Contact: Moe Charif
6039 Collins ave Suite 1430, Miami Beach, FL 33140
C: 954.579.2266, T: 305.767.4741, F: 305.867.4426
The undersigned reader acknowledges that the information provided by Project Exile in
this business plan is confidential. Therefore, the undersigned reader agrees not to disclose
any of such information without the express written permission of Project Exile.
It is hereby acknowledged by the undersigned that the information to be furnished in this
business plan is in all respects confidential in nature (other than such information which is
already in the public domain through other means) and that any disclosure or use of
same by the undersigned may cause serious harm or damage to Project Exile.
Upon request, this document is to be immediately returned to Impact Features, LLC.
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY
2. THE FILM
3. THE INDUSTRY
4. THE MARKET
5. THE COMPANY
6. DISTRIBUTION STRATEGY
7. RISK FACTORS
8. FINANCIAL PLAN AND PROJECTIONS
1. EXECUTIVE SUMMARY
• The U.S. box office reached $9.49 billion in 2006.
• The U.S. box office for independent films in 2006 exceeded one billion. The
year 2004 was especially good for independent films as their share of box
office revenue reached an estimated $3.4 billion.
• The worldwide revenue for U.S. independent films is estimated at $ 7 billion per
• Global box office revenues in 2006 exceeded $25 billion.
Impact Features, LLC is a start-up enterprise engaged in the development and
production of motion picture films for theatrical release. The company’s goal is the
production of the feature film Exile, a heart wrenching story that takes place in Cuba.
The main objective, however, is to produce a commercially viable film with mass
audience appeal capable of garnering awards and recognition from major film festivals
and film critics. The company plans on producing Exile with a $5 million budget, a low
number when compared to the average budget of a studio film which is estimated to be
around $100 million per movie.
In 2005, filmmakers Moe Charif and Omar Chavez Jr. set out to collaborate on a new
feature film project that could command a strong emotional response while allowing for
the kind of energy and drama that modern film audiences gravitate towards. A year and
a half later, after several drafts and revisions, the screenplay of Exile was complete.
Within a short time the duo were receiving excellent reviews for their efforts. ”Exile” is an
action-drama based on true events. It’s an original story with all the elements to attract
filmgoers nationally and internationally.
The success of the independent films My Big Fat Greek Wedding in 2002, which has
earned more than $400 million to date on a $5 million budget, and The Blair Witch
Project, which earned over $300 million in worldwide revenues on a $60,000 budget,
have revolutionized how studios and distributors look at the production and marketing of
By definition, an independent film is one that is financed by any source other than a U.S.
studio. Although Independent films can vary widely in budget, from as low as $30,000 to
as high as $100 million, all have one important factor in common; Creative freedom from
the homogeneity of studio production. With the benefit of increased time and with more
meticulous planning than studios tend to give their big-budgeted films, smaller
companies are able to focus greater attention on their lower-budgeted, but no less
important, dramas. Unlike studios, the independent production companies are able to
avoid substantial overhead.
The market for action-drama films inspired by real life events, like Exile, has always been
solid. Traditionally dramatic films with ties to historic events have had great success
garnering nominations, and ultimately winning prestigious awards. Gladiator, Braveheart,
The English Patient, Crash, Schindler’s List, and Blood Diamond are just few examples of
Although we are planning on releasing this film to mass audiences, Exile should be of
great interest to the Hispanic market. Hispanics account for 15% of all moviegoers in the
U.S. and that number is projected to go up to 18% by the year 2010. In addition, the
international market grows bigger and hungrier for films every year. Because of the
nature of the story told in “Exile”, the film should appeal to international audiences as
The Company will seek distribution by either a studio, or an independent distributor. A
truly exceptional film can become the source of a bidding war among distributors. Our
goal is to make a quality motion picture that audiences will enjoy and that distributors will
want to distribute, thereby increasing the chances of the film’s success. We will hold
screenings in L.A. and/or New York specifically with companies that have experience in
the distribution of films in the action-drama genre. In addition, we will take the film to
markets and film festivals where appropriate.
Over the past five years, the international market has been especially profitable for U.S.
filmmakers. This substantiates our plan to focus attention on international distribution.
The founders are seeking an equity investment of approximately $5 million for the
production of the feature film Exile and overhead expenditures. Current projections
indicate a pretax net profit of $32 million on the initial investment for the film.
2. THE FILM
In 2006, Directors Moe Charif and Omar Chavez Jr. agreed to collaborate on developing
the concept for Exile. A year and a half later, the screenplay is complete and the project
is ready for production. Since the owners of the Company own the screenplay, there will
be no need for optioning a script property from another party. Both director/writers are
South Florida residents, and are very familiar with the subject of Cuban rafters. This is
especially true of Omar Chavez Jr., a Cuban-American born of Cuban immigrants.
