Confidential Information Overview November 2009
CONTACT Adam Caudill 850.377.3279 (p) Adam@AfflictedMovie.com
Wrion Bowling 330.328.4038 (p) Wrion@AfflictedMovie.com 1.
This Confidential Information Overview (this “CIO”) contains confidential information regarding Afflicted Pictures (the “Company”). By accepting this CIO the recipient agrees that it will, and will cause its directors, officers, employees, advisers and other representatives to use this CIO and any other information supplied by or on behalf of the Company only to evaluate a possible transaction with the Company (the “Transaction”) and for no other purpose, will not divulge or permit others to divulge any such information to any other person and will not copy or reproduce in whole or in part this CIO. The recipient, by acceptance hereof, acknowledges its duty to comply with this certain Confidentiality Agreement between the recipient and the Company.
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Table of Contents
I. Executive Summary....................................4 II. Risk Management Overview......................5 III. Project Overview.........................................6 IV. Box Office and Marketing/Distribution......8 V. Production Plan/Time Line........................9
Appendix A - Projected Investment Return........10 Appendix B - Production Team...........................12 Appendix C - Film Industry Overview.................14 Appendix D - Acknowledgment of Risk..............20 Appendix E - Ohio Tax Incen tive........................22 Appendix F - Contact Information......................23
Afflicted is a modern horror film about nine strangers hired for a construction
job at the secluded Blackwood Resort. For most of them it was supposed to be just another job. But one by one, a vicious alien parasite is taking over the crewâ€™s bodies. When a gruesome accident exposes the invasion, those remaining have no way of telling who else has been afflicted--or who will be next. Suspicion leads to paranoia and the dead just wonâ€™t stay dead. Do those that remain have what it takes to escape, survive, or even stay human?
Production Plan Development: During the packaging process the necessary elements will be gathered to make the project appealing to distribution companies and investors, including the pursuit and attachment of name actors. Preproduction: During the preproduction phase (8 weeks before the start of production) all of the production elements will be acquired and organized. Cast and crew will be selected and hired, equipment rentals will be arranged, and schedules and shooting locations will be finalized. The creative team will do pre-visualization and test shoots to ensure that production and postproduction go as smoothly as possible. Production: This is when the magic happens. Over the course of five weeks the crew will shoot all the footage theyâ€™ll need for the final film, including all elements needed for visual effects. Postproduction: During postproduction (approximately 4 - 6 months) the filmmakers will work with various teams not only to assemble the best takes captured during filming, but
masterfully craft the sound and visual effects as well as acquiring a music score. Preproduction: . ........................................................................ 8 weeks Production:................................................................................ 5 weeks Postproduction:......................................................................... 4 - 6 months Total time to finished sellable product:................................... 9 months.
Goal: Afflicted is sold and profitable within 9 month of completion (18 months from start of preproduction) 9.
Appendix B: Production Team Adam Caudill (Writer/Director/Producer) and Wrion Bowling (Director/Producer) have a long history of successful collaborations, having worked together on six different projects over the course of five years--each in a key decision-making role (Writer, Director, Producer or Editor). In addition, Wrion and Adam placed first and second with their respective shorts in the 2007 Ohio University 48-Hour Shoot Out contest (Wrion with Vicious Cycle and Adam with Lou’s Clues). Adam Caudill has developed a reputation for tackling complex and ambitious projects Adam wrote, directed, and produced the logistically and emotionally challenging short Angel of Mercy; co-wrote, directed, and produced the effectsheavy Lou’s Clues; and was head-writer for Ohio University’s eight-episode sitcom Chester’s House. Adam also directed the short Class of 98 and edited and contributed visual effects to the short If/When. In 2008 he won the school’s Video Sequence Award and completed his degree in Video Production with corollaries in Creative Writing and Business Law.
Wrion Bowling established himself as a preeminent director at Ohio University with a reputation for leading large teams, working in a variety of formats, and the ability to find creative solutions to logistical problems. Wrion directed Chester’s House, the school’s first 3-camera sitcom, leading the cast and crew to produce one of the school’s most impressive efforts to date. Wrion’s crowning achievement is the original webseries Housemates, which he wrote, directed, and produced (available at www.HousematesTV. com). The comedy series garnered a small Internet following and was used by OU’s School of Media Arts and Studies as a recruitment tool. Additionally, Wrion has directed a number of shorts, including It Came From Horkin, The Subleaser, On Your Side, and the awardwinning Vicious Cycle. In 2008 he won the Media Arts and Studies’ Director’s Award and graduated summa cum laude.
