The Financing Plan
This section contains EMPIRE STATE PICTURES's revenue projections for the film (see attached charts A-B). These figures are estimates based on those of films similar in style and in budget level which we have listed.
1. The Company seeks capitalization of $250,000 to cover the film's budget, promotion, and producer's fees. All development and production data start from the date of capitalization with funds in the bank.
a.) If we raise less than the full budgets for the film, we plan on shooting the film anyway with whatever money we are able to raise, shooting on lower-cost formats. Investors will be fully consulted with on this matter.
2. All funds flow from each revenue source to the distributor, who deducts his P&A (Prints and Advertising) expense, and generally, pays back the production cost before any money goes to the producer / investor line.
3. The Domestic Box Office Revenue reflects gross dollars of tickets sales before the exhibitor splits the total with the distributor. Net Box Office Revenue reflects the distributor's share of the box office split with the exhibitor. Domestic Ancillary includes home video, DVD, online streaming, cable, network television, and television syndication. Foreign Box Office Revenue and Foreign Ancillary includes all monies returned to distributors from all venues outside the U.S. and Canada.
4. The Company assumes 9 months to one year from start of principal photography to having the film finished and ready for market.
5. The Budget, also known as the film's "negative costs," covers only the expenses that are needed to create the master print of the film. These are often referred to as "releasing costs" or "distribution expenses." These expenses also include the costs of making copies of the print from the master, advertising, video duplication, and other marketing costs.
6. Distributor Fees (the distributor's share of the revenues as compared to his expenses, which represent out-of-pocket costs), are based on 35 percent of all distributor gross revenue, both domestic and foreign, a generally accepted estimate by industry analysts and trade papers. (Note: the exhibitor's portion has been removed before this calculation.) Distribution deals are based on negotiation and vary greatly. There is no "typical" deal. The Company will seek to negotiate the most advantageous deal possible.
7. The Total Costs represent the Budget, Minimum P&A, and Distributor Fees added together.
8. Advances from presales to foreign territories, video, cable, online streaming and network / syndicated television will be accepted when it is in the investors' and EMPIRE STATE PICTURES's best interest.
9. Because of the timing of the cash requirements needed to produce and distribute EMPIRE STATE PICTURES's film, substantial amounts of the initial capital will be deposited into an interest-earning account to be drawn as needed.
10. The cash flow assumptions:
a) Film production will take 9 months to one year from preproduction through post-production, ending with the creation of a master print. The actual release date depends on finalization of distribution arrangements, which may occur either before or after the film has been completed and is an unknown variable at this time. For purposes of the cash flow, we have assumed distribution will start six months after completion of the film.
b) The majority of revenues will come back to the producer and investors within two years after release of the film, although a smaller amount of ancillary revenues will take longer to occur and will be covered by the investor's agreement.
c) The cumulative totals should be considered book entries, as the distributor will usually issue statements and payments every six months or once a year.
11. Completion bonds, which provide an insurance policy for a film, are not always available for low-budget films. We will make every attempt to secure one.
12. RISK FACTORS: The business of producing and exploiting low-cost theatrical release films is highly speculative, with many risks uncommon to other businesses. No assurances can be given of the economic success of any motion picture. The revenues derived from the production and distribution of a motion picture depend primarily upon its acceptance by the public, which cannot be predicted.
In addition, the competitive nature of the film industry, the possible box office failure of a motion picture being distributed, and the potential inability of a distributor to distribute the motion picture properly, collect distribution revenues, or remit funds properly to EMPIRE STATE PICTURES, make the successful distribution of a any motion picture subject to substantial risk. The commercial success of a motion picture also depends on general economic factors and other tangible and intangible factors, all of which can change our forecasts and cannot be predicted with certainty.
The entertainment industry in general, and the motion picture industry in particular, are continuing to undergo significant changes, primarily due to technological developments. Although these developments have resulted in the availability of alternative and competing forms of leisure time entertainment, such technological developments have also resulted in the creation of additional revenue sources through licensing of rights to such new media, and potentially could lead to future reductions in the costs of producing and distributing motion pictures.
In addition, the theatrical success of a motion picture remains a crucial factor in generating revenues in other media such as online streaming and cable. Because of the rapid growth of technology, shifting consumer tastes, and the popularity and availability of other forms of entertainment, it is impossible to predict the overall effect these factors will have on the potential revenue from and profitability of feature-length motion pictures.