Exile - Synopsis
Every year thousands of desperate Cuban citizens risk everything for a taste of freedom
and a chance at a better life in the United States. Embarking on a treacherous 90 mile
journey through a corridor of shark infested waters, these brave souls place all of their
hopes on homemade rafts built with whatever raw materials they can get their hands on.
Based on true events, Exile is a heart-wrenching action drama. The exhilarating story of a
group of Cuban rafters, told from the perspective of 12 year-old Cuban boy, Tito
Mendez, his father, Guillermo, and the rest of their family, Exile features moments of raw
emotional impact, high tension, and pulse quickening action, weaving several strands of
story together that culminate in the thrilling and dangerous crossing of the 90 mile gap
between Cuba and the United States.
The story highlights the family's plight when they are forced into extreme measures after
the family's eldest son, in an attempt to ease his father's worsening asthma, is caught in
possession of a stolen ventilating machine (a nebulizer) and arrested by the government.
Tito's father, Guillermo, a proud ex-police officer, feels he is left with no choice but to free
his imprisoned eldest son, build a makeshift raft for his family to flee Cuba and undertake
the harrowing journey to the United States.
With the help of some close friends, and using his knowledge, Guillermo plans his family's
attempt to gain a better life. Tito wants to help, despite his father's resistance, and
although his intentions are good, Tito's desire to impress Guillermo leads to more
complications. However, the family manages to construct a raft by converting an old
50's era pick up truck into a floating platform, modifying the drive shaft to act as a
Guillermo bides his time, and when the moment is ripe he springs into action setting into
motion events that may befall the entire family. In a daring night time raid, with no real
weapons except Molotov cocktails and household tools, Guillermo and friends free Tito's
brother while he's being transferred to a government prison.
Under the cover of darkness, the rafters converge on the beach. But something's gone
wrong and the police have been alerted to the family's plans of escape. In a dramatic
final push for the water, the rafters are forced to leave behind precious supplies lest they
be caught and arrested. The rafters make it out to sea, but at what cost?
Exile will lure the viewer into a deep emotional involvement focusing on the common
human experience; a son's hope for his father's affection, a father's love for his family, a
family's hope for happiness, and the desire for a better life.
3. THE INDUSTRY
Along with many corporations in the United States, the major studios began the radical
process of restructuring or “downsizing” at the end of the 1990s. While in the past they all
maintained expensive production facilities, staff, and significant overhead expenses, the
impact of unions and guilds and runaway productions forced studios to follow new
business models. They began releasing fewer films expecting greater gross per film. As a
consequence, smaller production companies with lower budgeted films have began to
command a bigger share of the market. Crash, Open Water, and My Big Fat Greek
Wedding are examples of smaller films that have scored high grosses. The success of
these and other low-budget films have hastened a change in the structure of the
industry prompting major studios such as Warner Brothers and 20th Century Fox to plan
and develop specialized internal divisions geared towards independent filmmaking.
In 2006, the North American box office totaled over $9.49 billion. Due to the growth in
international demand, American motion picture distributors generated more than $25.8
billion in worldwide revenues in 2006, an increase of 14% from the year before. Analysts
project that the worldwide box office will keep increasing over the next 2 years. The year
2004 has shown that the independent filmmaker is becoming a major force in the box
office market. Independents cashed in around $3.4 billion, an amazing 36% of $9.5 billion
total box office sales. In addition, the most recent annual survey of overseas sales
according to the American Film Marketing Association (AFMA) shows a total of $2.6
billion for U.S. independent films. When the AFMA total is added to U.S. box office, along
with the U.S. ancillary revenues (estimated at more than $1 billion), the worldwide market
for U.S. independent films is estimated at more than $7 billion. Independent films, by
definition, are those financed by any source other than a U.S. studio.
While U.S. theatrical distribution is still the first choice of any feature length film,
international markets are gaining greater strength than they had before. U.S. feature film
distributors project to raise their total worldwide revenue to $31 billion by 2010.
Independent films can vary widely in budget, from as low as $30,000 to as high as $100
million, but they all have one important factor in common; Creative freedom from the
homogeneity of studio production. With the ability to take more time and more carefully
planed budgets, smaller companies, like ours, are able to give greater attention to their
lower budgeted films. Unlike studios, Impact Features, LLC is able to avoid substantial
overhead costs by hiring creative and other production personnel on a project-by-
project basis. Due to our low budget, Exile can succeed in niche markets alone without
the need to draw the entire body of film going audiences. Our goal is to finance our
production activities from discrete sources, and to completely finance Exile before
commencement of principal photography.
Once a studio decides to produce a screenplay, lead actors are sought, budgets
approved, and all directors and producers assigned. This process is called
“development.” The next step is “preproduction”, the period before principal
photography when commitments are sought for talent, budgets are finalized, the
director and crew are hired, and most of the contracts are negotiated and signed.
Producers try to have all contracts in place before filming has started. The filming of a
motion picture is called “principal photography”. It takes from 8 to 12 weeks, although
major cast members may not be used for the entire period.
