Operating Strategy:

 The Merkin Group are in advanced discussions with Blaze Media Group and other parties  to  use their experience to identify and acquire a specific group of “target” films for their  proposed Film Acquisition Fund or SPV or partnership/s ( but herinafter referred to as the fund or proposed funds for expediency)  that will fit the specific profile described below. It is their belief that, given the current state of the film business, that we will have the unique opportunity to leverage the strong relationships, knowledge and experience of both ourselves and its Managers to effectively and profitably acquire the international distribution rights to the Pictures contemplated by Blaze’s Business Plan, in effect the  proposed Film Acquisition Fund’s Business Plan and realize a significant and consistent return for the fund through the management of the acquisition, marketing, distribution and exploitation of the Pictures as described herein. Furthermore it is also their belief that relationships, knowledge, experience and an exceptionally disciplined acquisition process, as well as the proposed structure of Blaze, will provide Blaze with several unique advantages over its competitors thereby enhancing the overall probability of success and out performance of the  proposed Film Acquisition Funds.

This belief is based on immediate prior experience and financial success of both Sean Rothsey and other managers  and current negotiations with studios and networks globally . Personal relationships and an exceptionally  disciplined acquisition process dovetailed to the exploitation prospects have proven to be a successful formula in both bull and bear cycles over the past 15 years.

 BLAZE MEDIA GROUP 

Concept Proposal Proposed Film Acquisition Funds

 1 January  2013

Event Films:

Based on their experience and understanding of the current environment, the Managers believe that the greatest opportunity and largest potential for returns lies in the acquisition and distribution overseas of “tentpole”  (genre driven) or “event” type films.  It is an axiom in the current distribution environment that “event” films with international stars generate the largest box office performance. The largest movie going demographic is the segment of the market that is between 12 and 24 years of age. It is the appeal to this segment, more than any other that tends to drive worldwide film revenue.  While there are occasionally breakout hits that take the market by surprise, the more predictable high level performing films have international stars or are special effects driven and appeal to the primary movie-going demographic. “Big star” vehicles tend to attract larger audiences and “effects-heavy” films tend to do better globally  than they do in the United States domestic market, as they are more visual than verbal, more youth oriented than dependent on mature support; these movies span a mix of genres (horror, thriller, action, comedy) that appeal to audiences worldwide on a broad commercial basis thereby making these type of films a natural target for Blaze’s acquisition strategy as described herein.

Maximize Upside/Minimize Downside through Blaze’s Unique Set of Skills:

Based on the experience and relationships of the Managers, as well as how it intends to structure itself, Blaze will be able to maximize potential upside, while simultaneously maintaining the greatest flexibility – in order to most effectively manage downside risk for the  proposed Film Acquisition Funds, as follows:

Risk Management:

 Blaze will be managed like a hedge fund and investments will be made by its managers in films or a portfolio of films in such a way as to maximize upside and minimize downside. A variety of factors – in most instances centering on values in overseas media in specific territories – will be taken into account when evaluating a potential acquisition. Downside risk can be managed by sales to third party distributors or by obtaining minimum guarantees in a particular territory when such a strategy is considered prudent. Driving down distribution fees and allowing the studio to distribute in most territories can maintain upside.

Distribution/Marketing Knowledge and Experience:

The management advisors of Blaze are, like ourselves, principally financial and distribution oriented and we have extensive experience in marketing projects based upon literary material and talent that have proven worldwide success. The managers are experienced in the implementation and control of worldwide studio distribution campaigns and the international distribution apparatus. This knowledge is invaluable when seeking to maximize profit by the timing of releases (dating) and spending to positively affect distribution revenues, or when seeking to minimize loss by limiting distribution expenses. Concentrating on the control of publicity and advertising costs, or maximizing a picture’s exposure through more publicity (which is considerably less expensive and generally perceived as more authentic, by the movie-going audience, than advertising) can substantially affect the ultimate profitability of a picture. It is in this area that the Managers have the most extensive experience and can make the most difference to the bottom line.

