ENTERTAINMENT Films

 
 
 
 
 
 
 
 
 
 
 

ENTERTAINMENT Films has a combined knowledge and hands on production experience in the domestic / international film market and its current conditions. Our opinion is that the film market is constantly changing not dramatically affected by outside markets. According to a recent Wall street Journal article 5/25/02 on the A.O.L. loss of a $54 billion this quarter (I am glad were small) it is the parent company of Time Warner the #1 company in traditional media, and at the same time period the company's star film division propelled by the success of Harry Potter as well as the "Rings" trilogy (HARRY POTTER and the chamber of secrets to date 12/16/02 did $550,000,000, worldwide) the entertainment unit reported a 60.2 percent film product jump from $113million to $181million. In the past decade, the film industry has demonstrated a major increase in profits due to box office larger volume in cinemas, increasing sales of DVDs and videos, more demand for by broadcast T.V., cable stations prime time slots, and an increased number of network stations of which the Worldwide revenues speak for themselves: 1980 =$180 billion, in 1990 =$134 billion and in 2000 =$319 billion. This spectacular growth rates in the last 15 years, and is due to the increase of distribution channels due to new technological developments, satellites, cable, pay per view, digital T.V. and video; all contribute to the growing demand in the Films industry.

In 1985, U.S. and Canadian studios produced 389 movies; in 1995 the respective figure was only 382 films. Yet revenues in this segment increased in the same period of time from $5.9 billion to $20.5 billion. Strong, stable output, and quadrupled revenues clearly indicate a supply and demand. Shelf values of film libraries have soared and balance sheets, and major studios had to be re-valued. The T.V. programming revolution in Europe, South/Central America, South East Asia, and China are hungry for western products. All of this guarantees a high demand with the current basis of a chronic UNDERSUPPLY of Film products. And there are more High definition Digital TV (HDTV), Video on demand (VoD), and digital downloading (DDL) will and is making consumers independent from preset programming and enabling a large internet interactive program selection, which is currently further stimulating more demand for motion pictures! On top of that DVD (Digital Versatile Disc) has exploded the video industry to a new growth cycle, the miniaturization. The new DVD storage technology allows the storing of one film in different languages on a single disc adding further growth cycles for the video market. Substantial capital has been invested to build new entertainment centers/multiplex screens installed thru out U.S. and European markets an increase from 1,582 in 1990 to 3,862 in 2002.

In Europe the annual T.V. demand of program hours has grown from 420,000 hours in 1996 to an expected 620,000 hours in 2000, covering the period from 1986 to 2000 the growth rate in this segment was a 260% leap. This present market condition of an under-supply has worked very favorably for terms and conditions for pre selling copyrights, which has become a valuable source of funding for film productions.

The scarcity of quality films in the last two years (2005 - 2007) has resulted in the drop of ticket sales and losses of hundreds of millions in revenue to major studios, causing major layoffs at Burbank, Warner Brothers Studios, Universal & Sony. This is creating a major shift of corporate acquisitions and studio heads being fired or removed by stock holders

The result in recent months (August, '06 - October, '06) in studios is to open their front doors to outsider investment capital. This is a phenomenal opportunity for outside investors to finally gain access into this golden wall of incredibly lucrative, highly protected and private financial market.

This results in license fees moving up consistently, and raising the sales potential, giving our investors at ENTERTAINMENT Films large returns. Here are some impressive examples: INDEPENENCE DAY $75m budget =$974.9 box-office returns (domestic and Int.) THE ROCK Sean Connery (not the wrestler) $75m =$400m return... THE FUGITIVE $ 44m =$450m CON AIR $75m=$565m ... and JAMES BOND FILMS have totaled $7billion.

As of July in 2006, "Pirates of the Caribbean: Dead Man's Chest" grossed an estimates $132 million in its first three days in the North American marketplace, stealing away records from the top openers in box office history: "Spiderman" and "Star Wars: Episode III - Revenge of the Sith." (To read the complete article about "Pirates of the Caribbean: Dead Man's Chest", from The Hollywood Reporter, please click here.

