Investing in Movies versus the Stock Market

[dow jones chart 1980-2013]

Stock Market performance chart 1980-2013

Crowdfunding is now official

Here's the full article from the government website - SEC.gov.

The intro to the articles is:

SEC Issues Proposal on Crowdfunding

FOR IMMEDIATE RELEASE
2013-227
Washington D.C., Oct. 23, 2013 —

The Securities and Exchange Commission today voted unanimously to propose rules under the JOBS Act to permit companies to offer and sell securities through crowdfunding.

Crowdfunding describes an evolving method of raising capital that has been used outside of the securities arena to raise funds through the Internet for a variety of projects ranging from innovative product ideas to artistic endeavors like movies or music. Title III of the JOBS Act created an exemption under the securities laws so that this type of funding method can be easily used to offer and sell securities as well. The JOBS Act also established the foundation for a regulatory structure for this funding method. 

SEC Chair Mary Jo White noted that the intent of the JOBS Act is to make it easier for startups and small businesses to raise capital from a wide range of potential investors and provide additional investment opportunities for investors. 

“There is a great deal of excitement in the marketplace about the crowdfunding exemption, and I’m pleased that we’re in a position to seek public comment on a proposal to permit crowdfunding,” said Chair White. “We want this market to thrive in a safe manner for investors.”

The SEC is seeking public comment on the proposed rules for a 90-day period following their publication in the Federal Register.

(Posted here at Oct. 29, 2013)

 

The Purpose of the Stock Market was so that the hardworking people of America could invest some of their earnings in the labor of others. This way they could be encouraged to concentrate on one sector of the economy: if they were farmers, they would produce the food that everybody needs, and not suffer loss if someone else who was a machinist and making several times more money was getting special advantages by the system, with unlimited financial resources to go way beyond their lifestyle levels. It was, in short, a way to level the playing field for everybody, to allow every American to have a relatively high standard of living.

So, let's say someone was good at farming; the country didn't want him to go into manufacturing because there was more money in it. The nation needed farmers to grow the food. So the stock market gave the farmer the opportunity to invest his excess money in manufacturing so as to benefit from the labor of others, and they in turn would be able to grow their business more with that investment.

The stock market worked well for a long time, but in the last few decades the stock market has become a big gambling casino. The farmers sold their farms to major food chains and went into the cities to make more money. This is how the cities grew to be overcrowded and the social problems began. The farms are mechanized and run like a corporation, only interested in profits. So the best food is sold abroad for the highest profit, and food grown in underdeveloped countries is imported by merchants to make the most profit at home. Therefore, the food standards have dropped; restaurants are serving rotten food sometimes and the fruits and vegetables have little nutritional value in them.

This was not how it was intended to be; the stock market was supposed to level the playing field for hardworking Americans and provide a reasonably balanced lifestyle for every individual in their chosen profession. However, this was not supposed to be a form of socialism; it was supposed to be capitalism at its best.

But this mentality of "profits at any cost" is ruining a lot of sectors of the economy. Now we have crowd funding. Crowd funding was great when filmmakers and artists could get a few people to donate toward their work; but now there are one thousand websites offering crowd funding platforms for anybody with any idea, and the business interests have moved in and they are using it to raise money for companies that originally had to go public to do it. So much so that the SEC has stepped in, because this is no longer "donations" but "investment" of capital.

I guess every good thing comes to an end. My concern is only for the filmmakers who need to make their movies; because in a free enterprise system there can be no long term regulation, eventually every loophole is discovered and exploited by the money interests.

We are left with raising our own money and working within a very small arena; but that is still better than joining the stampede. The stock market is no longer a viable option for the indie filmmaker. It is better for filmmakers not to get sucked in by the stock market.

July, 22, 2013

A public company that's not a yo-yo

Many stock brokers and market makers (not all) like a company whose stock goes up and down like a yo-yo, so they can buy and sell everyday or nearly everyday (it's called churning) and earn commissions and make huge profits. These quick buck aficionados are always looking for companies with CEO's who aren't committed to their industries (shady operators without scruples.)