Appendix C: Film Industry Overview Overview The film industry is comprised of two major activities: production and distribution. Production consists of the financing and creation of motion pictures. Distribution involves the promotion and exploitation of films domestically and abroad in a variety of formats, including theatrical and non-theatrical exhibition, home video, DVD, pay-perview, cable, free television, and other ancillary markets. The film industry as a whole as diversified its revenue sources over the past two decades with the development of new technologies and the growth of international markets. Technological advancements have created new distribution alternatives (and revenue streams) for films, including expanded pay and cable television, video on-demand, DVD and the Internet. Predicting the success of an individual feature film in any specific terms is difficult at best. There are no dependable rules of thumb that provide a guide to making revenue projections for films. However, the film industry as a whole is one of the few outlets of consumer spending that is relatively recession-proof; Box office receipts have grown over six of the last seven recessions (Julia Boorstin, CNBC). Development and Production A film goes through four stages before it is completed and sellable: development, preproduction, principal photography and postproduction. During development a producer either purchases the rights to a story, screenplay novel, or other source material or develops the story internally, paying a screenwriter to write and revise a screenplay. 14.
In the weeks leading up to principle photography, the film enters preproduction. In this stage the producers set up an office, hire a staff and begin planning logistical elements of the production, including purchasing insurance, arranging location agreements, and renting equipment. The production crew is hired from the top down and actors are auditioned and cast. The production team prepares a shooting schedule, makes a number of creative decisions, and prepares the commencement of filming. The next phase of production is principle photography. In this time the crew films all elements needed for the final assembly of the film. This phase usually takes 21-40 days depending on a number of factors including weather, actors’ availability, and other requirements specific to the script such as special effects. Once all elements have been filmed the project enters postproduction. Editors assemble the film (which is almost always shot non-sequentially in order to save time and money) into a cohesive story. Additionally, the music, sound effects, and visual effects and other elements are combined to create a finished film. Once the film is completed and ready to sell, the producers enter into an arrangement with one or more distributors (usually through a sales agent or other intermediary). The producers and distributors work together to prepare the film for exploitation in designated markets and launch advertising campaigns to raise awareness for the film. Distribution A film generates revenue through distribution and exploitation in various geographic markets in number of formats (or “windows”), including move theaters (domestic and foreign), non-theatrical venues (airplanes, cruise ships, military bases, etc.), home video/ DVD, and television (pay-per-view, premium, and free). Additional revenue is generated from ancillary sources such as music soundtracks, merchandising, and the Internet or “New Media.”
A large portion of a film’s revenue incurs during the first three years of its distribution, with the majority of that revenue being received in the first twelve to eighteen months. However, the specific timing and amount of the revenue can vary widely from film to film. Producer’s Net Profits All revenue from the film in all markets and formats is known as “Gross Receipts”. The first cut from the gross receipts goes towards the distributor, sales agent, and marketing agent’s fees. Next, anyone accepting deferred payment for their work on the film is compensation. After this, providers of financing and investors are entitled to recoup an amount equal to their investment plus an agreed upon fee or percentage. In the case of budget overruns, any money owed to a completion guarantor is also paid back at this time. The money remaining for the producers after these sums have been deducted is known as “Producer’s Net Profits.” This is the level at which investors participate in the profits of the film. Theatrical and Non-theatrical Exhibition Box office revenue from theatrical distribution is split between the distributor and the theater or theater chain. The arrangement of the split is negotiated between the distributor and the exhibitor. Though this agreement can vary widely from film to film, the average arrangement is a 50/50 split. The distributor’s chief expenses in this stage are print and advertising (P&A) costs. Print costs refer to the making and distributing of physical copies of the film for exhibitors to project into theaters. The print costs depend on how many screens the film plays on at any given time. Advertising costs are used to promote the film in the months leading up to its release, usually with a surge in promotion just before the film’s release date. These costs include the production and placement of print ads, radio and television commercials, the production of short “trailers” varying in length from 15 seconds to 2 minutes, and other publicity and promotional campaigns. 16.
