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Introducing the Producer’s Investment Pool

Learn how to become a film investor

12July2016

by Tero Kaukomaa — Posted in Blog

Earlier this year we launched the Producer’s Investment Pool, which is, in short, a crowd investment created to share our own financial risk. The investment has a fairly good position in our recoupment schedule.

There have been a lot of questions on how the Pool and especially the recoupment works, what are the changes to recoup and how big is the risk. Before I go explaining in more detail what it means, let’s go back in time a bit and see how we ended up here.

A long time ago, in a galaxy (not that far away)…

Making a film is no different than running your own business. To get it done, you need to know what you are doing (if you don’t, then pretend you do), you need to believe in what you are doing (if you don`t, then pretend you do) and most importantly you have to never give up (if you do, its probably the right decision).

One sunny Sunday back in 2006 I read an extraordinary article in Helsingin Sanomat, the biggest newspaper in Finland, about a group of youngsters from Tampere who spent 7 years shooting a scifi-spoof in their mom’s basement and then released the film for free – legally – on the Internet. Star Wreck: In the Pirkinning was the first feature film ever made for the internet and went on to attract over 10 million viewers – a huge number back then. Not sure if it was a coincidence, but the next day these guys contacted me and pitched an idea about the Nazis from the Dark Side of the Moon.

A decade before that, in 1996 I had decided to get into producing films. For me everything started from the determination to produce a Finnish film, which would travel and get global attention. That time my big hero was Aki Kaurismäki who created a global audience for his films. A loyal audience. A fan base! Words that were not often connected to Finnish films, especially outside Finland. Years went by, I produced some films and made my living on that. I was pretty happy and felt that my doings were on the right track, though always too slow for my impatient mind. One example in my career in getting international attention, was producing Jade Warrior, a Finnish-Chinese Kung-Fu film which was released in most parts of the world.

Back to 2006. This tall guy who was chosen to direct Star Wreck because of his loud voice. Who made his living as a telemarketer while directing the film. Yes, I mean Timo Vuorensola. I read a 12 page first treatment of Iron Sky and felt that here could be something, which could potentially interest audiences around the world. I had been waiting for a suitable idea for an English language film and that was it. Back then, Timo was 26 years old, I was 46. We had a night out in Tampere after agreeing to do the film. Timo asked me 3 am in the morning if I think the financiers will let him direct the film. Of course they will! But I did not tell that I hadn’t dared to watch Star Wreck as I was afraid to spoil my own enthusiasm if I found that the film was total crap. Years later, after we had financed Iron Sky, I finally braved to watch Star Wreck – and actually thought it was very good!

Six years later, in 2012, my company Blind Spot Pictures was on the edge of a financial cliff and I was on the verge of a burnout after a long financial struggle. We had just released Iron Sky really successfully in Finland and Germany and done quite well in some other European countries. The list for coming releases in various territories was pretty promising and I was very much looking forward to how the film would do in the USA, where a theatrical release had been agreed. Not a huge release, but a proper release nevertheless.

And then, BOOM! Our UK distributor decided they wanted to make money fast and they had this great idea of releasing Iron Sky in the cinemas for ONE DAY ONLY and then releasing the Blu-ray the very next day. Six months earlier than anyone else – which was six months too early. Next day the film was on Pirate Bay and our North American distributor cancelled the planned theatrical release. Also many other distribution plans were affected. That meant that in large parts of the world people had no legal way to see (and pay for) our film. This hit me hard. Big part of our business plan collapsed, I wasn’t sure if we could even pay all the debts from the production. But, what kept me going was the pride of the demand for the film – even if though that demand was largely met with piracy. By the end of the year the film was number 4 in TOP 10 most pirated films, on a list surrounded by Hollywood blockbusters.

Anyway, all this took some time to swallow, understand and accept. But soon enough it was clear that we couldn’t stop there. We had proven there is a global audience and we have proven that we can use our fan driven online activities as a very effective marketing machine. I had gotten to know Timo and believed in his talent as a director very much. I especially enjoyed sharing the same vision on marketing and how to survive in this jungle. So in 2014, when we finally got our head above the water to take a breath, Iron Sky Universe was established with the mission to build the Iron Sky franchise and Iron Sky The Coming Race was on the development table to start with.

