Cinematic Due Diligence Researchers (CDDR)

Simplifying film investments … vetting screenplays one at a time.

Why Film Is Such A Lucrative Investment

In the article entitled, “The Midyear Showbiz Stock Report,” in the June 24th, 2011 issue of the Hollywood Reporter magazine, George Szalai states the following. “The stocks of all major entertainment conglomerates are up year-to-date, led – as was the case last year – by CBS, followed by Viacom. The big entertainment stocks ……. are outpacing the broad-based S&P 500 index, continuing trends seen in 2010 and even 2009. Hollywood, it turns out, isn’t such a bad place to invest (in) these days.”

A celebrity list of prolific billionaires have become involved in bankrolling film investments because as investors they are looking for unconventional investment opportunities that have historically yielded a higher return on investment (ROI) through more multiple streams of revenue than conventional commercial mortgage backed securities (CMBS). Furthermore, these astute investors are able to realize immediate positive returns on their investments before reaping additional profits from Section 181 Federal tax write offs that allow for 100% tax deductions.

The reason why so many “dot commers,” billionaire financiers, and real estate moguls are financing films is because as investors they can earn an instant ROI of 100% to 125% or more before net profits are calculated, enjoy the sheltering hedge of revenues from investing in several films, experience additional liquidity if an exit IPO is done, and see their names as credited producers in movie theaters, on DVDs, television, and elsewhere.

Film rankings are based on worldwide box office receipts only because they are the most accessible source for calculating a feature film’s success. In the September 10th, 2010 issue of Box Office Mojo, Daniel Bukszpan stated the following – “A profitable movie doesn’t just do well at the box office.” Most feature films generate between 15 to 20 different streams of revenue. Keep in mind that box office receipts do not account for ancillary sales whose figures continue to grow for numerous years without any industry-wide accepted method for adequately tracking every facet of ancillary sales that are generated by a film’s release. However, if figures were more readily available from all of the multiple streams of revenue (i.e. streaming video sales, physical media sales, etc.) generated by a feature film project, the return on investment (ROI) figures would be staggering.

(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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