You can fix the game of declaring profit, but you can't fix the game of revenue. And therein lies the problem: management risk represents the ability of a business to draw a profit from revenue. Tax-flight and profit-sharing shenanigans represent the management risk of dishonesty, though more often management risk is the aptitude of a manager to run the business well.
The businesses we are working with (I'm with RT, wrote the post) aren't films. They're startups and operating businesses. And we believe royalty financing has more scaling potential in a massive crowdfunding marketplace than equity financing. Removing management risk makes crowdfunding more viable.
"You can fix the game of declaring profit, but you can't fix the game of revenue."
If there's money to be made in fixing the game of revenue, it will be. For instance, you could simply have a different company, say Foo Distribution, Inc., which actually collects money from the theatres, then charges a whole bunch of "distribution costs", then sends the net proceeds as "revenue" to the film investors. This could, for instance, reduce the film investors revenue to near zero. Of course, the production company, or its owners, could be sure to be the controlling shareholders of Foo Distribution, Inc.
In the end, it's not a revenue vs. profit game. It's a power game, wherein those with more power (legal, financial, political) take money from those with less power. The one with the most power will win.
I'll tell you what these guys see in "crowdsourcing". A big fat profit opportunity. A load of suckers that can be conned. In short, the same way financial professionals look at common equity investors, pension fund contributors, mutual fund shareholders. You're going to get taken advantage of because there's loads of money to be made, you don't have the power, and they do. Calling it "crowdsourcing" or whatever newfound appellation you care to toss around isn't going to alter this basic fact.
Startup investment is bad enough on the accredited investor side. I'd hate to see what it's like for crowdsourcing participants.
I'm not making a point that film investing is good or bad. I submitted this to HN because the audience is tuned to startup and business perspectives.
From an outsider's PoV, it is counter intuitive that these major films are technically not profitable. We aren't as surprised by their revenue, and that is the point: in the example of those films, revenue would have been easier to predict than profit.
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[ 3.4 ms ] story [ 26.0 ms ] threadThe businesses we are working with (I'm with RT, wrote the post) aren't films. They're startups and operating businesses. And we believe royalty financing has more scaling potential in a massive crowdfunding marketplace than equity financing. Removing management risk makes crowdfunding more viable.
If there's money to be made in fixing the game of revenue, it will be. For instance, you could simply have a different company, say Foo Distribution, Inc., which actually collects money from the theatres, then charges a whole bunch of "distribution costs", then sends the net proceeds as "revenue" to the film investors. This could, for instance, reduce the film investors revenue to near zero. Of course, the production company, or its owners, could be sure to be the controlling shareholders of Foo Distribution, Inc.
In the end, it's not a revenue vs. profit game. It's a power game, wherein those with more power (legal, financial, political) take money from those with less power. The one with the most power will win.
I'll tell you what these guys see in "crowdsourcing". A big fat profit opportunity. A load of suckers that can be conned. In short, the same way financial professionals look at common equity investors, pension fund contributors, mutual fund shareholders. You're going to get taken advantage of because there's loads of money to be made, you don't have the power, and they do. Calling it "crowdsourcing" or whatever newfound appellation you care to toss around isn't going to alter this basic fact.
Startup investment is bad enough on the accredited investor side. I'd hate to see what it's like for crowdsourcing participants.
I'm no expert on the financing of the entertainment business but I do remember a podcast on npr talking about this:
http://www.npr.org/blogs/money/2010/05/the_friday_podcast_an...
From an outsider's PoV, it is counter intuitive that these major films are technically not profitable. We aren't as surprised by their revenue, and that is the point: in the example of those films, revenue would have been easier to predict than profit.