Major Studio Relationships:

While Blaze’s management and advisors and ourselves  maintain excellent relationships with all of the U.S. major studios, it is not presently contemplated that Blaze will have any pre-existing overall contractual relationship with a single major studio in respect to the Pictures. Without having the obligation to any one studio Blaze will ultimately have the opportunity to choose from a larger universe of potential projects, as well as, through leverage, to maximize favorable distribution terms.

No Development or Term Deal Overhead Exposure:

The Managers intend to invest in Pictures that have already been developed by a major studio utilizing its own resources, thereby avoiding for Blaze the speculative costs and extended time periods associated with development. Blaze’s Business Plan also gives the Managers the opportunity to pick and choose among all available films in the marketplace in arriving at the acquisition of rights in a Picture hereunder. Not relying on any overhead or other draws from a particular studio, nor engaged in any extensive and expensive development which would also lead to obligating Blaze to a first look at a particular studio, Blaze is not burdened by the problems of the traditional production/financing model when exercising its discretion to acquire rights in Pictures. Exercising their discretion based on the extensive knowledge and experience of the international marketplace, the marketability of each project and the financial risk profile thereof, Blaze expects to have a more efficient and profitable result across its slate of the Pictures. Another benefit of the absence of a “housekeeping” arrangement is that it ensures that there will be no obligation on the part of Blaze to enter into co-financing arrangements on films that it does not feel will generate the returns sought by the owner’s of Blaze or on terms that it does not feel will be beneficial.

Access to Large Scale Distribution:

 Blaze intends to utilize the studio’s international distribution apparatus to a significant extent, in many territories around the world, thereby accessing the studio’s expertise and output arrangements without having to underwrite the cost of maintaining any extensive distribution apparatus on a year-round basis. Obviously, Blaze will be paying distribution fees to these distributors but only on an “as needed” per-Picture basis, therefore by partnering with the studio and capitalizing on the muscle and might it ensures Blaze significantly more revenue as opposed to self distributing This distribution strategy will also allow Blaze to avail itself of the economies of scale that ensure substantially more favorable rates, on many distribution costs, to studios. Print costs, advertising rates, and other distribution expenses will all be charged to Blaze at studio-negotiated volume rates which are substantially lower than those available to independents. The savings in these areas can have an enormous impact on the returns generated by the Pictures acquired by Blaze. 

Secured Distribution For Maximum Returns:

The majority of motion picture companies face a dilution of the value of their assets due to uncoordinated, fragmented distribution. Most independents also shop for distribution arrangements on a picture-by-picture basis and do not have the support of a major studio under an overall distribution agreement or a network of established relationships with distributors and end-users to facilitate maximum financial returns across all media worldwide on a consistent basis. Before Blaze will commit capital to the acquisition of a Picture, it is Blaze’s intention to have one or more distribution agreements with Third Party Distributors in each territory. This will minimize the down-side financial risk while accessing the leverage of an established distributor or end-user in each territory, which will allow Blaze to maximize per-picture revenues across theatrical, home video/DVD, VOD and Digital, pay-per-view, pay television, free television and other media handled by such distributor and/or end-user in such territory.Blaze will reserve the right to mitigate risk and bypass the highly financial intensive and risk prone area of theatrical distribution in some territories and to acclerate the waterfall back to invesors by accelerating the exploitation timeline.

Leveraging off our  previous experiences we may also consult to other acquirers and distributors on acquistions but expect that to be strictly  non theatrical films  which do not create a conflict of interest with the investors in the proposed Funds, but it does maintain and  increase the footprint of ourselves which will be to all parties advantage.Once the proposed Funds are  established the fund will get first and last look on any such proposed acquistions, which, whilst secondary to the sweet spot for the proposed Funds, remain consistent with all strategies and objectives of the proposed Funds.