The cost required to raise public awareness for the release of a new film is significant, especially for films that have a wide initial release. While sometimes the revenue from theatrical exploitation is not enough to justify the high P&A costs, the advertising can create a brand awareness with consumers that increases the revenue in subsequent release windows, especially DVD and television. A distributor may also license the picture to an exhibitor to show on airplanes, cruise ships, military bases, and other governmental institutions. Home Video/DVD There are two main components of the home video market: rentals and sell-though. The rental strategy, which is far more common, involves selling DVDs primarily to retailers for rental to the public. The primary costs of this strategy are the manufacturing of the DVDs and trade marketing. The sell-through strategy is utilized when a producer believes that the revenue generated from selling DVDs directly to consumers (in addition to or in place of rental revenue) will be enough to offset the cost of production and advertising. This decision is usually based on the film’s theatrical success. Pay-Per-View, Premium, and Free Television A film’s television rights are usually first licensed to pay-per-view outlets after or concurrently with home video/DVD release, followed by pay television (HBO, Showtime, Stars) then network broadcast television (CBS, NBC, ABC, Fox) and finally local broadcast stations and basic cable channels. Producers license the films to television stations based on the film’s theatrical success or, in the case of pay-per-view, the number of viewers that elect to pay for the service.
Ancillary Revenue Music from the film may be licensed for soundtrack release, public performance or sheet music publication. Merchandising rights may be licensed for products such as video games, toys, T-shirts, posters, and other merchandise. The screenplay rights can also be licensed for novelization and other publications. THE FUTURE Box Office The domestic box office continued to grow in 2008, reaching $9.85 billion after a 2.1% gain from 2007. 2009 is projected to gross even more. Television The television markets have an enormous potential for growth in the coming years. The proliferation of digital cable and satellite services has offered a wealth of new options for consumers, including more free and premium movie channels and the availability of content on-demand. The market will become increasingly important as the price of highdefinition sets and digital television continue to decline, both domestically and abroad. loss.
Digital - DVD and the Internet The DVD and Internet markets are becoming increasingly important as digital television receivers and players continue to drop in price. These new digital technologies are set to alter the release pattern windows for a film. Until recently, a film would appear in the home video market within 6 months of its theatrical release; 6 months later it might have appeared on the premium pay television networks, and a further 12 months later it might have hit the free-to-air television screens. Recently, the release pattern window exclusively devoted to home video has been expanding. This trend is expected to continue with the growing popularity of DVD. 20th Century-Fox released Titanic on DVD shortly after its theatrical run. The other major studios are now doing the same; an example of this is Disneyâ€™s huge success with Pirates of the Caribbean. The recession has brought about a recent decline of overall DVD sales. Whether or not this trend will turn around as the economy improves remains to be seen, but industry leaders are hopeful that new digital avenues for revenue will at least partially offset the loss.
Appendix E: Ohio Motion Picture Tax Incentive The Ohio Motion Picture Tax Credit was created in 2009 to encourage and develop a strong film industry in Ohio. The program provides a refundable, non-transferable tax credit to be taken against a business’s corporate franchise tax or an individual’s Ohio personal income tax obligations. The credit is based on eligible production expenditures (EPEs) in Ohio, defined in Ohio Revised Code 122.85 (A)(4) as “expenditures [...] for goods or services purchased and consumed in [Ohio] by a motion picture company directly for the production of a tax credit-eligible production.” The tax credit is equal to 35 percent of Ohio resident wages and 25 percent of nonresident wages and non-wage Ohio production expenditures, with a cap of $5 million per production. Based on the portion of the Afflicted budget comprised of EPEs and the estimated number of employees that are Ohio residents, Afflicted Pictures projects a tax credit of 20.15% of total production expenditures. At the end of a two year period, even in the event that Afflicted does not achieve any form of distribution, this money will be returned to the investor(s), essentially reducing the investor’s risk to 80 cents on the dollar.
Appendix F: Contact Afflicted Pictures 2842 Indianola Ave Columbus OH 43202 Adam Caudill 850.377.3279 (p) Adam@AfflictedMovie.com Wrion Bowling 330.328.4038 (p) Wrion@AfflictedMovie.com www.AfflictedMovie.com