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Great Lakes - Fabulous Four
Finance - Cine is a platform that allows movie producers to raise capital for films by issuing bonds to viewers. Producers issue bonds through the Finance - Cine portal and mobile app to fund specific movies. Users can purchase these bonds and trade them on the exchange until maturity. Bond holders receive interest payments regularly until the movie's completion and release, at which point their capital is repaid. This model provides benefits over traditional funding by giving producers capital upfront without ownership dilution and users an investment opportunity with higher returns than risk-free rates.
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Great Lakes - Fabulous Four
- 1. Directi Case studyContest Finance – Cine : A Movie Financing Venture Presented by: Fabulous four Mahesh Panigrahy Namita Joshi Namratha Vaidya Sanyukta Sen 11 December 2012
- 2. Introduction Finance – Cine Weare : • The first platform for the movie makers to connect with the viewers for funding purpose • A service provider that facilitates raising capital for movies through its own viewers • A medium by which users can reap more ROI as compared to traditional investments Exchange will enable trading of purchased bonds by traders Producers can Users can raise money by purchase movie issuing movie bonds bonds Finance - Cine 11 December 2012
- 3. Product 11 December 2012
- 4. Product – Conceptionand Timeline Movie Financing Timeline Trading of Movie Start of Capital is Movie Bonds Completi Bond movie Production raised on the on & Maturity Exchange Release • Bonds are • Finance – Cine • Bonds will be purchased by issues bonds traded on the • Coupons will the users to the public on exchange after be paid • No bonds can behalf of the the NFO close regularly to • Production be issued Production date till the bond House will purchased House for maturity holders till have pay back after the NFO funding the • Maturity Date movie the capital to close date specific movie will be some completion the bond • Production • The New Fund house start the weeks after the and few holders Offer expires release of the weeks after movie with the after a certain movie release raised capital duration 11 December 2012
- 5. Movie Financing –Current Scenario Major Funding Sources: Problems with the Current Funding Sources: • Till 1990’s movies were funded by •This creates hegemony of underworld in the movie Black underworld, diamond merchants Black industry Money Money • This can be obtained at high interest •Problem with this fund source is that it has to be repaid rates(10 -15% in 2011) based on your Bank before movie release Bank Loans financial muscle Loans •IPOs generally are prefered only upto 20% of the total • Raising capital from people in the equity capital requirement IPO IPO • Fund is obtained from distirbutors by selling •This reduces the bargaining of the producer over Distribution distribution rights Distribution distributor Financing Financing • HNIs pump in money, who put money as •Raising money through equity will lead to dilution HNIs equity HNIs • Issued by US based Film finance Inc •Issuers asks for guarantees(upto 3 -5 % of film budget) Completion Completion •They scrutinize budgets, schedules and control the Bonds Bonds same 11 December 2012
- 6. Product - Benefits Benefitsof our service to the producer: • Finance – Cine will directly transfer funds to Production Houses after charging a minimal fee • No ownership, control, scrutiny or interference by Finance – Cine or by bond holders(viewers), as there is no dilution of equity • Trading of the bonds in volatile Indian markets will lead to price fluctuations thus popularizing the movie • High Trade Volumes just before./after release of the movie will increase viewership of movies, thus increasing profitability • Interest paid on bonds would be tax deductible business expense Benefits to the user: • Higher interest more than the risk free rate without incurring much risk • The benefits similar to US prediction markets can be reaped without actually betting • For traders it is a good route for diversification in short term investments • Minimum or No credit risk, as defaulting on part of the production house would lead to the loss of viewership of subsequent movies by the production house • User friendly interface of the portal and timely updates 11 December 2012
- 7. Technology 11 December 2012