During the post-production period that follows principal photography; the film is edited
and synchronized with music and dialogue. In our case, special effects will be added.
The post production period normally requires six to nine months.
With a large corporate structure making production decisions and a large amount of
corporate debt to service, the major studios, such as Paramount, Warner Bros. and
Disney, aim the majority of their films at mass audiences. Producers and directors are
forced to make films on a schedule and a budget imposed by studio executives, who
are often influenced by factors other than a desire to make quality films, or even show a
profit. Due in part to skyrocketing star salaries and costly special effects, the average
studio film cost $100 million in 2006, according to the Motion Picture Association of
America. In addition, studios often demand changes to the script that result in a loss of
focus or direction, and adversely affect the overall appeal of the film to its intended
audience. More money is being channeled into studio blockbusters, which typically cost
upwards of $120 million. Industry figures indicate that a picture must generate 2.5 to 3
times its costs just to break even.
Independent films have benefited from recent technological advancements. With the
increase in cable channels and the use of digital satellites, the Internet and a wide
variety of other new technologies, distributors and programmers are seeking more
content to fill consumer demand. Since the major studios produce and distribute only an
average of 190 films combined, a programming void exists that independent producers
are able to fill.
The distribution of a motion picture involves the licensing of the film in the U.S., Canada
and the foreign marketplace. After locking the picture, our plan is to negotiate with
distributors to distribute and market Exile. With the film complete at that stage, Impact
Features, LLC will be in an excellent position to negotiate a deal with a distributor that
maximizes the profit potential for both the filmmakers and investors. Deals vary according
to each situation, depending on how many bidders are willing to take on the project, but
normally a distributor receives around 35% of total revenues.
The distributor will license the following rights; theatrical exhibition, non-theatrical markets
(where applicable, such as educational markets), home video (including laser disc, DVD,
HD-DVD, and Blu ray), cable and pay-per view, video-on-demand, and television.
Additional ancillary markets include merchandising.
Much of the projected growth in the worldwide industry comes from the international
markets, which grew 14% in 2006. It is anticipated that international distributor revenues
will keep increasing over the next 2 years. Distributors and exhibitors continue to find new
ways to grow the box office revenue pool. The growth of multiplexes in Europe and an
increase in the number of screens in Asia and Latin America have both contributed to
this growth. The growth in Latin America specifically is an excellent advantage in the
case of Exile. Part of our marketing strategy will be geared towards South America as the
movie deals with a topic that is of importance to the region.
OTHER SOURCES OF REVENUE:
Cable and Broadcast Television
Television exhibition includes over-the-air reception for viewers either through a fee
system (cable) or “free television” (national and independent broadcast stations). The
proliferation of new cable networks in the last 15 years has made cable (both basic and
premium stations) one of the most important outlets for feature films and documentaries.
Whereas network and independent television stations were a substantial part of the
revenue picture in the seventies and early eighties, cable has become a far more
important ancillary outlet. The pay-per-view (PPV) business has continued to grow, thanks
to continued DBS (direct broadcast satellite) growth and significant NVOD (near video
on demand) rollouts by cable operators. Pay-per-view and pay television allow cable
subscribers to purchase individual films or special events or subscribe to premium cable
channels for a fee. Both acquire their film programming by purchasing the distribution
rights from motion picture distributors.
Home Video, DVD, Blu-Ray, and HD-DVD
A large source of motion picture revenue continues to be the worldwide home video
market. Home video companies promote and sell videocassettes, DVDs and most
recently Blu-ray and HD-DVDs to local, regional, and national video retailers, which then
rent or sell these cassettes and discs to consumers for private viewing. While Blu-Ray and
HD-DVD are growing, DVD rentals are expected to remain a major source of home
entertainment income in the near future.
4. THE MARKET
An independent film goes through the same process from development and
preproduction through production and post production as a studio film. In the case of
Exile, development and preproduction may involve only few key people. The founders of
Impact Features, LLC, will maintain control over the final product. An independent film
may be distributed by a studio, although its negative cost has been provided by other
sources. Many of the large production companies started with the success of a single
film. Carolco was built on the success of Rambo III and Terminator II; New line achieved
prominence and clout with the Nightmare on Elm Street series and the list goes on and
The smaller production company usually raises money for one film at a time, although
there may be other films in different phases of development. Since the beginning of the
1990s, independent film has been going through one of it’s “up” cycles. Traditionally, the
fortunes of independent filmmakers have always varied from year to year. The recent
success of independent films has sent the independent segment into another growth
The market for films inspired by or that deal with real life issues has been growing.
Traditionally dramatic films with ties to historic events have had great success garnering
nominations, and ultimately winning prestigious awards. In 2007 Blood Diamond, an
action drama dealing with the struggles in the African nation of Sierra Leone was
nominated for five Academy awards, one Golden Globe, and one Grammy. In 2006,
Crash was nominated for six academy awards, winning three of them, and also went on
to win two Golden Globes. Crash is a great example of how a low budget film can turn a
high profit. Because of the recognition it gathered from awards, nominations, and good
reviews the movie generated “good buzz” that later translated into success. Crash was
produced on a $7.5 Million budget, but grossed over about $200 million in total revenue.
