

Slated aims to disrupt Hollywood as the AngelList for film funding - bproper
http://venturebeat.com/2012/01/25/stephan-paternots-slated-aims-to-disrupt-hollywood-as-the-angellist-for-film-funding/

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rockarage
_"A good example of “Hollywood accounting” would be “Harry Potter and The
Order of the Phoenix”, which took in $938 million in revenue, yet still
produced a $167 million loss. In cases like this the distributor, Warner
Bros., still makes a bundle, but the film and its backers, set up as a
independent corporation, wind up in debt. How is this possible? You can get a
more detailed picture in this episode of Planet Money, which details how
Disney paid itself more than $200 million in distribution fees on the Nicholas
Cage vehicle “Gone in 60 Seconds.” The film made a lot of money for Disney,
even while the corporation created to produce “Gone In 60 Seconds” was a loser
on the official accounting."_

Now I understand why Hollywood does not want simplified and efficient
distribution. It has nothing to do with ignorance and everything to do with
greed and avoiding all risk. They overcharge for complicated distribution and
DRM, and pass all the risk of to the film and its backers.

~~~
DevX101
If by 'film backers' you're referring to the executive producers that pay
money for the movie, I highly doubt they're stupid enough to fall for
hollywood accounting and actually lose money. Their fee is in that $938
million somewhere.

More likely, the losses are probably for tax reasons or to screw over anyone
involved in the film that signed a 'percent of net' rather than a 'percent of
gross' deal.

EDIT: See link below for how wealthy individuals finance films because they
WANT the film to lose money on paper. This gives them large tax deductions.

<http://en.wikipedia.org/wiki/Film_finance#Tax_schemes>

~~~
jonnathanson
This.

The smart money involved in film financing wets its beak before the accounting
actually begins. Gross percentage points, hefty producers' fees on top of
those gross points, salaries on top of those fees, generous slices of
ancillary revenue streams and foreign territory sales, and so forth. A
Hollywood film is basically a vehicle designed to enrich its participants,
_and_ allow them tax deductions on the nominal loss after everyone's taken a
taste of the profits.

If you're someone with _net_ points in a movie -- the screenwriter, say --
good luck ever seeing a dime. You're at the bottom of a pretty big pyramid.

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tomkin
I'm probably way off, but this is my understanding of this whole "kill
Hollywood campaign" that we've got ourselves into.

Step 1) Create a company that _destroys_ Hollywood. Stick it to Studio X by
way of Y tech advantage.

Step 2) Become a profitable company, maybe even a titan in the industry.

Step 3) Watch as others see your service as a threat, build their own
competing tech.

Step 4) Fight to keep your stake in the market, or exit. Fighting leads to
bullshit tactics. Exit eventually gives your company to the very studios you
were against.

Step 5) Studio X acquires your company in an attempt to compete with the "new
way of doing things". Your research & development goes into their melting pot
and the cycle repeats _OR_ Studio X acquires one of your aforementioned
competition, leaving you no choice but to resort to bullshit tactics to
survive (after all, you're huge at this point).

To me, the problem isn't Hollywood. It's the laws that surround and re-enforce
it. Locking up an industry in a closet full of weapons is asinine and the end
result is obvious.

~~~
wr1472
And you could substitute "Hollywood" for any other industry out there. Isn't
this just how the business world rolls?

~~~
tomkin
Sure, but we're not all about taking out the industry. The raison d'etre is
undignified by the motivation.

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sunchild
This idea has been kicking around since the late 90's. The difference is that
production costs have (in theory) gone way down since then. The flip side of
that is everyone with a Mac and a Canon 5D thinks he's Stanley Kubrick, so
it's harder to spot real talent. Either way, it's an inevitability that the
market for financing feature films and "television" series will spread
horizontally as the costs keep coming down.

