The film industry is littered with stories of the one that got away.*

When TriStar turned down Quentin Tarantino’s Pulp Fiction they called it “the worst screenplay that this film company has ever been handed. It’s not funny. It makes no sense.”

The highest-grossing film of 1985, Back To The Future, did the rounds of the studios before being picked up by Universal. Columbia rejected it on the grounds that it was “not sexual enough” while Disney’s passed because it was too sexually perverse. The idea of a mother falling in love with her son was deemed unsuitable for Disney’s audience.

There are legions of similar stories and most people in the industry can tell you a “that could have been me” tale.

At Iron Box, we wouldn’t be foolish enough to suggest that we would never pass up a great opportunity. But we like to think we give ourselves the best chance of picking winners by having a structured process for deciding whether or not to invest in a film, and securing its success once we do.

So, what is this process? Here are the steps we take when deciding whether or not to invest in a film.

Initial assessment
The starting point is to examine the key components:

The pitch/proposal
The main team such as the director, producer and key members of the cast
The counterparty/sales agent responsible for sales
Budget top-sheet giving a broad outline of the estimated budget
Sales estimates
Once we have carried out this initial assessment – and we can do this pretty quickly – there are three possible outcomes:

An outright no. This is the most usual result as we are selective about the projects we back. This sounds harsh but many proposals will get rejected immediately because the film genre is not one we are interested in at that time, the budget is unrealistic or for a host of other factors.
A maybe. If we feel the project has potential we may ask for additional material or more detail on information already supplied.
A yes we are interested – in which case we move to the next step.
Internal due diligence and investment review
This covers the two keys areas: the production side and the financial side.

On the production side, we will analyse the script and look more carefully at the proposed production team. We will take up references for the heads of department, most importantly the producer and director.

On the financial side, we will look closely at the sales agreement. This is crucial in determining both the risk and the potential upside of a project.

At this stage, our decision will again be a yes, a no or a maybe. As previously, a maybe indicates we need more comfort on certain points before moving forward.

1. External due diligence and verification
Having carried out as much due diligence in house as possible, we would now get external advice in a number of areas.

As sales estimates are so important, we would seek external verification of these. Also, if there are pre-sales, we would check the reliability and professionalism of the counterparties.

We would also obtain a qualitative analysis of the target audience. This information is a strong indicator of a film’s potential financial success in terms of box office receipts, DVD sales and streaming revenue.

We will also instruct specialist lawyers to review the legal documentation to ensure it is watertight.

2. Agree investment terms
Once the external due diligence is completed, we are ready to agree terms and complete our investment. This involves some negotiation as well as professional advice from lawyers and accountants. After this is all tied up we crack open the champagne to toast working together on the project and, hopefully, its future success.

This is not where our hands-on involvement ends, though, far from it.

3. Active executive production
We take an active executive producer role on all our investments. Our goal is to use our experience and expertise to ensure the financial success of the film and the best possible return for our investors.

We will maintain a close eye on the progress of the production, the costs and the sales. This includes looking at costs reports and scheduling as well as keeping tabs on the general progress of the film and watching dailies.

4. Sales
This is the final push to maximise sales. We will liaise closely with the sales agent in order to monitor the sales performance. Where necessary we will also actively push sales ourselves.

By applying this structured process, we are confident of giving ourselves the best chance to back and make a success of the right projects, and avoid missing out on the next Pulp Fiction or Back To The Future.

No one is infallible though. Hopefully we will never know what it feels like to be one the executives at United Artists, Disney or Universal who saw little hope for an unusual space story called Star Wars that crossed their desks in the late 1970s. Forty years later, the franchise is still going strong and has raked in an astonishing $30.5 billion. Some mistake.

*By Bernard Pucher, Soucre: Ironbox Capital



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