Back to the future!

Now, it’s July 2016. Iron Sky The Coming Race has been edited and the visual effects are in production. Few months ago we arrived back from Cannes and closed a major multi-territory distribution deal to be announced in the near future. This deal is a vital part of the strategy to get the film available world wide, as simultaneously as ever possible. This means that our global release strategy is shaping up nicely. Also we are working on the first teaser trailer to be released this coming autumn. Exiting times ahead of us.

So, all is good, but why do we need more investments? The reason is very simple. Last autumn we could start the production only by closing the financing by using all the possible budgeted items what were possible to defer. This means that all the producers, director and partially the core Iron Sky team do not get their fees yet, but only once we reach certain point in sales and crowdfunding. It´s a challenging situation for us, operating for month after month without any money coming in. We’re certainly no strangers at taking personal risks, but there’s no denying having money in the bank would make things a lot easier and help us concentrate on making the film instead of surviving.

So that’s why we have this offer for you; if you share this risk with us, we’ll share the rewards with you.

How does it work?

Minimum investment is 5,000 € and we wish to collect up to 1 million € by the end of 2016. Why 5,000? We want to keep crowd investing as accessible as possible, but due to the way this works the higher the number of investors the higher the overhead in reporting and distribution of profits through the collection agency. This puts a limit on what the minimum sensible investment is.

Premium means a fixed interest and is 22,5 %. Each 5.000 € investment potentially brings you back 6.125 € from three different revenue streams A, B in a 1st row and C in a 2nd row.

Back-end profit share. Every 5,000 € investment brings the investor a profit-share of 0.029 %. Please note that to reach this level the film has to perform big time in the box office. Also do note that once the Producer`s Investment Pool, including the premium, is recouped, there will be close to 2 million euro in other investments & deferments to cover before we are profitable.

Reporting and Payments are handled by Fintage, an independent collection agent. When you sign the Producer`s Investment Pool agreement you will be added as a beneficiary in the Collection Agreement and you will receive reports every 6 months.

PIP cama

Producer`s Investment Pool investment agreement is valid for 3 years counted from the North American release, which is estimated to happen in autumn of 2017. So by 2020 the film has had time to make the first and most important rounds of revenues on all platforms.

Revenue Streams

PIP Revenue streams

Chart is simplified for illustration.

Finally, I try to explain how these 3 revenues stream works and give tools to analyze the risk.

A: Crowdfunding Revenues

This means our reward based crowdfunding, the so called “Kickstarter-model”, which we currently run in IndieGogo and on Ironsky.net. We are pre-selling the up-coming film itself in various formats

Chart is simplified for illustration.

Chart is simplified for illustration.

From the crowdfunding gross revenue platform, transaction, bank and other fees will be deducted and from the remaining crowdfunding net revenue 50 % goes to cover fulfillment costs, such as VAT, manufacturing, packaging and shipment. The remaining 50% will be distributed to Producer’s Investment Pool and other investors according to their share of the overall investment.

All crowdfunding revenues from IndieGoGo and Ticket sales at ironsky.net starting from 1.1.2016 are counted in!

Iron Sky The Coming Race – Fan Premieres.

PIP on tour

I want to give you an example what we are building up here as part of the crowdfunding as well as promotion. With the original Iron Sky we did Iron Sky on Tour in Finland, where we pre-sold about 10,000 tickets for 25 € each. With that pre-payment fans were delivered fan-screenings in 25 cities followed by a Q&A with the director and the producer of the film, an Iron Sky on Tour t-shirt and a poster of the film with autographs. A perfect financing and promotion tool in the same package.

This time we want to do that globally. But as we can`t be physically in many places the same time, we are currently modifying the concept a bit.

Approximate route. Final destinations will be determined later.

Approximate route. Final destinations will be determined later.