I wonder how many people realize that Hollywood Studios are basically financed
by major banks. It's the talent pooling and fairly consistent ROI that keeps
the lenders coming back.

~~~
technoslut
>The flip side of that is everyone with a Mac and a Canon 5D thinks he's
Stanley Kubrick, so it's harder to spot real talent.

This is the only point I disagree with. I don't care how much more accessible
the tech gets it's still about te storyline, the acting and cinematography.

~~~
jasonwocky
I assume sunchild called it "harder" to spot talent simply because the
increased accessibility of tech means there's now more crap to wade through.

~~~
technoslut
I can't make that assumption. Any one of these crafts: direction, acting,
editing, cinematography and soundtracking is always hard to find. You always
had to wade through a mountain of garbage. The way most execs did it
previously is through word of mouth. I don't believe that's changed today.

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randall
AngelList's peg / competitive advantage is Venture Hacks / Nivi and Naval. It
sounds like this guy is a technology insider (investing in SecondMarket) not a
Hollywood insider. That makes me think it's going to be more difficult for the
winner investors to get on-board... and I don't know about you, but if
AngelList just had random investors from podunk nowhere, it'd definitely not
have the cred it has.

Do people producing movies care about who their investors are? Do film
investors have the same relationship with their producers as startup founders
do with their investors?

(Aside about AngelList: Some people I've talked to still feel like asking
money on an open platform such as AngelList is something you do if you're not
going to have a brand name investor. That means it's a backup or round-filler
strategy for the hottest startups, which lessens its utility compared to
traditional strategies of generating dealflow.)

~~~
bproper
Paternot has worked in the film industry for the last 8 years and definitely
acknowledged that the biggest challenge was getting the social proof in place
to ensure that investors and talent feel comfortable listing on Slated.

------
drumdance
I've thought about doing something similar in the past. While researching it I
noticed that there are not a lot of "insider" blogs like we see in the tech/VC
world. In fact, I briefly thought about getting into film production and using
blogging as a way to document the process and create a brand. (I ultimately
decided I like my current career better.)

I think someone will eventually do this and build a huge name for themselves.
I asked this question on Quora but didn't get any response:
[http://www.quora.com/Why-arent-there-more-movie-TV-
finance-a...](http://www.quora.com/Why-arent-there-more-movie-TV-finance-and-
production-blogs)

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brown9-2
The article, and idea behind the startup, seems to be that the studios are
screwing over the backers and the funding corporation.

But if this is so, why do people continue to invest in these vehicles? Don't
the backers of these movies, especially a blockbuster like Harry Potter,
_know_ that this accounting is going to happen?

It seems to me like there must be another explanation at work here - such as
the funding corporations being set up as losers purposefully for the purposes
of taxes. Otherwise, if the studios were screwing their funders so much,
wouldn't they have run out of suckers by now?

~~~
untog
I don't have a citation for this because it's from memory, but I believe that
a lot of the companies that go under in debt are actually subsidiaries of the
studios themselves. It works out as a tax/debt write-off.

~~~
mcao
Just curious, how is this different from what Enron was doing? They are
basically setting up shell companies to hide their losses right?

~~~
rgoddard
The shell companies are to hide the profits and maximize the studio's gain.

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redthrowaway
FTA:

>In response Paul Graham, the Svengali of of the startup community, posted an
essay calling for ideas that would kill Hollywood.

From Wikipedia:

>The word "svengali", has come to be used as a common noun referring to a
person who, with evil intent, controls another person by persuasion or deceit.
The Svengali may use pseudo-kindness and manipulation to get the other person
to turn over their autonomy.

How, exactly, is this an apt description of pg?

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NerdSatire
Hallelujah!

Once Stephen Paternot orchestrates this coup d'état of Hollywood, its new
motto will be: "Got the girl. Got the money. Now I'm ready to live a
disgusting, frivolous life."

My apologies that this comment is very un-HN like.

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TheCowboy
So in reality, Hollywood profits are decreasing due to unintentionally-on-
purpose losing more money to studios such as Disney, rather than actual
pirates.

Make sure to share this information with anyone you know when discussing SOPA.

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smoody
This has been done before. But, as we know, being early is the same as being
wrong.