In my view, a company with integrity is the most lucrative for investors and shareholders. In the long run stock brokers and market makers who trade such a company do best for themselves as well as for the general public.

Just because films are riskier than real estate, it doesn't mean that a film company going public should possess poor fundamentals. Movie profits are higher now than they have ever been. This is a great time to launch an entertainment company.

Mar. 11, 2013

Obama's JOBS bill will help Indie Filmmakers get funding. The JOBS Act which Obama signed into law a few days ago will allow filmmakers to raise money easier. It was reported that the new law makes changes to the way companies file financial paperwork when making an initial public offering, increases the number of investors – from 500 to 2,000 – that force a company to file paperwork with the Securities and Exchange Commission, and allows companies to solicit investors online.

There are some websites which are already set up to take advantage of "crowd-funding" (a new term for online donations for projects by essentially anonymous donors). The new law will allow for "investors" and "investments" to be included in the funding process without the usual requirements of the 1934 SEC Act. It's somewhat complicated so potential movie investors and investment seekers should read the rules carefully before advertising.

The new law does not change the ethical practices recommended for all business transactions dealing with an art form such as filmmaking. However, it opens up a window to increased investments for Indie Filmmakers, something that was really difficult before; only major studios used to be able to take advantage of funding available from wealthy investors and major brokerage houses. Now Indie Filmmakers will be able to level the playing field a bit more.

Apr. 15, 2012

Investing in movies ain't what it used to be. Much has happened since I last updated this page at the end of 2010. The average studio picture is now about $50 million. Movies like AVATAR and HARRY POTTER are now drawing over a billion dollars at the box office. Of course, the exhibitors have never paid more than 50% of the ticket money to the distributors, and the distributors, for that matter, have rarely paid back the 40%, usual contract, to the producers. So what does it mean for someone like James Cameron who made AVATAR? Well, he made millions, but the exhibitors and distributors made billions, and are still raking it in. But James is pretty lucky nonetheless, because the studios still finance his movies. But what about the rest of the filmmakers, the overwhelming majority, whose movies don't even cover the production costs, and what about the indie filmmakers who make movies on a shoestring budget?

That's what this article is about, the indie filmmakers, and who invests in their movies. Well, at this time almost nobody invests in anything; the stock market is supposed to crash, if Obama becomes the only President who can't raise the Debt Ceiling and he decides to rock the boat. So the only way for an indie filmmaker to make a shoestring movie is to sell his shoes as well as the shoelaces that hold them together. The shoelaces aren't worth much, but the shoes may be worth something, especially if they're made from crocodile skin.

Which brings me to the budget. An indie feature budget should not exceed the cost of the filmmaker's monthly living expenses. It should be possible for an indie producer to raise enough money to cover one month's living expenses and then spend that on the movie -- take a chance.

The problem is that distribution ain't what it used to be also. So, where is an indie movie maker going to sell his movie? The foreign market is dead, so Youtube is the only place to premiere the movie and perhaps Amazon would be the best place to sell DVDs and streaming versions of the movie. If the budget of the movie is low enough, there is even a good chance for the indie filmmaker to recover the cost of the negative -- the production cost plus marketing.

So I invite movie investors to consider financing indie movies. The budgets are quite reasonable, $5,000 to $75,000 on the average, depending if the filmmaker is shooting digital or film (film is now cheaper), and the distribution costs are minimal, as there are wonderful companies like CreateSpace that will manufacture the DVDs and even put the movie on Amazon.

And there is the outside chance that one of these movies, shot for a few thousand dollars, will go on to make billions. It has happened before. This is why they call Hollywood Tinsel Town. Sometimes Santa Claus passes through and brings the lucky filmmaker a big gift.

July 29, 2011

Investing in Movies 101

Investing in movies is a serious business. The SEC is supposed to scrutinize IPOs (Initial Public Offerings) like hawks. Individual companies seeking capital to start a publicly traded company, besides having a going business with collateral (real estate), equipment, and personnel, must pay CPAs (Certified Public Accountants familiar with SEC regulations) for certified financials, SEC attorneys for opinion letters, and market makers (stock brokers) who are willing to float the company stock in the appropriate stock exchange -- they must pay them a lot of money to do these services, something to the tune of $150,000. This is conservatively. The IPO may seek $5 million, for example. The SEC will not approve a production company from raising this kind of money, because the movie business is considered one of the most risky businesses around, even more risky than digging for oil by wildcatters. So, a company with interests in the entertainment business must find another way to finance its movies. The IPO for major studio projects usually encompass other technologies and real estate investitures. For an indie filmmaker whose budget is less than $150,000 it doesn't make any sense to think of IPOs anyway.

