Independent Film Funding: A Structured Approach

Abstract

Although the sale of film assets to investors on a portfolio basis is not a new idea, the mechanics and reasoning behind the vast majority of past deals would hardly qualify them to be true structured finance transactions. The combined effects of global recession and economic turmoil have forced many industries to explore new forms of structured financing. But the film industry has been extraordinarily resistant to applying any major form of statistical and predictive modeling. Many in the film industry are convinced that the wide range of variables related to movies is incapable of being successfully quantified in any significant manner.

A viable means of doing such quantification for low-budget independent filmmaking exists, however, as does the application of this technique to the creation of a portfolio of films that is capable of achieving a reasonably precise overall predictive structure for the financial management of that portfolio. The authors believe the structure presented in this article can provide efficient, long-term, and flexible funding to independent films and introduce to the indie community an entirely new suite of capital management techniques. As a byproduct, it goes a long way toward the creation of an essentially new asset class with previously unseen and yet to be explored correlation properties.

TOPICS: Portfolio theory, other real assets