The current sources of financing available to Hollywood are essential golden handcuffs for studios and creatives alike; however, there are valid reasons why obtaining capital in this industry can be particularly burdensome. 

Most financial institutions don’t fully understand the business of Hollywood. The terms of a revolver or borrowing base are set by a group of MDs that have never been practitioners at a studio and have limited optics on how a studio is run and where the industry is heading. However, this space isn’t without risk especially for studios that don’t have a distribution network. Most studios are simply looking to breakeven and make most of their money on the one or two movies that outperform. Unlike investments in more traditional industries, a $100MM investment in a film is a complete projection and combines art and science to come up with an investment rationale. When compared to making a $100MM investment in an existing widgets business with historical financials, investing in a film (outside of a presale) is incredibly risky. When you combine these factors the results are poor terms and many operational hurdles to stay compliant to a debt facility. 

An important note is that creatives most likely have no access to financial institutions as a source of capital. They are essentially required to have their projects funded by a studio or international distributor. The former can put creative guidelines to a project and the latter greatly reduces the chance of selling a project to a global distributor as territory rights have already been sold.

The film business is very akin to venture capital and the financing structures should match that. As noted above, the film business counts on “hits'' to drive overall profitability with most projects either breaking even or losing money. The same goes with VC. There is a reason VC companies (for the most part) don’t use debt to fund investments. This type of business model doesn’t align with debt being the primary way for studios to fund projects; however; this is the only option that exists in the market. It inherently doesn't make sense to overlay financial structures that are more appropriate for a widget maker than venture bets. Available financing models are not scalable or efficient for most players in Hollywood. 

A DAO can be a singular low touch financing source that can be accessible to creatives and studios alike. This structure, especially when run by former and current operators, can provide market appropriate financing (equity preference over debt) while truly understanding how this business operates. In a ideal world a DAO can:

• Be a truly novel and incremental source of financing

• Increase optionality and financial upside for studios and creatives

• Act as financing plus

  • Financing with added component of providing long term economic upside to DAO participants in the form of tokens and reducing CAC

The current sources of financing available to Hollywood are essential golden handcuffs for studios and creatives alike; however, there are valid reasons why obtaining capital in this industry can be particularly burdensome. 

Most financial institutions don’t fully understand the business of Hollywood. The terms of a revolver or borrowing base are set by a group of MDs that have never been practitioners at a studio and have limited optics on how a studio is run and where the industry is heading. However, this space isn’t without risk especially for studios that don’t have a distribution network. Most studios are simply looking to breakeven and make most of their money on the one or two movies that outperform. Unlike investments in more traditional industries, a $100MM investment in a film is a complete projection and combines art and science to come up with an investment rationale. When compared to making a $100MM investment in an existing widgets business with historical financials, investing in a film (outside of a presale) is incredibly risky. When you combine these factors the results are poor terms and many operational hurdles to stay compliant to a debt facility. 

An important note is that creatives most likely have no access to financial institutions as a source of capital. They are essentially required to have their projects funded by a studio or international distributor. The former can put creative guidelines to a project and the latter greatly reduces the chance of selling a project to a global distributor as territory rights have already been sold.

The film business is very akin to venture capital and the financing structures should match that. As noted above, the film business counts on “hits'' to drive overall profitability with most projects either breaking even or losing money. The same goes with VC. There is a reason VC companies (for the most part) don’t use debt to fund investments. This type of business model doesn’t align with debt being the primary way for studios to fund projects; however; this is the only option that exists in the market. It inherently doesn't make sense to overlay financial structures that are more appropriate for a widget maker than venture bets. Available financing models are not scalable or efficient for most players in Hollywood. 

A DAO can be a singular low touch financing source that can be accessible to creatives and studios alike. This structure, especially when run by former and current operators, can provide market appropriate financing (equity preference over debt) while truly understanding how this business operates. In a ideal world a DAO can:

• Be a truly novel and incremental source of financing

• Increase optionality and financial upside for studios and creatives

• Act as financing plus

  • Financing with added component of providing long term economic upside to DAO participants in the form of tokens and reducing CAC