Film making consists of two principals: Venture Capital, production and distribution. We at Entertainment Films have strong relationships with major distributors. The film finance/venture capital market in it self is a complex maze of investors, attorneys, accountants etc. At Entertainment Films we have minimize the risk factors by professionally handling, controlling with a marketable money making selection of scripts or projects with A-LIST renowned cast, directors, writers, producers and union production crew. We like to keep it simple, honest, and with a solid lucrative percentage returns to our investors.

Production involves the script (the story) with "A" list talents, Directors, staffs, legal, completion bond, equipment, locations, transportation, craft services etc; while the distribution involves advertising, publicity, P&A, licensing, promotional and physical reproduction, delivery and exhibition of the completed motion picture "in the can." We can honestly say from our many years in film production, that the most exciting and relieving words on the set are CHECKING THE GATE and THAT'S A WRAP! YES! (After a 120 to 160 day shoot). The following is a simplified overview of a complex process for the purpose of describing how the business model of a completed film works.

Domestic Distribution
A domestic theatrical distribution deal refers to the distribution of a film to theaters in the United States and Canada. It defines the duration of the agreement, the territories covered, and which rights are included. Domestic distributors range in size from major studios like Paramount and Sony/Columbia, Warner Bros. pictures to smaller midsize independent distributors such as Miramax (a subside of Disney so Mickey can distribute R rated stuff), New Line, and many others.

An independent domestic distribution deal is often a 50/50 split between the producer and the distributor. The principal difference between this split and the major Studios, 70/30 split is that expenses come off the top and the balance is split 50/50. In other words, the distributor and producer share equally in distribution expenses such as prints and advertising, whereas the major distributor generally takes 30 percent off the top as profit and deducts distribution expense entirely out of the producer's 70 percent share.

Foreign Exhibition
The foreign theatrical market has become even more important than the domestic theatrical market. Whereas foreign theatrical used to account for less than ┬╝ of a film's theatrical take, it is now basically 50%. Major studios have their own distribution offices in many countries, and they also cooperate with local distributors. In many cases, a film may see only moderate success in the United States but do better abroad.

Non-Theatrical Exhibition
Feature films also receive considerable revenue from non-theatrical sources. BLOCKBUSTER VIDEO now has its own film production "B" list type for there own distribution video/DVD markets now doing 15 films a year! Just like HBO FILMS For domestic and foreign film rental, also included are the cable networks, home video, pay-preview, and networks ABC/NBC/ television, which pay licensing fees to broadcast a feature film to U.S. networks, which commonly pay 10% of a film's negative cost for the right to broadcast it for so many runs. Domestic Syndication usually garners anywhere from 35% to - 45% off a film's negative cost (the total price of making the film) of the same, and foreign broadcast traditionally pays approximately 40%. In the past few years, there has been a resurgence of independent filmmaking. (Ask me for examples of the hits and Oscar winners!) Along with this growth spur, the specialty film market has been flourishing, especially with foreign films. Artsy/Inde theaters all over the U.S. have regular attendees who enjoy these foreign productions as in colleges university towns. Often, a film made for $500, 000 or less can earn back its cost from these artsy theaters and smaller "Four Wallers" like the film "el mariache" filmed in Mexico for about $7,500 a Robert Rodriguez director and edited himself (and it looks like it!) the director used his relatives/friends! And went to a blood bank to finish his film later did a remake called blockbuster Hit "Desperado" with Antonio Banderas!

The Latino market has experienced a tremendous growth in California And the U.S. Preliminary 2000 census figures put the nation's Hispanic population at 35.3 million, up from 22 million in 1990. The Latino market spends more money on entertainment and advertisement a multi billion-dollar market more than any other ethnic group in the U.S. More Latin films are being released in the U.S. than ever before some have gained notoriety such as last years Academy award winner "Amores Perros", (Mexico) This year's Golden Globe nominee "Tu Mama Tambien" and other releases such as "Santitos," and the most popular of modern times, "Like Water For Chocolate" also Crouching Tiger from Asia an Oscar winner and many other films were crossover films that play well in the mainstream market.

Distribution strategy:
As stated before, the domestic territory includes the U.S. and Canada. Many of the independent distributors consider the United States and Canada to be one package and prefer not to have them separated beforehand. Domestic rights refer not only to theatrical distribution but also to all other media such as video, cable, pay-per-view, and television, When a producer secures in advance from one of these medias for film production financing, the "deal" becomes less attractive to potential distributors by fractionalizing the rights. Any source of future revenue that is taken out of the potential money pie makes it more difficult for the producer to close the distribution deal, which is why other structures of financing are more amendable.