With an investment of $150,000 a filmmaker can complete a feature film and pay for the marketing costs if the movie is going straight to video. A professionally produced movie by knowledgeable filmmakers can even go theatrical, especially if it is shot in 35mm color. Digital movies cost more because it costs more than $150,000 just to finish a movie on digital and telecine (transfer) it to 35mm negatives for printing.

Besides the costs of digital post production and lab work, the major theater chains are union and require the union label on a print before the projectionists union will screen a movie. The fee for the certificate is over $50,000 per movie. Then there is the American Society of Motion Pictures which must allow its rating label attached to a print, and that costs from $2,500 to $15,000 depending on a movie's budget. Again no major theater chain will screen a movie without the rating (PG, PG-13, R, etc.)

It is really tough for indie filmmakers to finance a movie. The major studio movies cost millions of dollars. The major movie stars get twenty million dollars per picture. A movie with many movie stars easily costs over a $100 million dollars. The money is borrowed from entertainment banks, so there is interest on the money as well, and a typical movie takes three years from conception to production to exhibition. The prints and advertising budgets for these movies have to be commensurate with their budgets, so the marketing costs for a $100 million dollar movie might be more than its budget. Moreover, a movie must make two and a half times its budget (negative cost or the cost of its acquisition by the distributor), before any profit percentages are paid to the producers.

The exhibitors keep three sets of books, one for the IRS, one for the producers, and one for themselves. You can imagine the flimflam that goes on in the bookkeeping process. Needless to say, everybody gets ripped off.

So the indie filmmakers must play by different rules and have their feet firmly planted to the ground. The indie film is a whole other kind of production. The risk is just as great, because there are no guarantees and insurers who will touch a small investment -- the insurance bonding company may charge 5% and the budget of an indie movie doesn't allow much wriggle room. However, indie filmmakers with experience and integrity have a better chance of making successful movies and getting their money back. The only danger is selling themselves short or selling out to small distributors who don't have the cash to advance the filmmakers even half the budget of an indie movie.

So the alternative for indie filmmakers is to finance their own movies by earning their production money somehow and running a tight ship. Also they have to leave at least $50,000 for marketing costs and do their own distribution.

The things to keep in mind for indie filmmakers is to make non-exploitation movies (exploitation movies are sometimes called genre movies), shoot 35mm and finish on 35mm (so the prints can be screened in 90% of world theaters without the cost of digital blow-ups and post-production), use competent but non-union actors and non-union crews, and never borrow money from anybody. If investors are to be found, the filmmakers must be completely upfront about all the risks, such as stating in the contract that the movie business is high risk and that they may lose their entire investment in a movie. This will turn away all the investors, except for the ones who really believe in the movie project being proposed.

After many successful movie productions, the filmmaker with a respectable library can go public and raise millions of dollars in the stock market. This is when it is alright to go public; but the timing must be right. Today, in this business climate it is not a good idea to contemplate IPOs.

Dec. 6, 2010

Global Warming & the Movie Business

There is a saying that even the fool is wise after the event. The Obama Stimulus Plan ended up in the back pocket of the bankers, the stock brokers and insurers of the flimflam companies.

Al Gore scored big with his Global Warming movie, winning an Oscar and the Nobel Peace Prize. I can understand the Oscar (Al Gore is a phenomenal artist), but what with the Nobel Peace Prize? Isn't that given to peacemakers? What does the Global Warming theory have to do with peace? In fact, the imposition of laws to punish polluters of the environment is more likely to start wars, especially as the biggest polluters themselves are the beneficiaries of the Global Warming products and services.

