For Love and Money: Investors Shreibak and Rad visit the set of Saint John of Las Vegas. | photograph by Chris McPherson
From the moment investors sign on to a film, their cash is placed into an escrow account. If a film is never made, 100% of the money is returned. The Financial Industry Regulatory Authority provides oversight, ensuring that IndieVest's financial statements are properly audited and commissions don't exceed 10% of members' money. IndieVest's plan is to give investors 115% of their money back and then 50% of any project's remaining net profits: Almost 40% will be allotted for the actors and filmmakers in order to attract top talent.
IndieVest guarantees that its flicks will be shown in theaters by earmarking enough money in the budget to pay for it. "Traditionally, distribution is someone else's problem," Burton says. "Not with us. As much as two-thirds of each project's budget is devoted to marketing and distribution." This is in contrast to many production companies, which will spend the entire budget prettying up the film for sale and forcing the buyer to take on distribution costs. IndieVest also hired distribution execs Larry Gleason, a veteran of Paramount, MGM, and United Artists, and Andy Gruenberg, a Miramax alum, to leverage their relationships. "These films have guarantees," says Bill Riley, CEO of Riley Hutto Wealth Management, a private-equity firm in Fort Worth, Texas. "It makes investors feel a lot more comfortable."
In SJLV's case, the company has set aside $5.2 million for distributing and marketing the film, currently scheduled for a March or April 2009 release. The company plans to spend at least $1.2 million on the U.S. release, beginning with four to six theaters in New York and Los Angeles, and ramping up to 30 screens across the top 10 markets. If SJLV isn't getting traction by the end of the third week, IndieVest will rein in its promotion, returning the remaining $4 million to investors. Box-office grosses would pay for international distribution and marketing the DVD. Bradley claims IndieVest will never spend 100% of the budget "unless the film is growing significantly in theaters and providing strong return on investment."
Bradley is counting on the marketing campaign to spark more deals. "A seven-figure launch opens up all the ancillary markets," he says. "Blockbuster, Wal-Mart, foreign markets -- they want films that got a real release." Even if the film flops then, its backers are unlikely to walk away empty-handed. By pooling unused marketing dollars with revenues from ancillary markets and several hundred thousand dollars in state tax rebates, Bradley says he expects to be able to return at least 70% of investors' money. "And that's a conservative estimate."
The souring economy has actually sparked increased interest in IndieVest from investors seeking to diversify. (As one Variety headline characterized the downturn, "Hollywood gets bump from slump.") Bradley reports that calls from curious advisers and independent investors are up fivefold in recent months. "People understand that entertainment is going to outcapitalize the rest of the market during a recession," he says. "They're looking at us as a safe haven."
Bradley doesn't speak for all his investors of course. Shreibak and Rad acknowledge that investing in indie cinema would be more difficult today than it was months ago -- though neither has any regrets. "The opportunity to go to private screenings; talk to producers, actors, and directors; see your name on screen -- that's priceless," Shreibak says. "But, right -- hopefully we'll be getting checks all the way to the DVDs."
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