As an independent production company, Impact Features, LLC has advantages over a
studio system. The production team is in control of the screenplay, which means that any
changes to the script do not need to be reviewed by committee, losing valuable time in
the process, but can be implemented immediately. This quick response time is vital to a
production, when every minute wasted costs money. Another significant advantage that
the Company has is the lower risk involved in investing in a smaller firm. When the
negative cost (actual price paid up to and through the completion of the film negative,
which is then used in the process of creating release prints to be shown in theaters),
overhead and P&A (prints and advertising) costs are factored in, a studio picture must
gross 2.5 to 3 times the film’s budget to recoup the costs of making the film. Therefore, a
film costing $50 million would have to make $125 - $150 million to just break even. By the
same standard of comparison, a film budgeted at $5 million need only gross $12.5 - $15
million to recoup its costs. This figure is much more readily achieved in domestic and
Impact Features, LLC has several market advantages
1- The company is run by people who are devoted to the idea of producing a film,
Exile, that is cost effective and entertaining at the same time. The devotion to
quality will produce a low-budget film with much higher value on the screen than
the budget would indicate. The high production values are evident in the trailer
produced for Exile with a budget of under $15,000.
2- The company controls the rights to the screenplay of Exile, which received
excellent reviews from critics and was ranked 2nd out of 2,750 screenplays on
www.triggerstreet.com, and eventually nominated for “screenplay of the month”
3- The company plans on marketing Exile to the masses. However, our niche will be
the Hispanic and international markets. Fifteen percent (%15) of all U.S. movie
goers are Hispanic and the number is expected to increase to 18% by 2010.
Impact Feature, LLC plans to capitalize on this fact.
4- With obvious international appeal with regards to Exile’s subject matter, coupled
with the fact that that U.S. filmmakers netted over $25 billion in global revenues in
2006, the international market is ready to be taken advantage of.
5- We plan on shooting a great deal of the film in the Dominican Republic. All
necessary equipment will be shipped from the U.S. however; shooting in the D.R.
provides financial advantages such as low costs for accommodation, catering,
local below the line crew, locations, etc. In addition to the financial advantages,
the D.R. will approximate the look of the Cuban backdrop. This adds authenticity
and production value to the film.
6- Immigration has recently become a huge national debate. Our story tackles this
subject in an indirect way. Curious audiences will be drawn to experience what
Cuban immigrants must go through to achieve their ultimate goal of a better life.
Referred to as a “time capsule” by many, the island of Cuba, under Communism,
has remained essentially unchanged since the 1950s. This amazing Caribbean
backdrop is one that will surely dazzle audiences throughout the world, revealing
the struggles that our characters must go through to reach their ultimate goal.
5. THE COMPANY
Impact Features, LLC is a privately owned Florida company established in March 2008.
The company’s principle purpose in business is the creation of the theatrical motion
picture Exile. Our goal is to develop and produce a feature film that has all the elements
necessary to be a box office hit and at the same time screen and garner awards at
prestigious film festivals such as Sundance, Cannes, and Toronto.
The past few years have shown that the public is ready for action/drama films that deal
with real life issues. Big budget dramatic films with “based on true events” themes have
opened up the market over the last five years with films such as Munich, Pursuit of
Happiness, Michael Clayton, and Enemy at the Gates just to name a few.
The objectives of Impact Features, LLC are as follows:
1- The production of a quality feature film that provides a high level of
entertainment and enjoyment, while educating audiences to the realities that
less fortunate people go through to get to the U.S.
2- The Development of a feature film that is appealing to all markets above the
age of 13.
3- To exploit the international markets. American motion picture distributors
generated more than $25.8 billion in worldwide revenues in 2006 as opposed to
about $9.5 billion in North America.
4- To distribute our film through an Independent distribution company or through
a major studio. Preferably through independent distribution channels, however,
this decision will be based on opportunities as they arise throughout the process
of making Exile.
There is strong public desire for more action/drama films. We believe that we can make
a very exciting film with great potential for $5 million without sacrificing quality. The
struggle of Cuban rafters is a very interesting topic to tackle; especially that no feature
film on the topic has ever been made. Although Cuba is one of our closest neighbors, it’s
a country that traditionally, on a national level, we know very little about.
Management and Organization
Moe Charif - President, Founder
Moe Charif brings a heightened understanding of the intricate workings behind the
scenes of making projects successful. When viewing Moe’s work, one can’t help but
notice the very high level of quality in his films.