Basically, the structure provided in Blaze’s Business Plan gives Blaze the ability to deliver to the proposed Film Acquisition Funds (and ultimately  its Investors) the flexibility of having direct access to the distribution and exhibition end-users in certain territories. Such direct distribution is economically efficient while at the same time retaining the economic opportunities comparable to that of major studio distribution (while incurring a fraction of the fixed overhead) in other territories where no guarantees and lower distribution fees will give the proposed Film Acquisition Funds  a larger upside.

Blaze assures  that each Third Party Distributor licensing a Picture from Blaze will advance all Distribution Expenses, including their share of participations and residuals, and that each Picture will stand alone as a separate accounting unit; there will be no cross-collateralization between Pictures. The typical deal with a Third Party Distributor would account to Blaze on the following basis, i.e. Gross Receipts from the exploitation of the rights licensed to such third-party distributor would be applied and paid to Blaze on a Picture-by-Picture basis in the following order on a continuing and cumulative basis:

• First, the Third Party Distributor will deduct and retain for its own account its applicable distribution fee
• Second, the Third Party Distributor will deduct and retain for its own account an amount equal to all Distribution Expenses advanced by it in respect to such Picture.
• Third, the Third Party Distributor will deduct and retain for its own account an amount equal to the participations and residuals advanced by it in respect to such Picture.
• The balance of Gross Receipts (“Third Party Distribution Overages”) will be paid to Blaze who will deduct and retain for its own account its applicable distribution or management  fee, deduct and retain for its own account an amount equal to all Distribution Expenses advanced by it in respect to such Picture ,and the balance of Gross Receipts (“Distribution Overages”) will be paid to  proposed Film Acquisition Funds  .

In the entertainment industry it is common for collections agents to receive and account for all receipts and expenses in accordance with the chain of title and agreements. These run typically at 1 % of all revenues.

Blaze propose to take advantage of competitive terms from global administrators, custodians and and trustees in the global funds management business  to mitigate costs whilst maintaining investor security in the  proposed Film Acquisition Funds  so that the normal fiduciary responsibility inherent in a Fund is maintained.

Nominal fees relative to the investment will be taken by us to cover direct costs, with a considerable hurdle for the investor ( guaranteeing the first 10 %) with the balance being split between the investor and ourselves.

Sean Rothsey  has founded , run, or provided advice and assistance to public and private enterprises since the early 1980s and is a global specialist in Private Equity and Corporate Finance and Investment Banking,  with experience in Equity Capital Markets (including IPOs and reverse listings), property, agribusiness, manufacturing, shipping and logistics, data and technology solutions, information and communications technology, diversified financial services, online trading solutions, institutional wholesale & retail stockbroking, film acquisition, financing & distribution, media & entertainment ranging from start up to +A$1Billion. In addition through The Merkin Group ( including Pinefilm Pty Ltd, Merkin Pastoral Holdings Pty Ltd, The Rothsey Family Trust, Pinefilm Entertainment Pty Ltd, Horizon One Entertainment Pty Ltd,Revolution Entertainment Ltd and numerous partnerships its related entities have acquired and managed or distributed in our own right , or in partnership some 400 films across all rights in many territories. They have been attending film markets and festivals and Hollywood for almost 15 years and have strong film financing , sales agents, film production and studio relationships. They  have co distributed and worked with MGM , Warner Bros , Buena Vista, Disney, Fox, Sony , Universal,Madman, Becker Film, REP, Polygram,UIP  and all the major sales agents and producers. They are successful creators, funders and managers of investor pools.

The capital raising from third party investors will be handled by BoxRED Corporate (a division of Merkin Pastoral Holdings Pty Ltd  ACN056384975) (“BoxRED”), solely for information purposes and for the recipient’s sole use and shall not be further transmitted to third parties. It is and will be based on information provided by our client or third parties . 

Investors will be provided with a document in their capacity of institutional and / or qualified  and/or professional and/or exempt investor(s).

 IMPORTANT – PLEASE READ DISCLAIMER BEFORE YOU ACT ON THIS MATERIAL

Read Here     

https://www.merkin.com.au/?p=1514

 Sean Rothsey