Arundel Partners
– Business structure: Purchase sequel rights before first movie of series produced/released
and exercise call option depending on success of first movie
– Sequel rights not picked dependent on artistic judgments, or prediction of certain movies
success
– Contract to purchase all sequel rights for a specified period of a studio or a specified
number of films for studio
– Studio gets advance cash payments from Arundel per film, aids financing initial releases.
– Options idea intended to deal with art vs commerce conflict of interest amongst studios,
also distribute risk of movie production, distribution and overall success.
– Options move helps reduce borrowing for studios as well
– Arundel profit depended on price of sequel rights and overall costs; estimation of 2 mln $
or more for valuation of sequels
Movie Process:
– Production: Making film negative, Distribution: Marketing, Licensing, Advertising,
Shipping Prints Exhibition: Projecting film in theaters
– Major companies and studios mainly involved in production and distribution
– 1991: 150 ~ 274 films by major studios and smaller distributors in USA, major studios
35% distribution, 93% revenues.
– Top us film rental to theaters: Terminator 2, 5% of rentals. Top 5 movies 16% total
rentals, top 10 movies 26% total rentals
– Production: Most movies based on literary properties, either acquired or presented
to producers. Some producers bought options of film rights to literature properties but
didn’t usually exercise
– Production costs: pre-production, photography , and post-production costs. Total
cost of production includes fixed expenses for story acquisition and known as negative
cost.
– Production cycle usually 1 year
– Negative cost excluded future compensation linked to film’s revenue or earnings.
