Cinematic Due Diligence Researchers (CDDR)

Simplifying film investments … vetting screenplays one at a time.

Case Studies

Stock Market Trading Versus Film Investments

CDDR believes that institutional and corporate investors and high net worth individuals should consider investing in the lucrative, multiple streams of revenue provided by the world of film investments.

As an example, let us briefly discuss an investment that occurred several years ago of approximately $246,000,000.00 by an institutional investor in a REIT wishing to invest in the acquisition of approximately a dozen hotels scattered in different areas of the United States. Within less than a year, the REIT had defaulted on the non-recourse loan and returned the keys to 9 of the hotel properties to the institutional investor, and the collective value of the properties had decreased to $173,000,000.00 which meant that there was a 29.67% loss in the principal value of the original loan amount.

As an alternative investment, let us use the budget for the 2009 release of the movie, “Avatar” which also had an adjusted budget of approximately $246,000,000.00. To date, it has accumulated worldwide box office receipts of approximately $2,782,275,172.00 which represents a return on investment of 1,131%. In 2014 and in 2015, there are plans to release Avatar 2 and Avatar 3, respectively. In 2016, Disney World in Florida plans to open a new segment of its theme park that will be called Avatar Land. Ancillary sales figures from multiple streams of revenue from the release of the first film in this series are still being calculated with no end in sight. In retrospect, which investment opportunity do you believe was more worthy of consideration by the institutional investor?

More recently, executives at one of the top U.S. investment banking firms lost billions of dollars when they chose to invest their firm’s retained earnings in stock market transactions despite the well known volatility of these derivative transactions over the last few years. Also, let us not forget the overestimated stock value that marked the fiasco of the IPO of one of Silicon Valley’s most highly regarded firms that established a leading social network whose stock value took a 31% plunge over the course of a year before regaining its initial IPO stock value.

Despite the vast amount of misinformation regarding the upward trend in stock market trading, and specifically commercial mortgage backed securities (CMBS), this traditional source for investments is not going to stabilize until the globally-impacted economy restructures itself and makes the necessary adjustments; and when that will occur within the next five (5) to fifteen (15) years is anyone’s guess.

“My Big Fat Greek Wedding” was produced with a total operational budget of approximately $6 million. To date, its box office receipts exceed $368 million dollars. For its producers, that represents approximately a 6,150% return on investment (ROI) which makes this movie “the most profitable movie released of all time to date.” It is also important to note that ancillary sales figures from the minimum of 15 to 20 multiple streams of revenue generated by the release of this and other feature films are not included in the box office receipt figures listed above.

(Please Note: The facts used herein to express the views of the author are from an opinionated viewpoint and should not be solely relied upon by any reader of this material in formulating or executing an investment strategy. All readers are encouraged to conduct their own research of the data and opinions presented herein before making any commitment to a particular project or a series of projects.)

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