But despite of the economic disasters that the Global Warming industries are producing, the movie business has never done so well. Audiences are crying for more movies and the Internet is poised to serve up the whole package of entertainment, news and information media online.

In two weeks, the American voters are going to the polls. They will either extend the Democrats lease on fraudulent government or pull the plug on the overtax and overspend Ponzi schemes. The Real Estate market is ready to drop to all time lows. Whatever money is out there will lose its value, as Obama keeps printing more and more worthless paper. As this counterfeit money never ends up in the hands consumers, it is worthless even before it is printed. It is being used as a psychological factor to get real money to be spent. It is catch-22 for investors who don't have much money to invest, and the stock market's shuffling of paper isn't fooling anybody.

The only value left in the world is that which real people are willing to create with the sweat of their brow and their God given talents. I am an indie filmmaker. I make movies based on worthwhile concepts.

Oct. 15, 2010

In business what goes up must come down; in film what goes up keeps going up.

What does not make sense to me is spending one's whole life working to pay off the mortgage on a house and then ending up with nothing: the house is paid off, but the property taxes are higher than the original mortgage payments, the neighborhood is run down and dangerous to live in, and the house itself is infested with pests and falling apart. There are a few exceptions, but even there one has to reverse-mortgage the house because the social security benefits are not enough to pay for food and utilities and the upkeep on the house plus the property taxes. So much for what I think about real estate.

The other thing is that why should one live all their life without achieving anything? It is like being born, growing up, working, eating, defecating, procreating and dying off. To me this should not be the life of a human.

I met a young man one day who said to me quite resentfully, "Art is totally useless." I was a young filmmaker and he was an entrepreneur. I answered him that the purpose of art was to appreciate beauty.

For me making movies is the best way to justify one's existence and assert one's humanity. It is the most rewarding experience of life. Making movies is inspiring, educational and entertaining. The marketing and selling of movies is a worthwhile occupation that requires financing, offices, employees, transportation, manufacturing and production. The business of movies is a solid investment, unlike drilling for oil or sending a man into outer space.

Showing movies and making friends is better for humanity than fighting wars and selling weapons of mass destruction to dictators. However, governments consider making movies a crooked business; therefore, one should research the process of making and selling movies. It is called doing due diligence.

July 17, 2010

Economic Terrorism

There is a new trend in the world economic markets toward terrorist tactics; the superficially wealthy blow themselves up in a crowded financial arena and create a ground zero environment where hard earned money hides itself until the dust clears. Those battered investors who rush in too fast to recover their positions on the floor get a chest-full of toxic waste in their lungs and wilt away as the terrorists carry off the loot strewn about.

March 15, 2010

No Investors, please! This is Business! Investing in real estate used to be a lucrative business, but today with the real estate values laying flat this is no time to dig your money into the ground and wait for it to germinate. And if you have some money that you had set aside for a rainy day, this is not the time to buy an umbrella; it is flooding. And Wall Street is not the place to play “double or nothing” these days either. In fact, there are no safe investments anymore, not even gold. The markets are too volatile; the future is uncertain.

This is the time for basics: people need to eat, they need a place to live and they need entertainment. This is where I come in. I am looking for a building that is occupied by movie industry service providers who will help me buy the building. I am seeking active financial partners who will join me in this project. Industrial real estate has been the hardest hit. There are good values in occupied buildings with good renters. Email me
[releasing.net email] if you are interested. Let us find common grounds for cooperation and doing business.

Feb. 24, 2010

Investing in movies doesn’t sound so risky anymore, now that we’ve seen how risky investing in real estate, in the stock market, and even putting money in the banks can be. In fact, owning a piece of a movie is more substantial than owning a piece of a house built like a matchbox, owning stocks in a company with all its products manufactured abroad, or having money in a bank that loans money to even enemies of America. There is something to be said for a movie company that guarantees the principal will not be touched, only the interest from the deposits, and provides the best potential profits from wholesome American movies as return on top of interest and principal sums deposited in its bank. To receive information on this business opportunity, please provide name and phone number in your email. Send Info to:[releasing.net email].