Graduating from the University of Florida with Honors and holding a Bachelor’s degree in
Arts, Moe set out to pursue his dream of filmmaking. With an eye for photography, he
started with small projects until 2005 when he directed and produced "Hunted," a short
film action thriller that screened at over 18 film festivals worldwide. The short was
nominated for a number of awards including "Best Short Drama", "Best Thriller", and "Best
of Festival" and ultimately won "Best Horror" and "Best Short Drama". Moe believes that a
film is a harmonious equation bringing all factors together in a perfect fit, which is why he
focuses a great deal on all aspects of filmmaking. His fastidious attention to detail,
cutting edge visual style, strong story sense, savvy business mentality, and talent for
utilizing stunning visual effects produce the kind of end result that you'd expect to see in
big budget Hollywood films.
It's often said that directors use a strong vision to create the movies they make. Moe’s
vision never fails to deliver outstanding quality; the kind you’d expect to see in Hollywood
Omar Chavez, Jr. - Vice President, Founder
Omar Chavez Jr. was born and raised in Miami, FL of Cuban immigrants. As a child he
always favored the arts spending almost all his free time drawing and typing out stories
on an old derelict typewriter. It's no surprise then that when it came time to declare a
major in college, Omar chose to pursue a degree in creative writing. Studying under a
score of best selling authors at the vaunted Creative Writing program at Florida
International University, Omar honed the craft of writing to go along with his natural
talent for story telling.
After college, as an avenue to his true passion of filmmaking, Omar pursued a career in
production. Over the course of 10 years time in the South Florida production scene,
Omar developed a considerable amount of experience in editing, motion-graphic
design, music production, and directing. Eventually able to establish the contacts to
make his first short film, Take Four, he and partner/friend Adrian Orozco saw the film
through to completion in 2006. The short went on to achieve critical success and
screened at 21 international film festivals, winning several awards. It was given the
distinction of best South Florida narrative short film 2006 by the GenArt association.
Adrian Orozco - Co-Producer
As a child growing up, Adrian Orozco always had a creative itch expressly geared
towards storytelling. Writing short stories became a hobby at a very early age. However,
a desire to follow in his father's business footsteps led Adrian to seek a degree in finance,
eventually utilizing that knowledge in a part time career selling real estate. Although
successful, having sold and managed over 10 million dollars worth in real estate during
his stint, he found himself ultimately unsatisfied. Adrian's true calling was film.
Realizing he had a lot to learn about filmmaking, Adrian attached himself to good friend,
Omar Chavez Jr. For the next few years Adrian learned everything he could; voraciously
self studying, paying apt attention whenever he could, learning how to produce, edit
and shoot films from those around him. Once confident enough in his abilities, Adrian
began to seek work in the field and eventually grew a solid reputation in South Florida
Since then, he has been involved in award-winning television shows, commercials, music
videos, and documentaries. Able to apply the knowledge garnered from his finance
degree, Adrian understands that film is a business, yet his strong story sense and visual
style always shine through his work.
Ingrid Gonzalez – Line Producer
A graduate of the American Academy of Dramatic Arts in New York, Ingrid Gonzalez, is a
motivated and hard-working individual with over 10 years of administrative experience.
Always ready for challenges and opportunities, Ingrid brings unequaled passion to
everything she does. In 2006, she was hired on to work closely with the Producers of the
feature film project "Spin" by director Dan Neira. Because of her multitasking and ability
execute all assigned duties she was promoted within the first week of the film's
production. On the strength of that experience, Ingrid was later hired by SiTV producers
to participate in the planning and producing of the popular cable network series
Styleyes staring Jay Rodriguez.
Through the years, Ingrid, a Dominican-American, has a established a wealth of contacts
in the Dominican Republic that she plans to take full advantage of during the filming of
6. DISTRIBUTION STRATEGY
Most of the marketing strategies commonly employed by independent distributors will be
used to market our film. The actual marketing of the film itself is the distributor’s job. It
involves the representation of the film in terms of genre, the placement of advertisements
in various media, the selection of a sales approach for exhibitors and foreign buyers, and
the “hype” (word of mouth, promotional events, alliances with special interest groups,
and so on). All of these factors are critical to a film’s success. The plan for Exile is to realize
sizable opening audiences (relative to the budget and theme of the film) and generate
good reviews, and then use the money and reviews to keep releasing the film on
additional screens. The distributor will fund the copying of more prints out of the revenues
from the first week. Advertising will work in the same way.
Each major studio has its own distribution division. All marketing and other distribution
decisions are made in-house. This division sends out promotional and advertising
materials, arranges screenings of films, and makes deals with domestic and foreign
distributors. Each studio releases 15 to 25 films a year and they often acquire
independent films to release. After the picture is locked, we will seek distribution for Exile
by either an independent distributor or a studio. The high quality of the feature should
attract interest from multiple parties. This creates an opportunity for our film to be the
source of a bidding war among distributors, thereby increasing the chances of the film’s
There are advantages to distribution through studios and independent distributors:
Independent distributors have an advantage in releasing low-budgeted films, since they
have the experience and patience necessary to handle the slower “platform” method
of release. A platform release strategy involves opening a film in a select few cities,
building on the film’s word-of-mouth, and gradually widening the release to add more
cities and more screens to the release schedule. Positive buzz, festival success and strong
reviews all add to a film’s platform. Movies such as “Sling Blade” benefited greatly from
this type of release strategy. Miramax released the movie in a few cities and, as it gained
in popularity, expanded the release to more cities and more theaters. What began as a
small “art house” film became a mainstream hit.
