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Friday, 9 June 2017

Invest in the Movies!! (Yes, Really!)

Movies have giant budgets and giant earnings, not just from theaters but from spin-off books, kids toys, terrible terrible video games, and less-terrible, sometimes-good mobile apps. When I was contacted to have a look at reviewing a crowd-funded movie investment, I assumed it was a spam message because investing in movies is for multi-millionaires in Hollywood. But it's not a scam, it's open to the little guy and now you can now invest in a movie. How cool is that!

Lights, Camera, Investing!

The deal

It's kind of like Kickstarter, but instead of being one of the first to buy a product, you're one of the first to buy a share of the profits from the product. Specifically a movie called I'll Be Next Door For Christmas that has a joke density to rival Big Bang Theory.

The premise is simple, teenage girl has out of state boyfriend visiting for Christmas. Teenage girls family are christmas loving nut-bags who go ridiculously over the top. So our plucky young lady hires the empty house next door and a bunch of actors to pretend to be her real not-crazy family. What could go wrong? Obviously everything.

Motion Activated Santa, what could go wrong?

Laundry list of accolades

While this is being pulled together by an indie film company, there are plenty of great names that you may or may not have heard before, you've definitely heard of their work though. The guys (and girls) behind the movie are also the ones behind The Simpsons, Fraiser and School of Rock.

The have writers, directors, producers, marketers, the whole hog. What they don't have is crazy high-paid A list celebrities on screen. Which as an investor suits me just fine.

Didn't Baywatch just flop horribly?

Yepp - even the power of a huge franchise backing wasn't enough for them to compete when sharing an opening weekend with Pirates of the Caribbean, which also performed poorly at the US box office. Which doesn't actually sound a death knell for high earning movies. Both Baywatch and Pirates are chasing a huge income from international sales, and can almost guarantee that they will see another round of income when they make their way to DVD. 

The Pirates franchise has the weight of the first movies success dragging it along (got to finish that DVD collection) and Baywatch can almost guarantee it will be watched by everyone eventually, even if it's just so they can say they gave it a go. 

I'll Be Next Door For Christmas isn't even aiming for the mainstream cinema market. Firstly, let's be honest how many of us actually got to the cinemas these days? The chairs are uncomfortable, the drinks and snacks are stupidly overpriced, there is something on the seat, and there is always someone who insists on talking through the movie. Plus, you can't pause it for a mid-movie bathroom break and snack top up. No thanks.

Secondly, cinemas take a big slug of profits. So do the distribution guys. So does anyone who get even a sniff in. It's crazy how much of the profits are sucked up by the middle man. So the team behind I'll Be Next Door For Christmas are planning on avoiding as much as possible by distributing through Netflix, Hulu and the like. They are still doing some cinema releases, but through some of the lower cost options, they anticipate cutting middle-man fees by 35-40%.

But really, a Christmas Movie?

Yeah, I know, I feel that way to. I'm not a Christmas person. I haven't even seen Elf because Will Ferrell's high pitch childish squealing in the trailer irked me. But on the other hand I still watch The Santa Clause movies every year, and let's be honest the first one is great, the second one is okay, and the third one is truly terrible. 

I am a fair bit of a Grinch in that I don't decorate, I hate pointless gift exchanging and I honestly just want to spend some time with my family without all the stupid requirements of Christmas (I'm sounding a bit like the main character of this movie at this rate...).

The thing about Christmas-based movies is that they tend to do pretty well because people are just so caught up by the spirit of the season. Does anyone remember Rise of the Guardians? That movie was brilliant. And I would never have watched it normally, but t'was the season for a festive movie and I adored it. People of all ages get a bit of family-friendly movie nostalgia around Christmas. Put in a brilliant script and some wonderful comedy and people will keep coming back to it.
Let's be honest, this is terrifying!

Potential returns, is it worth it?

Maths time! Let's assume that the movie does break even. If you can't afford to lose your investment forever this isn't for you. Let's me be entirely honest, this movie could be a terrible flop and you won't get your money back. I personally believe it will succeed and I'll be throwing a little money in. But I'm also nervous about it, so I'll only be throwing about $200 in. I'm keen to get a royalty check forever, but I'm not so flush with cash at the moment that I can risk much more. 

Many Christmas movies have made two, three or even six times their budget. Home Alone made sixteen times it's budget. There is potential to make a lot here. 

The minimum investment is $100 (pretty reasonable) of a grand total budget of $850,000. Most movie budgets are in millions - this movie won't be choc full of ridiculously high paid actors driving the costs up. Any money made by the movie immediately goes to paying back investors. Once your original investment is repaid (and assuming the movie is successful) investors receive 50% of the profits. 

This means that for $100 investment, for every $1,000 the movie makes, you receive a whopping 6 cents. But considering that many Christmas movies make triple their budget in the first year, and keep earning for years to come you can imagine much bigger numbers. Imagine this movie returning triple it's budget in the first year. You would receive your original $100 back, plus another $100, amazing.

How likely is it that the movie will make triple it's budget? Well as I said I'm a Grinch, so I have my doubts (even though The Grinch made almost triple it's budget). I do anticipate the movie will cover costs and start sending some money back to investors. I don't think I'm going to fund my retirement on it, but I'm willing to throw a bit of money at it and see where it lands.

The campaign has hit it's first funding goal and needs to raise another $16,000 in a month. If that target is hit they still need a minimum of $200k more and will use the first bundle of money to fund advertising and scoping out some more investors. Reading the comments they have many many plans to use more traditional fund-raising methods if they don't see enough via crowdfunding. 

Doom and gloom aside - is it worth it?

I think so. Commit an amount that you're willing to lose and let the chips fall where they may. If you're trying to crawl out of debt this is not the platform to do it. But if you're comfortable and want to try a slightly off-the-beaten-track investment, this could be for you. The movie has a great list of writers and producers with plenty of experience between them. They have fall back plans for raising capital and multiple avenues for generating revenue. 

Just like investing in any business it could tank horribly, blow everyone away or just limp along dribbling in small amount of royalties every year. While 'dribbling' isn't a fun word, getting a royalty check every year will be. As I've said, my inherent Grinch isn't excited about a Christmas movie, but my investy-sense thinks that there is a great team with a decent business model.

I'm throwing some money behind That Christmas Movie - if you'd like to as well, head over to their funding page.

Update: I just went to invest and discovered I need a passport. Last time I set foot outside the country I was in primary school, so that passport is definitely expired. Looks like I'll be missing this opportunity. In the last week they've absolutely smashed their $100,000 funding goal. While I'm disappointed I'll be missing out on this movie, I'm really excited to see how this project goes and what they do next. Hopefully I'll have a passport sorted by then.

Update Again: That Christmas Movie didn't meet it's first round of funding goals and has moved to WeFunder.com. They've also pushed back the movie release from 2017 to 2018. I'm actually not surprised because they seemed extremely ambitious the first time around, and by pushing it back a year I feel that they will be able to produce a much higher quality product.

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