Nov. 16, 2008

Obama's Presidency promises to bring reality to the markets. The politicians in Washington are going to be on a Third World kick. The climate for independent filmmakers will be good. There will be a lot of crazy stories to tell over the next four years.

Nov. 5, 2008

The Stock Market is going up and down like a yo-yo. Yesterday it dropped over 700 points, the biggest drop in history. The world markets are dropping down also. However, even if the stock markets are the barometers of world economy, the world economies themselves are not governed by the gamblers who bet on them. The world population is increasing and the world resources are being consumed faster than can be replaced; therefore, the world populations are becoming impoverished day by day. This trend is not going to change. It is going to be harder and harder to make money in the Stock Market in an honest way.

Oct. 16, 2008

World Stock Markets are all crashing. The US Stock Market dropped 678.91 points today. The Dow Jones Average is now 8579.19. This is very close to what it was ten years ago. Taking into consideration the number of companies that have disappeared entirely and the thousands of new companies that have come into the Stock Market, it is clear that the Stock Market represents a poor investment opportunity. You are probably better off starting your own business and investing in your own company.

Oct. 9, 2008

The Stock Market dropped another 500 points today. Yesterday it was down over 300. There is no telling how far it will drop. Funny thing is that the stock brokers seemed to be pretty calm now that their needs have been addressed. The stock brokers make money when the market goes up or when it goes down, because they make their commissions either way. So it's the investors and gamblers that are losing trillions of dollars. The money just disappears; it's only paper anyway -- it's what they say.

It's different with the film business. When a filmmaker makes a movie and even if all the money is lost, at least there is a movie left. The movie is a permanent asset. A movie has the potential to become a classic. Memories are what only remain.

Oct. 7, 2008

The Bailout Bill was signed by Pres. George W. Bush yesterday, Friday 3rd of October, 2008. The Bailout Bill was designed to save the Economy so the people of the United States wouldn't have to pay the price for the mistakes of the Predatory Lenders and the Stock Market Gamblers. They in turn are expected not to do what they did to the public again.

Seven hundred billion dollars will be printed by the Treasury and distributed to those institutions that will presumably help the American people from ending up in the street.

It's interesting that in the scramble to grab the money, somebody managed to put $487,000,000 so movies won't end up being shot outside the US!

The Bailout Bill will also bailout Hollywood! Hooray for Hollywood!

Are the indie filmmakers going to get a piece of that pie? Not likely. The Independent Filmmakers make movies for peanuts; they don't need millions. The millions will go to the studios. The studios know how to spend money. The feature films of Hollywood are averaging $80,000,000 each and the marketing budgets are about $75,000,000 for each movie. So Hollywood will be able to keep about three movies from going out of the country at this rate.

Too bad they're not going to help the independent filmmakers. The indie filmmakers would've made five hundred movies with that money.

Oh, well, the Stock Market won't like it if the high-rollers don't have any money

If, however, the Stock Market continues to slide down toward ground zero, the public will need cheap entertainment, as they did after the Big Crash of 1929, and the indie filmmakers will come to the rescue and offer the kind of entertainment that will cheer up the American audience.

Investing in movies will still be hard, because there won't be enough money for food and shelter for most people; but they will somehow come up with the ticket money, I'm sure.

If you're a qualified investor interested in seeing a business plan and becoming an active partner, send me an e-mail: [releasing.net email].

If you're a filmmaker, invest in movies, not stocks. The Stock Market is for gamblers; gamble instead on your own talents and dreams; at least you'll have some record of who you were and what your times were like; it's history.

Oct. 4, 2008

The second major point in an investors disclaimer notice is to recommend that the investor reading your prospectus should check with their tax accountant or attorney before investing in your movie, the first one being that the investor should realize that he or she could lose their entire investment. Have you ever known a tax accountant, attorney or financial advisor who recommends investing in movies? I sure haven't.

The first time I tried raising money, I asked a millionaire acquaintance of mine if he'd invest in my movie. He said, "Film is a crapshoot." I'd never played craps, but I didn't have enough experience to answer him. I thought what does filmmaking have to do with craps?

