.
The CAM department has a negative balance over the last couple of years, but the results become better every year. In the year 2002 the CAM department had a negative budget of 275.000 EURO and an actual negative result of 310.000 EURO.
negative result was 270.000 EURO. The big difference between the budget and the actual result for the year 2003 is partly caused by a negative change in the exchange rate from Euro to Dollar and partly caused by disappointing results. The budget exchange rate was EUR 1 = USD 1. At that time the Euro was 0,94 with respect to 1 USD. Now the Euro is 1,26 with respect to 1 USD. This change on a sliding scale in the last 2 years has had a huge negative effect on the results for the CAM department.
The presumption of Fintage House is that when they are able to make a better selection concerning movie projects and if the exchange rate will be stabile, a break- even result should be within reach.
Despite the negative balance Fintage House has two main reasons to maintain this department; First of all the assumption of this department is that the CAM service could become profitable in the near future. The second, and far most important reason is to bind clients to the company in order to be able to deliver additional services. A quote by Mr. M. Melchior describes it best; “The CAM department is the theatrical release of the company.” The meaning of this pronouncement is that when an agreement with all the parties related to a movie project is signed, the licensing, the music and secondary right and the talent departments have an easy entrance and can also contact the parties in order to inform them about their additional services. As the parties involved become clients of Fintage House, it becomes easier for the other departments to make contact and sell their services.
1.3 Conclusion
Fintage House offers several services in the entertainment industry, some departments are profitable and some are not. The CAM department is not profitable, but its advantage is that this department lowers, in many situations, the entry to other clients for the other services departments within Fintage House. As this department is
