Questions Regarding Entertainment Finance
Directions: Answer both questions on the following page. Your answer to each question cannot exceed two handwritten pages (single-sided) per question. You may use the attached paper, although it is not required.
Your goal is to demonstrate mastery of the material in a concise answer. Do not just do a brain dump. Construct a neat, organized answer that is easy to read. As in a job interview, an answer that reflects creativity based in facts will be better received then a response that just states facts. Keep in mind that there are no right or wrong answers to these questions.
This exam will be graded anonymously. When finished, please scan your hand-written exam into three separate PDF files, using the following file names, and without your name on any pages and without this page on top:
Should Lionsgate copy WarnerMedia’s strategy for 2021 and release all of their theatrical films to their Starz streaming service? See this for the latest subscriber numbers.
You are the producer of a thriller project called THE HITCHHIKER, that you would like to shoot in the Spring of 2021 in Los Angeles, where the script is set.
Your line producer has created a budget for $6 million. You have received a $5 million offer from a private equity source to finance the feature.
The financier has three conditions for funding:
1) You must obtain a tax incentive to reduce her risk.
2) She expects you to engage a sales company to reduce her risk. 3) You must cast her son in a compensated speaking role.
Other Notes on the film:
-The line producer has created a 32-day shooting schedule.
-The deadline to apply for the California incentive in 2021 has passed.
-The financier has said she will not agree to any dilution of her $5 million in equity. -The star is being paid $500,000.”
Explain at least three different mechanisms to close the $1M gap in finance and satisfy her conditions, and then explain in as much depth as possible the process of completing the financing through each mechanism. Please be sure to discuss the pluses and minuses of each mechanism. Your analysis is as important as your solutions.