ABSTRACT
Investors in any business need accurate information in order to assess risk and project rewards. The movie business, however, does not provide the full panoply of publicly available information to make such judgments, so prospective investors have to seek other sources of information to augment their analysis. In particular, this chapter distinguishes between “budget” and “actual film cost” and points out the lack of transparency with regard to domestic and international distribution and marketing costs and the difficulty of determining accurate correlations between domestic box office and ancillary revenue streams, such as home video and free and pay television. The first challenge that prospective investors face, assuming they are looking at financing a single picture or a slate of studio films, is how budgetary discipline will be exercised. The chapter addresses a number of considerations that impact budgetary discipline. Finally, the chapter reviews historical expectations with regard to investing in a portfolio of studio films and why expectations and actual results did not always match.