- 8. Technological Aspect ofthe Product / Service • Producers issue Online bonds Portal • Users buy bonds • Producers issue Mobile bonds Application • Users buy bonds 11 December 2012
- 9. Business Model 11 December 2012
- 10. Why is thebusiness model sustainable ? • The Product offering / service is unique, so this gives Finance – Cine, the first mover advantage • With 1000+ Bollywood movies and 3000+ Indian movies, the movie financing market, is yet to flourish leaving large untapped market segment • Financing of movies through issuance of bonds will appeal even to the common masses as they can connect well with the movie • Movie bonds will give traders a diversification strategy, thereby enabling us to make sustainable profits • Issuance of bonds through electronic media will help cater the needs of 150 Million Indian Internet users and 27 Million smartphone users 11 December 2012
- 11. Assessing Porter’s FiveForces Bargaining Powers • High number of suppliers • Unique Service of Supplier +1 • Low probability of forward integration • Large customer base to raise fund Bargaining powers • No competitor • High cost of changing of Customer+1 Balance of Competitive • No Competitor • First mover advantage Power Rivalry+1 (Out of 5 our • No substitution as it’s a unique product firm is Threat of scoring 3) Substitution+0.5 • High time and energy cost Threat of new • Low technology protection • Low entry barriers entry-0.5
- 12. Profit Model 11 December 2012
- 13. Profit Projection Profit Model: •The margins obtained from the issuance of bonds by the seller and buyer will contribute to profits Assumptions: Film Business Assumptions: • No. of movies financed in the first year is 40 and will grow at the rate of 20% • Average budget of Indian movies is 87 Million and will grow at the rate of inflation • Permissible Financing Ratio will be 25% of the budget • Average duration for the movie production is 24 months Product/Service Assumptions: • Face Value of the bonds issued will be Rs. 1000 • Margins from the seller and buyer will be .25% each • Bond trading Margins would be .02% 11 December 2012
- 14. Income Statement Projection– 5 years Income Statement Projection (Rs.) Year 1 Year 2 Year 3 Year 4 Year 5 Revenue Initial Margin 4,375,000 5,722,500 7,485,030 9,790,419 12,805,868 Trading Volume 1,750 1,750 1,750 1,750 1,750 Sales from Application 866,250 944,213 1,029,192 1,121,819 1,222,783 Total Revenue 5,243,000 6,668,463 8,515,972 10,913,988 14,030,401 Expense Fees for NSE Listing 250,000 250,000 250,000 250,000 250,000 Other Expense 2,097,200 2,667,385 3,406,389 4,365,595 5,612,160 Total Expense 2,347,200 2,917,385 3,656,389 4,615,595 5,862,160 Profit Before Tax 2,895,800 3,751,078 4,859,583 6,298,393 8,168,241 Tax 955,614 1,237,856 1,603,662 2,078,470 2,695,519 Profit After Tax 1,940,186 2,513,222 3,255,921 4,219,923 5,472,721 11 December 2012
- 15. Profit Projection for5 years Assumptions: Film Business Assumptions: • No. of movies financed in the first year is 40 and will grow at the rate of 20% • Average budget of Indian movies is 87 Million and will grow at the rate of inflation • Permissible Financing Ratio will be 25% of the budget • Average duration for the movie production is 24 months Product/Service Assumptions: • Face Value of the bonds issued will be Rs. 1000 • Margins from the seller and buyer will be .25% each • Bond trading Margins would be .02% 11 December 2012
- 16. Marketing Strategies 11 December 2012
- 17. Segmentation, Targeting, andPositioning for Production Houses •Fund house •Ease of raising capital •High consumer Base Market •Low interest payments Positioning •Establishment of new relationship • with customer with increased credibility •Large & Medium Production House •15 & 30 nos. Market •Big & Medium Budget movies •40 movies Targeting Budget of movie making (demographic) Big, Medium & Low Budget, Market Segmentation Art & Parallel Movie 11 December 2012
- 18. Segmentation, Targeting, andPositioning for Consumers (Bond Traders) •Security Market •Easy Accessibility Positioning Online traders Market Targeting Movie Viewers in India 50% of 14.5 million daily Viewers Market Segmentation 11 December 2012
- 19. Risk 11 December 2012
- 20. Risk Although our businessmodel is robust it is prone to certain risk such as: • The production houses that run out of money before producing a movie and those who abscond will result in credit default risk • If funds are not collected before the close of the NFO, the production house runs the risk of raising insufficient funds 11 December 2012
- 21.
- 22. Thank You 11 December 2012