Studios, on the other hand, have extensive resources with which to finance a number of
prints, and have guaranteed exhibition of their product. This means that a film can be
seen by large numbers of people at any given time. A film’s success or failure at the box
office can directly affect its success in all other venues. Another advantage to the studio
distribution system is that, as the studios merge with larger corporate conglomerates,
they often add arms of television stations and cable systems.
Each system, whether studio or independent, offers advantages and disadvantages with
respect to our distribution strategy. Whether or not the Company will negotiate with an
independent distributor or a studio depends on which distributor offers Impact Feature,
LLC the strongest release pattern, platform or wide, with as many people as possible
seeing the film. This must be balanced with the film’s potential profitability, thereby
ensuring the producers and investors a return on their investment.
There is an active market for completed motion pictures, with virtually all studios and
independent companies seeking to acquire completed films. These acquisitions are
influenced by the film’s elements, such as quality of screenplay, cast, production values
and the number of other films in the same genre or theme currently being distributed by
Distributors license the film to both domestic and foreign exhibitors, for a percentage of
the box office gross. The best possible initial release for Exile is a domestic release in
theaters. Not all films earn the prestige that a theatrical release will garner. However, a
theatrical release drives the price upward for the rest of the media releases, such as
home video, pay TV, etc. For a picture in initial release, the exhibitor will pay a
percentage of the revenues from ticket purchases to the distributor (the “film rentals”).
Every distribution agreement is different, however, there are similarities common to all.
The distributor receives a distribution fee, which is the percentage of the profits that the
distributor will receive from the revenues. The distributor is then entitled to recoup its
marketing costs and distribution expenses. The remaining sum is payable to the
producers and investors, and is generally called the “producer’s gross” or the net sum.
Other media releases for the film are calculated in a similar fashion. For instance, a home
video company pays an amount to the distributor for the right to stock its video stores
with the title. From these fees, the distributor will deduct its distribution fee, advertising
costs and other distribution expenses in order to recoup its costs. The producers and
investors then receive their agreed-upon revenues as set out in the distribution
agreement. The same goes for television and ancillary rights. The sum total of the money
received by the distributor from the exploitation of all rights that it is entitled to exploit
under the agreement are called the “distributor’s gross.”
It is in Impact Features, LLC’s and the investors’ best interest for the Company to seek a
distribution advance against revenues, or to seek a “negative pick-up”, from a
distribution company. An advance against revenues means that in exchange for the
rights to the Project, the distributor would pay the Company a sum of money upfront.
Portions of this advance can then be used to recoup those amounts expended in the
production process. While some distributors do not pay advances on features, it is an
important strategy that we will utilize when negotiating with distributors. A “negative pick-
up” means that a distributor pays the actual costs of creating the negative of the film.
This cost includes development, pre-production, production and post-production.
Depending on the distribution agreement, the relationship can end there with the
distributor buying the film out right, or Impact Features, LLC can share in net proceeds
from the film after the distributor has recouped its distribution fee, negative pick-up costs,
marketing and distribution expenses.
7. RISK FACTORS
Investment in the motion picture industry is highly speculative and inherently risky. There
can be no assurance of the economic success of any motion picture since the revenues
derived from the production and distribution of a motion picture depend primarily upon
its acceptance by the public, which cannot be predicted. The commercial success of a
motion picture also depends upon the quality and acceptance of other competing films
released into the marketplace at or near the same time, general economic factors and
other tangible and intangible factors, all of which can change and cannot be predicted
We believe that the screenplay for Exile is extremely high in quality. An interesting story
has a much better chance of attracting name talent to the film project. Not every role in
a script is played by actors who are well known to the public. But it does help an
independent film’s chance of success if one or two actors in the picture are instantly
recognizable to the viewing public. Another way we can increase the film’s chance of
success is to ensure that the production values are high. In essence, the concept of
production value is based on the principal that it takes money to make money. Our plan
is to spend our budget wisely to ensure that the film’s final look is one of quality.
The entertainment industry in general, and the motion picture industry in particular, are
continuing to undergo significant changes, primarily due to technological
developments. Although these developments have resulted in the availability of
alternative and competing forms of leisure time entertainment, such technological
developments have also resulted in the availability of additional revenue sources
through licensing of rights to such new media, and potentially could lead to future
reductions in the costs of producing and distributing motion pictures. In addition, the
theatrical success of a motion picture remains a crucial factor in generating revenues in
other media such as videocassettes, DVDs, and television. Due to the rapid growth of
technology, shifting consumer tastes, and the popularity and availability of other forms of
entertainment, it is impossible to predict the overall effect these factors will have on the
potential revenue from and profitability of feature-length motion pictures.