The idea is to set up fan premiere screening events, which are to take place in selected cities a few days or max a few weeks before the actual release of the film in the territory. We started to build up this system last November as its 1st wave of development and have already sold tickets to over 40 cities worldwide. 2nd wave is planned for the coming autumn 2016 once we release our first teaser trailer. 3rd wave is once we release the launch trailer couple of months prior to the release and have confirmed the exact dates for these fan premiere screenings.

PIP premieres

There will be 3 different Fan Premieres;

RED CARPET PREMIERE 50 / 100 USD. In Helsinki and Berlin. For these main events we have already sold over 600 tickets, and its only a start. Will have the maximum amount of cast & crew present and a huge party event.

GALA FAN PREMIERE 25 €. In about 15 cities (+/-) on 3-4 continents. Will present the Director & Producer and also cast members. The final decision which cities are part of this tour will be done Q1 / 2017 once the release plan will be more concrete. The more FAN PREMIERE tickets are sold to a city, the more likely it will be part of this tour.

FAN PREMIERE 25 €. In as many cities as possible. These events are organized without cast & crew in present, but will be one of the first opportunities to see the film. The attendees will get also some extra content/perks such as Directors video greeting before the screening.

All these premiere events will be organized together with local distributors, where the local press and celebrities will be invited to maximize the promotional power.

B: Scandinavian Revenues

We have kept Scandinavia separate from the rest of the world, meaning all revenues from our beloved home territory Finland as well as Sweden, Denmark, Norway and Iceland will cover Producer`s Investment Pool and other already existing investors. In a first row after the costs! First Iron Sky generated close to 1 million € revenues in Scandinavia, which we obviously aim to exceed.

C: Rest Of World Revenues

Producer`s Investment Pool has the second position after a 1 million euro GAP loan. Advance payments from UK / Ireland, Germany, Austria, Switzerland, France, Benelux, eastern Europe, middle East, India, Latin America, Japan, Korea, Thailand and Vietnam are already part of the financing. Rest of the world, including countries like USA & Canada, China, Australia & New Zealand, Russia, Spain, Italy etc. have been valued in the sales estimates by our world sales agent. The minimum prices on those estimates add up to way more than the 1 million € GAP loan.

How film sales normally work?

This is the most standard way, but there are others as well.

a) Producer makes an agreement with a world sales agent, who takes a fee on the sales made, and is also allowed for a gapped sales costs.

b) Producers, sales agent and other investors make a collection agreement with a third party, who is collecting the revenues and distributing to parties who are part of that agreement.

c) Distributor from a territory, which could be one country, several countries or even whole world pays production a minimum guarantee (MG), which is an advance payment for future royalties.

d) Distributor spend additional money to release the film in its territory in different medias, such as cinema, video, digital and TV. For each of those medias a royalty share for Producer is negotiated.

e) Distributor gets revenues from cinema, digital platforms, physical stores, TV, Netflix etc. The first revenues are covering the release costs (which are usually capped), then the earlier paid advance will be covered from the Producers share.

f) From that point on, more revenues will reach producer.

In practical sense; You can think it as 2 different revenue waves. First the advance, which come already before the film is released. And then second, possible overages if the film performs good enough.

PIP revenue timetable

I believe in our case with Iron Sky The Coming Race, including the crowdfunding revenues, we have a pretty good change to pay back already from the revenues before the film is released. But please note that I can`t guarantee that!

Thanks for reading all the way. It means you might be interested and I hope it gives you tools to analyze the risk in this investment. We do also have material to show for interested investors.

If you are interested, please contact anniina@ironsky.net and he will send more information.

Let us know any possible questions, comments and suggestions you might have, and we answer as quickly as possible and possible add those in the Q&A section for others to see.

tero_kaukomaa_s

-Tero Kaukomaa, producer

Ps. I do not mind if you tip this to your friend. We need all the help available.

DISCLAIMER: PLEASE NOTE THAT, this material is for marketing purposes only. This text is only explanatory and shall not form any legal relation or be used under any circumstances for interpretations of content of such legal relation. The accurate, complete and binding terms and conditions for such investment are provided in separate written investment agreement which shall not bind either of the parties or has no effect on relation between them until it has been signed by both of such parties.

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