Film Finance
Historically, movie investors have almost always been brought in to invest on the production equity side of the equation, providing early stage financing that enables a script to be turned into a film, according to Sylvan. But that investment represents the highest risk and longest waiting period for repayment. He says this is not normally articulated to film investors. "They go in on the promise of a great script, stars and promise of lots of box office without understanding how the money is returned," he says.

In fact, a film may never find distribution (recall the 5% rate), and as a result it may never have an opportunity to realize revenue. Moreover, even if the movie does get a distribution deal, the equity investor falls at the very bottom of the recoupment schedule, and so may never get his money back-or may wait a very long time to do so.

Ahead of equity investors in the repayment queue are providers of senior debt, another major source of film financing. Traditional providers of debt such as banks require some form of collateral-perhaps the value of contracts for the sale of distribution rights in different countries-against the money they're advancing and repayment ahead of equity investors. The equity investor has no collateral, and so falls junior to all the collateral holders.

In contrast to the equity investor, the person who enters on the print and advertising side stands at the very top of what Sylvan calls the "recoupment waterfall." That funding is the last money to come into a film production, but it's the first money to be repaid, thus significantly mitigating the risk to that investment.

Other forms of film financing involve tax credits for shooting a movie in a certain domestic or foreign locale and so-called slate financing, whereby investors provide various kinds of financing for a group, or slate, of films in an effort to diversify their risk.

How P&A Works
Sylvan says that each film's marketing and P&A requirements are analyzed project by project. Based on that analysis, Sycamore will tap the expertise of various partners. The two largest monetary outlays go to film print and duplication firms-the "print" portion of P&A activities-and to media buyers-the "advertising" portion of those activities.
Film print and duplication firms duplicate the physical print of the film to be distributed to exhibitors. A feature film scheduled to be released in 500 theaters, for example, would need 500 physical prints of that film. For their part, media buyers purchase advertising time from TV, print and all other media outlets within the scope of the marketing objectives of the specific film project.

Sycamore may also work with other partners in some combination, depending on the exigencies of the particular film project:

Advertising agencies to assist with the branding of a film project or the permeation of a film project within a specific consumer segment.
PR agents to work in tandem with Sycamore's advertising mechanism to drive market-specific interest in a film project or in its principal actors as well as generate publicity for the film project itself.
Other distribution companies with the possible objective of reducing P&A costs, entering into an agreement with a film project that already has a distribution agreement or using the market-specific relationships of another distribution company.
Editors to develop the trailers needed to market the film project and occasionally to assist in finalizing a cut of the film project, for example, by adjusting the length.
Sound and color mixers who assist the editors in creating the marketing trailers for the film projects as well as assisting if any finalizing is needed.
Printers to produce the marketing paraphernalia required to market the film project such as posters and billboards.
Shipping companies to move the physical print to the exhibitors.
Theater chains that exhibit the finished film project, such as AMC Entertainment Inc., Regal Entertainment Group and Cinemarks Theatre.
Box office collection agents such as Fintrac to tabulate, collect and allocate the box office receipts from the exhibitors.

The Fund
The P&A Fund's target investors are institutions and accredited investors, which include high-net-worth investors. The lockup period for investors is one year. After that, the fund will proceed to payout.

But what if the film is a critical or box office bomb? Sylvan says the fact that the P&A investor has put up $10 million (in the example) to market the movie indicates the project has a certain level of awareness in the marketplace. That ensures the film is going to be shown in various venues. Seventy-five percent of a film's revenues, he notes, comes from all of the market that follows the box office.