The Company itself is in the organizational stage and is subject to all the risks incident to
the development of a new business, including the absence of a history of operations and
minimal net worth. In order to prosper, the success of Exile will depend partly upon the
ability of management to produce a film of exceptional quality at a lower cost, which
can compete in appeal with higher-budgeted films of the same genre. In order to
minimize this risk, management plans to participate as much as possible throughout the
process and will aim to mitigate financial risks where possible. Fulfilling this goal depends
on the timing of investor financing, the ability to obtain distribution contracts with
satisfactory terms, the obtaining of completion bonding and the continued participation
of the current management.
8. FINANCIAL PLAN AND PROJECTIONS
The financial projections for EXILE assume a conservative level of success for the film
project. Potential investors must recognize that the projections are only estimates, and
are not guaranteed.
Impact Features, LLC proposes to secure all production financing from equity partners by
means of a limited partnership investment. With production funding in place from
independent investors, the Company will negotiate the most advantageous distribution
deal. We will wait until principal photography has commenced before talking with
distributors so that they will be able to view the professional quality of the film. This
strategy will allow the maximum flexibility in a rapidly changing marketplace where the
availability of product is in constant flux.
Many factors affect the financial projections for a film. Its commercial appeal is the most
important factor in determining financial success, followed closely by the agreement
with the distributor. Being able to self-finance the production of a film puts the Company
in the strongest position to control the quality and costs of the film, along with striking the
best financial arrangements with the various distribution channels.
We will attempt to secure the best distribution deal for Exile, with a distributor who will
commit financial resources and secure a favorable distribution release pattern. This is key
to our film’s success, because when a distributor commits funds to the prints and
advertising budget of a film, it is signaling its desire to see the film become successful and
make a profit. The distributor can accomplish this by securing enough screens for the film
to ensure that sufficient numbers of the viewing public pay the admission price to see the
film. As with any business, when revenue exceeds cost, profits are realized.
Return on Investment
The Company is confident that it will produce a motion picture which audiences will
enjoy, thereby reaping the financial rewards from that success. We cannot guarantee
that the film will be profitable, or that it will even earn back its budget, but will stand
behind our commitment to ensure that the most reasonable distribution deal possible will
be sought and executed.
The Company proposes to pay back the limited partners who invest in Exile in the
(a) From the Producer’s Gross Income, the Company will cover any and all
outstanding production expenses not covered by the production budget, such
as deferred pay of talent salaries and other such costs.
After deducting any deferred fees or outstanding expenses, the Producer’s Gross
Income will go directly to the limited partners proportionate to each partner’s
investment. Money will be disbursed to all limited partners at the same time.
Accounting statements from distribution companies are usually handled on a
quarterly basis for the first two years of the distribution agreement, and semi-
annually thereafter for a period of two years. Accounting statements are then
handled on an individual basis. Generally, the distribution company is responsible
for providing statements and paying any sums due to the production company
within sixty days of the end of each quarter. The Company will provide the limited
partners with accounting statements and payments due and owing, if any, within
sixty days of the receipt of those statements and money from the distributor.
(b) 90% of the project’s Net Profits will be paid to investors, with the production
company receiving the remaining 10%. After each limited partner has recouped
his/her initial investment, any additional money earned will be divided between
the producers and the limited partners on a 50/50 basis.
For the purpose of the business plan, several assumptions have been included in the
financial scenarios and are noted accordingly:
1- Box Office reflects gross dollars of ticket sales before the exhibitor splits the total
with the distributor. Domestic Rentals reflect the distributor’s share of the box
office split with the exhibitor in the United States and Canada, assuming the film
has the same distributor in both countries. Domestic Other (also known as
“ancillary”) includes home video (Cassette, DVD, Blu-Ray, HD-DVD), cable,
network television, and television syndication. Foreign Revenue includes all
monies returned to distributors from all venues outside the United States and
2- All funds flow from each revenue source to the distributor, whose expenses are
deducted before any money goes to the producer/investor; therefore, profit is
shown as the Gross Profit. This is the income before the distributor takes his fee.
Depending on negotiations, after the distributor deducts the cost for prints and
ads, the investor generally is paid back the budget cost. Then the distributor
deducts his fees. The timing of disbursements, however, is always subject to
3- The Budget, also known as the film’s “negative costs”, covers only the expenses
that are needed to produce the master print for the film. All marketing costs are
included under P&A (Prints and Advertising), often referred to as “releasing costs”
or “distribution expenses”. These expenses also include the cost of making copies
of the print from the master and advertising.
4- The films shown in table 1 are used as the basis for the projections. The rationale
for the projections is explained in number (9) below. The films relate in genre,
tone, and/or budget to our film.
5- Table 1, “Gross Profits of Selected Films with Similar Genres with Budgets $500,000
to $7.5 Million, years 2001-2006”, shows gross profit results for films before
distributor fees have been deducted.
