FINANCIAL RISK

“All profit is derived from risk.”

—Peter F. Drucker

Investment

Absurd Outlay Seeks Impossible Gain

The top three ways to lose money are “wildcatting” (i.e., drilling for oil in lands deemed unproductive, or for which no geological information exists), race horses (e.g., an Arabian that doesn’t start winning quickly won’t offset the small fortune necessary for boarding and the myriad expenses of proper care), and making movies — which truly require the miraculous to be realized and profitable.

Consider. Screenwriter William Goldman famously explained the economics of Hollywood: nobody knows anything. For this reason, the major studios underwrite, on average, 20 films a year — 19 of which are commercial failures. But there is that one production that succeeds beyond any reasonable expectation, providing the wherewithal to not only underwrite the unsuccessful projects but keep the company moving forward. The majors and mini majors have this business dynamic down to a near science.

Net-net: this is a high risk wager, for investment in the production of such a project is extremely speculative. And while we are cautiously optimistic that our Live Cinema innovation will generate positive returns over a 36-month monetization timeframe, financial gains should be a secondary motivation for all who consider making an investment in this project.

Production

Hazards of a Road Less Travelled

The first risk of any production is that it simply does not get made, whether due to issues with the Production Team, Cast, Location, or any of seemingly innumerable variables in play beyond the control of the producers. Nevertheless, given our team’s considerable experience and the countless ideation and planning sessions held with key creative and commercial stakeholders over the past two years, we have developed and operationalized a strategic and tactical framework to mitigate the greatest risks, providing much confidence that this production will happen — worst case scenario, by hook or by crook, as the saying goes.

Live Cinema carries its own unique risks, of course, which could result in a disappointing performance, one borne of numerous elements, such as technical breakdown, cast performance blunders, project leadership issues, and so forth. Regardless, we have thought through the most challenging issues of the principal production components, which are well-accounted for through rigorous scenario planning. 

Compounding the overall production risk is inadequate marketing, or other promotional deficiencies and challenges that may result in poor turnout. We do not, however, envision this being a significant risk given the uniquely experienced marketing professionals on the team, the caliber of those with whom we will partner externally, and our practical plan to ensure that this production is known far and wide, most especially across key demographics in the United States and Europe.

Distribution

The Crucial Aspect of the Whole Process of Business

Without successful distribution — a vital component of the marketing mix (i.e., the 4Ps) — even the greatest work of storytelling art will be, not unlike the parable of a lamp under a bushel, of no benefit to our fellow man, precluding production stakeholder gains, quantitatively or otherwise. At the livestream level, this could be related to technology issues, fallouts with venues, or poor monetization agreements. No matter the issues that may arise, however, we are confident in our livestream strategy — and the team executing it — and that our production will successfully broadcast to the principal and minimum number of venues targeted for success. 

At the venue level, notwithstanding our ongoing efforts to ensure the requisite number of Colleges & Universities, Historic Theatres, and Art Houses present the performances, it is possible the total number of venues we have modelled either do not sign on to the livestream or produce the revenue forecast. Still, given the uniqueness of the project we are very optimistic to have in place both the minimum number of venues and contract particulars for a profitable production. Likewise, should the final-edit of the live performances result in a beautiful film, we are confident the Festival dynamic will lead to a promising theatrical run.

Lastly, for VOD and beyond, poor distribution deals or streaming services unwilling to host could preclude the success of this distribution channel. Nonetheless, in light of Amazon Web Services’ likely involvement, we are not overly concerned that this “final” channel will not produce the intended results. This, along with the deep and wide experience in commerical distribution (both film and music) of our stakeholders (e.g., board members and beyond), provides much comfort that we will meet expectations “downstream” of the live performances, further ensuring an overall financially sound inaugural project. 

“Fires will be kindled to testify that two and two make four. Swords will be drawn to prove that leaves are green in summer.”

—GK. Chesterton