Industry Briefing May 2011 PDFF OBJECTIVES 1To broaden the scope of Australian films by encouraging major distribution outlets to invest in films with bigger budgets 2 To provide a breadth of entertaining Australian films that work with local ID: 499001
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Slide1
Producer Distributor Film FundIndustry Briefing May 2011 Slide2
PDFF OBJECTIVES 1.To broaden the scope of Australian films by encouraging major distribution outlets to invest in films with bigger budgets. 2. To provide a breadth of entertaining Australian films that work with local audiences and
on the world stage.
3. To offset the negative economic and employment impact of the Australian dollar on the local industry because of the serious decline in “Offshore” production i.e. footloose US Studio productions e.g. The Matrix. 4. To entice Australian actors, directors and writers back home. 5.To make Australian film businesses self-sufficient. 6. To change commercial behaviour in local film investment.
Producer Distributor Film Fund
Industry Briefing May 2011Slide3
Producer Distributor Film FundDavid CourtMay 2011Slide4
Operation of the Fund $60 million over 3 years matching loans, not equity same terms for all managed by Screen Australia
wound up after 5 years
Producer Distributor Film FundIndustry Briefing May 2011Slide5
Loan terms – recoupmentDistributor recoups marketing and release costsDistributor receives 50% of normal commissionDistributor and Fund recoup advances pro rata and pari
passuDistributor receives balance of commissionFund receives interestProducer Distributor Film FundIndustry Briefing May 2011Slide6
The model – assumptions average film budget $15m p&a spend 10% of budget
financing
Australian distributor 8% ROW distributor 25% Film Fund 33% Producer Offset 33% distributor commission 30% interest rate 12%
Producer Distributor Film Fund
Industry Briefing May 2011Slide7
The model – base case
Gross rentals as
proportion of production cost (%)Probability (%)
20
10
50
25
66
25
75
10
100
10
150
10
200
10
Producer Distributor Film Fund
Industry Briefing May 2011Slide8
Outcomes in base caseAustralian distributors recoup 79% of advances (plus commissions)ROW distributors recoup 65% of advances (plus commissions)PDFF recoups 73 cents in the dollar (68 cents loan recovery, 5 cents interest)
Producers net back 30% of Producer Offset
Producer Distributor Film FundIndustry Briefing May 2011Slide9
Outcomes continued 17 films financed over 3 years Fund losses of $28 million after 5 years present value of subsidy = $31 million
Producer Distributor Film Fund
Industry Briefing May 2011Slide10
PDFF Finance Plan 1
Total Budget
$10,500,000
(A) Studio Funds one-third of Budget
A studio (e.g. Fox Searchlight) or mini major (
Lionsgate
or Summit) funds and cash flows one-third of the budget acquiring world distribution rights.
The PDFF recoups
pari
passu
with the distributor from worldwide gross after P&A and a (partly deferred) distribution fee. PDFF would also cash flow and the Producer would borrow against the PO for remaining one-third of budget.
Investor
Form of Investment
Amount
% of Budget
Marketplace
Lionsgate
World Advance
$3,500,000
33.33%
$0
0.00%
$0
0.00%
$0
0.00%
$0
0.00%
Sub Total
$3,500,000
33.33%
Finance
Recoup %
Profit %
PDFF
loan
$3,500,000
33.33%
50.00%
0.00%
Lionsgate
advance
$3,500,000
33.33%
50.00%
50.00%
subtotal
$7,000,000
Producers offset
equity
$3,500,000
33.33%
0.00%
50.00%
TOTAL
$10,500,000
100.00%
100.00%
100.00%Slide11
PDFF Finance Plan 2
Total Budget
$10,500,000
(B) Multi Party Financing of one-third of Budget
A major (e.g. Paramount International or Universal International) or multi territory buyer (e.g. Studio Canal or Icon) pre-buys certain territories e.g. Australia/New Zealand, UK, France, Germany. PDFF cash flows.
Subsequent to completion or in post production, a sales agent sells rest of world territories. Sales Agent recoups sales expenses and a distribution fee (partly deferred).
PDFF recoups from net Sales Agent revenues and (if necessary) overages from the majors pre-sold territories.
Producer would borrow against PO for remaining one-third of budget.
Investor
Form of Investment
Amount
% of Budget
Marketplace
Aust/NZ
Paramount
$750,000
7.14%
UK
Paramount
$750,000
7.14%
Germany
Paramount
$1,000,000
9.52%
France
Paramount
$1,000,000
9.52%
ROW
Sales Agent
$0
0.00%
Sub Total
$3,500,000
33.33%
Finance Loans
Recoup %
Profit %
PDFF
loan
$3,500,000
33.33%
100.00%
0.00%
$0
0.00%
0.00%
0.00%
subtotal
$3,500,000
Producers offset
equity
$3,500,000
33.33%
0.00%
100.00%
Sub Total
$7,000,000
66.67%
100.00%
100.00%
Producer
0.00%
TOTAL BUDGET
$10,500,000
100.00%
100.00%
100.00%Slide12
PDFF Finance Plan 3
(
C) Sales Agent pre-sells or contributes Sales Advance to one-third of BudgetA Sales Agent (e.g. Arclight
or Myriad) pre-licenses and/or provides a combination of pre-licenses and/or sales advance to contribute one-third of the budget against select territories. Sufficient territories remain unsold for the PDFF to recoup.
PDFF cash flows.
Producer borrows against the PO and the Sales agent collateral.
Sales Agent recoups its advance and pre-sale buyers recoup their advance after sales expense and a sales fee (partly deferred).
Total Budget
$
10,500,000
Investor
Form of Investment
Amount
% of Budget
Marketplace
Aust/Nz
Dist advance
$600,000
5.71%
UK
Dist Advance
$500,000
4.76%
Italy
Dist Advance
$550,000
5.24%
Nth America
Dist advance
$1,850,000
17.62%
Sub Total
$3,500,000
33.33%
Finance Loans
Recoup %
Profit %
PDFF
Against ROW
$3,500,000
33.33%
100.00%
0.00%
$0
subtotal
$3,500,000
Producers offset
equity
$3,500,000
33.33%
100.00%
Sub Total
$7,000,000
100.00%
Producer
0.00%
TOTAL BUDGET
$10,500,000
100.00%Slide13
Producer perspective new financing avenue bigger films enabled enhanced equity position 30% expected average offset recoupment
Producer Distributor Film Fund
Industry Briefing May 2011Slide14
Distributor perspective leverage limited recourse debt preferential recoupment commercially driven
Producer Distributor Film Fund
Industry Briefing May 2011Slide15
Government perspective precedent (1970s) market driven intervention capped commitment low admin/delivery cost
Producer Distributor Film Fund
Industry Briefing May 2011