6- Table 2 shows the projected income statement for Exile. The revenue scenario is a
moderate projection based on the data shown in table 1. They are used for the
cash flow in table 3.
7- Distributor’s Fees (the distributor’s share of the revenues as compared to his
expenses, which represent out-of-pocket costs) are based on 35 percent of all
gross revenue (note: the exhibitor portion is separate from this calculation), both
domestic and foreign.
8- Net Producer/Investor Income represents the projected pre-tax profit after the
distributor’s expenses and fees have been deducted and prior to negotiated
distributions to investors.
9- The cash flow assumptions for table 3 are:
a. Film production will take one year from development through post
production, ending with the development of a master print. The actual
release date depends on finalization of distribution arrangements, which
may occur either before or after the film has been completed and is an
unknown variable at this time. For purposes of the cash flow, we have
assumed distribution will start within the first quarter after the completion of
b. The largest portion of print and advertising costs will be spent in the first
quarter of the film’s opening.
c. The majority of revenues will come back to the producers within two years
after release of the film, although a smaller amount of ancillary revenues
will take longer to occur and will be covered by the investor’s agreement.
10- Due to the timing of the cash requirements needed to produce the film, draw
downs not immediately used will be deposited in an interest-baring account.
GROSS PROFITS OF SELECTED FILMS WITH SIMILAR GENRES AND/OR BUDGET
WITH BUDGETS OF $500,000 TO $7.5 MILLION
YEARS 2001 - 2006
(Millions of Dollars)
DOMESTIC REVENUE FOREIGN TOTAL COSTS
GROSS PROFIT (f)
FILMS BOX OFFICE RENTALS (a) OTHER (b) GROSS RENTALS (c) OTHER (d) REVENUE (e) BUDGET P&A TOTAL
Whale Rider 20.7 11.1 16.7 20.7 9.3 15.0 52.0 3.5 12.2 15.7 36.3
Crash 54.5 29.1 46.2 43.8 19.7 34.1 129.0 7.5 22.8 30.3 98.7
Open Water 30.5 16.3 33.1 27.6 12.4 20.4 82.1 0.5 23.0 23.5 58.6
The Last King of
17.6 9.4 16.0 30.5 13.7 23.9 62.9 6.0 6.8 12.8 50.2
Monster 34.4 18.4 30.1 25.9 11.8 18.6 78.9 5.0 19.6 24.6 54.3
Garden State 26.7 14.3 29.1 9.0 4.1 7.4 54.9 5.0 16.2 21.2 33.7
Lost in Translation 44.5 23.8 30.1 74.1 33.3 47.8 134.9 4.0 22.9 26.9 108
Monster's Ball 31.2 16.7 22.5 7.7 3.5 6.9 49.6 4.0 12.0 16.0 33.6
Capote 28.7 15.4 19.9 20.5 9.2 17.1 61.5 7.0 12.4 19.4 42.1
"EXILE" PROJECTED INCOME STATEMENT
(Millions of Dollars)
DOMESTIC REVENUE FOREIGN TOTAL COSTS EST. DIST. NET PRODUCER INVESTOR
GROSS PROFIT (f)
FILMS BOX OFFICE RENTALS (a) OTHER (b) GROSS RENTALS (c) OTHER (d) REVENUE (e) BUDGET P&A TOTAL FEES INCOME
EXILE 32.1 17.2 27.1 28.9 13 21.2 78.4 5.0 14 19 59.4 27.5 32
(a) Rentals equal money made after paying the exhibitor, in this case 50% of Box Office Total.
(b) Domestic Other Revenue includes television, cable, video, DVD, and all other non-theatrical sources of revenue.
(c) Foreign Rentals equal money made after paying the exhibitor.
(d) Foreign Revenue includes television, cable, home video, DVD and all other non-theatrical sources of revenue.
(e) Total Revenue includes both theatrical and ancillary revenues.
(f) Gross Profit before distributor's fee is removed.
SOURCES: IMDB.com, The-numbers.com, boxofficemojo.com, Baseline Studio Systems (A division of the New York Times).
Totals my not add due to rounding.
"EXILE" CASH FLOW
(Millions of Dollars)
YEAR 1 YEAR 2 YEAR 3
Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4
Production Budget (0.75) (1.5) (1.5) (0.75) (0.5)
Prints and Ads (6) (3) (4) (1)
Domestic Rentals 9 5.2 3
Domestic Ancillary 15 12
Foreign Revenue 9.2 8 6 7 4
Distributor Fees (15.5) (12)
TOTALS (0.8) (1.5) (1.5) (1) (0.5) 3.0 2.2 7.8 7.0 6 7 4.0
CUMULATIVE TOTAL (0.8) (2.3) (3.8) (4.5) (5) (2.0) 0.2 7.9 14.9 20.9 27.9 32
*Numbers between parenthesis depict negative cost. i.e. (1.25) = -1.25
Totals may not add due to rounding