In terms of foreign sales, there are U.S. based distributors who specialize in the rest of the world. These companies deal with networks of sub-distributors in various countries where it is important to distinguish between a distributor and a foreign sales agent. If a distribution company is granted the rights to the film for the foreign markets, that company is the distributor. Generally, if the ownership of the foreign rights is retained by the producer, who grants someone only a percentage of the receipts in exchange for obtaining distribution contracts in each territory or for various media throughout the world, that person is actually a sales agent. If required, we will work with
one of the more established sales agents in securing favorable presales. It has worked in the past!

Our intention is to submit our films when needed to multiple film festivals such as Cannes or Sundance in for competition and we feel that our films have the potential to receive awards and therefore increasing its domestic and foreign value. While domestic distribution contributes a major profit to our films, the foreign market can be just as lucrative and sometimes more.

Investment returns:
An independent film goes through the same process from development to production and post-production as a studio film. In this case, however, development and pre-production may involve only one or two people (general partnership). The investors, whether it's the executive producer and or director, maintains control over the final product.

An independent company is the one that finds its production financing outside the studios. A studio may distribute it, but "negative cost" (the actual cost of making the film) has been funded from other sources. It is not uncommon for independent films to be financed in very creative ways. Indeed, this is usually the way most independent films are funded. Producers will commonly draw upon varied financing arrangements and structures-sometimes with several partners-for the complete financing of just one motion picture.

At ENTERTAINMENT Films we work on multi-film production deal, with in conjunction with the companies or project owners or controller, like the "creative person", such as a writer/director, or writer/producer, or creative producer, and in combination with a financial partner or group. These independents make low-budget pictures B types that usually starting at $50,000 up to low $3.5millions range. We can do this as long as we see a mean of MAJOR returns to our investors.

To help protect us at ENTERTAINMENT Films and its investors from losses, we will endeavor to secure a combination of financing agreements. Given that the project is unique, and marketable, an agreement will be entered into only if it is perceived to benefit all investors. In a presale agreement, a foreign organization or person buys the ancillary rights (domestic or foreign) in advance. In exchange for the presale contract, the U.S. or foreign buyer obtains the right to keep the revenue (rentals) from a particular territory and may also seek equity participation. The agreement can be for a certain length of time, a revenue cap, or both. A one-year period from start of principal photography to distribution and release is projected for our film.

The budget, also known as the film's "negative cost" covers only the expense that is needed to create the master print of the film. All marketing costs are included "P&A" (prints and advertising) often referred to as "releasing costs" or "distribution expenses." These expenses also include the costs of making copies of the print from the master, advertising, video duplication, and other marketing costs. As of now, we have no way of knowing the details of these costs until a formal distribution agreement is entered into.

Distribution fees (the distributor's share of the revenues as compared to his expenses, which represent out-of-pocket costs) are based on 34% of all distributor gross revenue, both domestic and foreign; a generally accepted estimate by industry analysts. Distribution deals are based on negotiation and vary greatly. There is no "typical" deal. This estimate takes into account that filmmakers with moderate experience have little leverage with distributors; nevertheless, we will seek to negotiate the most advantageous deal possible. We have strong relations with the "majors".

Advances from pre-sales to foreign territories, video, cable, and fee and syndicated television will be accepted when it is in every investor's best interest. Because of the timing of the cash requirements needed to produce and distribute the film, substantial amount of the initial capital will be deposited in an interest-bearing account to be drawn as needed. The finished film will take approximately one year usually less from pre-production through post-production, ending with the creating of a master print. The actual release date depends on the finalization of distribution agreements, which may occur either before or after the film has been completed and is an unknown variable at this time. For purposes of the clash flow, we have assumed distribution will start within the fist quarter after completion of the film.

The majority of the revenues will come back to the producers within two years (at the most) after release of the film, although smaller amount of ancillary revenues will take longer to recoup sometimes with huge profits returns to our investors; returns can be in the 150% to 600% range.


For current and future investment opportunities:
Dan De Alba CEO
- (949) 500 6736
ferraridanela@yahoo.com

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