Take a look at the chart above. If you'd invested in the Stock Market in 1997, and didn't sell your stocks, at the end of 2002 you'd be exactly where you were five years before. If you bought your stocks on margin, you wouldn't even have received any dividends. Your money would be tied up for seven years, and not only that, but you'd be worried sick about your investments everyday, by the looks of that chart; it's enough to give a man a heart attack. You may have sold your stocks and blown the money a long time ago also.

You would've invested your money in companies where nobody cared who you were and what you thought. Now, why would you invest your money in other companies if you have your own dreams, desires and plans? You should've considered investing in your own business, your own health and well-being. Sure, the stock market provides you with an opportunity to prosper off of other people's enterprise, but these companies don't really represent who you are. They're often run and owned by people for whom making a buck is all that counts. And the SEC and the US Congress, all they care about is that these companies play by the rules, but they don't guarantee that they do anything for you personally. So, if you're a filmmaker, why would you want to invest your money in giant companies that are owned by people from all over the world, people that don't even share your values, certainly not your artistic concerns.

If you're a filmmaker, invest in your own dreams. If you want to gamble, there's Las Vegas. But why would you want to gamble. Filmmaking is not a gamble. It's a risk you take, sure, but at least you're taking a risk with your own talents. You've always loved movies, (otherwise why are you a filmmaker?) and you should believe in the films that you make.

Take another look at the chart above. Stock brokers make a commission whether the market goes up or down. So it doesn't matter whether you buy or sell, they make money. In fact, they don't make any money if the market moves sideways, because then nobody buys or sells. If you buy shares in a company that's worth ten dollars a share today and stays that way for another five years, what have you gained? Especially if the company doesn't pay dividends, and most companies don't these days, such as the technology sector -- why would you buy stocks in the first place?

Another thing to keep in mind is the rise in the stock market in the last few years is due to new companies going public. Maybe it's a cause to celebrate that the stock market keeps going up and up. Disasters come and go, but we seem to recover and move even higher. The stock market has now moved up over the 11,000 point mark. Hurray! What does it mean to the investor? It's an illusion that the stock market keeps going up. The truth of the matter is that stock brokers keep pumping in more companies into the stock market, and other companies go bankrupt and disappear from the Dow, so more companies are formed, more IPOs are floated on the stock market -- that's what it is. That's why the stock market keeps going up and up, because the brokers pump more companies and shares into the stock market, and they do it faster than the companies whose stocks become worthless. Millions of dollars disappear from the market every year, to be replaced by new money from new investors. You might think I'm exaggerating, but I've seen companies go under, haven't you? What happened to their shareholders money? Of course, there are people who know how to make money in the stock market. They know which company shares to buy and which company to ignore. The brokers themselves are playing the market; they buy and sell shares themselves, and since they make commissions as well, most of them make a hefty living. If you're not a broker or haven't studied the market as a professional, then chances are that you'll lose money. That's my opinion.

I'm not encouraging you to invest in my film productions, but what's so special about other industries? Movies are the number one export of the United States. Some of the riches people in the world own movie companies or TV networks. So many people invest in real estate, that it's not all that easy to make money in it. It takes a long time to realize a profit. Meanwhile your money just sits there. You can borrow on it, take out one mortgage after another, and you'll qualify for a lot of credit cards, but then there comes a day when you're forced to sell, or even worse, when you can't maintain the payments and the lenders foreclose on you.

With the Stock Market always fighting to stay credible, many savvy investors are beginning to wonder about the viability of stocks in this day and age. It's a well known fact that the stock market has been artificially supported by the Federal Reserve Board pumping paper money into it and reporting positively regarding its health (if this were a homeowner he'd be long foreclosed on); but the numbers for the market are still up there. You might ask, "what's with that?" Well, the brokers keep floating more public offerings and with the interest rates low, new investors keep coming in, like the Stock Market was a Las Vegas casino. But at least with the casinos there is entertainment, what does one get investing in companies that neither appreciate nor pay dividends?

Please, do ask your tax accountant and your attorney. Ask them if it's okay for you to invest in my movies. Check out my track record. Ask them what is the best investment for improving your life style. Let me know what they say.

Index

Filmmaker's Track Record

Potential IPO

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Email me
[releasing.net email]