HOW DOES SEGI MAKE MONEY???
Well if "The Eye of the Storm" continues getting Academy Award mentions for Davis, Rampling, and Rush it will bode very well for the films revenue potential. Look at what academy award (Oscar) winning film "Winter's Bone" did with an initial 4 theater release and maximum theater count of 141.
http://www.the-numbers.com/movies/2010/WBONE.php
If "Eye of the Storm" can perform comparably to Winter's Bone performance of $6.5 million domestic box office and $3.7 Million on Home Video that would be an enormous win for SEGI. A $6.5 million box office would put probably at least $1 Million back in SEGI's coffers for continued acquisition of other films.
Otherwise I will explain simply how film distributors make their money below.
As an investor in SEGI it doesn't really matter what the investors in the film itself make or the cost to produce the film. What matters is the distributors percentage cut and if they had to pay anything in advance to acquire the distribution rights of the property. Film Producers have the largest risk of losing money on a film. Far more risk than distributors as distributors are the last money in the investment and the first money out. Outside of the theater chains who take their cut first at the ticket window.
Every distribution deal is in effect a business of its own. But you can use base percentages and get a decent estimation of what a company like SEGI could earn from being the distributor on a film. They also will make more money from managing the P&A fund. I will try to provide a basic explanation of this, and I will use low end numbers in these estimations, as most full service distributors actually make at least 30-45% but my number is based on a low end service deal of 15%.
Every movie distribution deal is different as everything is negotiated between each distributor and the film makers, but P&A (Print & Advertising) funding gets paid back first after the theatrical 50/50 split. Then distributors make anywhere from 15% to 40% of gross revenues.
So just as an example. Using the film "Insidious" as an example, and pretending that Sycamore acquired the distribution rights of that film. Again this is just pretending that Sycamore Entertainment released "Insidious"
SEGI would have successfully released the film domestically to the tune of $54 Million. Also lets assume a $10 Million P&A fund was used for the film which is probably a bit high. Cause Film prints and delivery cost on average are approximately $1000 for each theater location (This is the cost of a film print and shipping) Digital copies that are shipped on a hard drive to theaters with digital projectors can cost as little as $250, and then associated advertising for a few weeks prior. I'm assuming P&A was probably around $5 to $7.5 Million. But $10 Million should be very a safe over estimated barometer.
http://www.boxofficemojo.com/movies/?id=insidious.htm
We subtract the $10 Million P/A and we'll say a $1 to $2.5 Million fee to pay the fund investors for a total of we will say $12.5 Million.
We now have a total of $14.5 Million gross from which distributors are allowed to take any incurred expenses as well as their agreed upon distribution fee which can be anywhere from 15% to 40% but we will use 15% on the low end which is essentially the equivalence of a "service deal". Service Deals they are basically just letting film producers use their contacts, film printing accounts, and a few other
So say there were $2 Million in expenses negotiated in management fees with the films distribution such as distribution management, marketing plans, and marketing consultants that Sycamore could take off the top to pay off those expenses leaving $12.5 Million. Then there is the 15% SEGI could potentially bring in as their distribution fee which could net them $1,875,000 from the remaining $12,500,000 in this instance plus say a P&A managment fee of $500K, thus leaving the producers that made "Insidious" with $10,625,000 to cover their production budget of $1.5 Million and making the producers a $9,125,000 Million profit.
Take into account the monies made by SEGI in Distribution Fees of $2,000,000 and their 15% take of 1,875,000 and their P&A management of $500,000 then there is potential for $4,375,000.
If just $1,000,000 of this is profit (low end) and they can replicate this business across 5-8 films a year then a significant return could be foreseen. Use 5 films and $5 Million in profit annually from those films spread across an O/S of 222 Million give and EPS of $.0225
Use a low end P/E ratio of 10 and you have a $.22 stock. Use a 20 P/E and you have a $.44 stock.
Get a couple of blockbuster movies and Sycamore becomes the next Lionsgate or Summit on the distribution depth chart and your looking at a moon shot of the share price.
Keep in mind, that I did not mention anything about the monies received from Home and Video distribution. A DVD costs distributors on Average about $1 to copy. If walmart sells a DVD for $15 the price paid to SEGI would probably be around $7.50. Minus $1 production run costs there is $6.50 left to split between film producers and SEGI the distributor. SEGI using a low end assumption again of 25% but could again be as high as 405% would get approximately $1.625 per DVD.
1 Million DVD's sold would net them $1.625 Million based on that calculation.
Imagine doing this all 5 to 8 times a year for every film acquired. Sure some will be flops but some might be moderately successful. What if one was a hit? If one was a hit, Moon Shot might be an understatement.
