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Seven Arts Pictures plc, through its subsidiary, Seven Arts Filmed Entertainment Limited, engages in the production and licensing of motion pictures in the United Kingdom and internationally. It develops motion pictures for theatrical, video, and television. As of March 31, 2007, the company owned a library of approximately 25 motion pictures. Seven Arts Pictures plc operates in Europe, North America, South America, Africa and Middle East, Asia, and Australia. The company is based in London, the United Kingdom.
Why Invest in Seven Arts Pictures plc?
- Seven Arts Pictures is an independent motion picture production and distribution company.
- The Company’s core business strategy is to finance, produce, and distribute 4-7 films annually with budgets of less than $10 million each with built in margins based on pre-sales of 30-50%. These are supplemented by higher costs movies (15-40 million), with lower guaranteed margins and that may enjoy a higher upside in the event of theatrical breakthrough. The company also seeks to acquire completed films for distribution as an agent for a 15-20% fee.
- The Company reduces its financial risk on each movie by pre-selling certain domestic and international rights to distributors before production commences.
- Seven Arts Pictures takes advantage of tax motivated financing structures to subsidize and support film production. Investors receive tax credits based on their investment; therefore, the Company is not obligated to return the principal invested. The net result is to lower the cost of movie production. In 2008 through 2010, tax credits are expected to provide 40% to 50% of the total annual production budget.
- The company utilizes proprietary and non-proprietary structures in the US, Canada, UK, and Hungary to minimize film production costs and the company keeps current with changing tax laws to identify appropriate scripts and locate production in geographic regions that qualify for tax credit investments.
- Each motion picture is independently financed with non-recourse senior debt secured by pre-sales. The Company does not go beyond pre-production until senior debt financing is secured by pre-sale agreements. This financing discipline targets a minimum gross margin of 20–50% for each movie based on the most conservative revenue forecasts.
- The Company does not expect wide US theatrical release for many of it pictures and therefore the majority of its revenues on these pictures are derived from the pre-sale agreements payable upon delivery of the movie in the appropriate format. The majority of revenues come from domestic and international DVD distribution, pay-per-view (PPV), as well as pay and free TV distribution.
- Although the Company is not dependent on theatrical distribution, when it occurs, the advertising and marketing associated with the theatrical release helps to propel DVD, PPV, and TV distribution revenues. Further the 1-2 supplemental larger budget movies per year have breakout potential and limited downside.
- The company is poised to benefit from expected revenues generated by technology changes when consumers download movies directly.
- Seven Arts Pictures has excellent relationships with theatrical distributors including MGM, Sony, Paramount, and fox, as well as international distributors such as Momentum, Pathe, AMG (Japan), and Scanbox, These relationships provide a majority of pre-sale agreements.
- Through a combination of releases and selected acquisitions Seven Arts would like to increase its film library from 35 films to 125 films over the next five years.
- In FY 2008, two films produced by Seven Arts Pictures had a limited theatrical release. Deal, starring Burt Reynolds, Bret Harrison and Shannon Elizabeth was distributed through MGM. Noise, starring Tim Robbins and William Hurt was distributed through ThinkFilm. Both performed modestly, but are expected to meet profit targets based on pre-sales.
- Several more films are in final post production or are ready for distribution, and will likely be released in the next several months. Some of these may have a theatrical release. American Summer may become the highest revenue generating film in the Company’s history.
- Seven Arts Pictures has secured the exclusive rights to create motion pictures based on a series of 11 novels by Boris Akunin, a Russian writer. The novels are adventure/thriller stories based in Czarist Russia and are very popular in Europe. We expect the first film of the series, Winter Queen, will be released in FY10.
- The Company has several films in development scheduled for production and release in 2009 through 2010.
- Management has a wealth of experience in the film industry, including financing transactions, risk management, film production and distribution. Management has been directly involved in many successful feature films such as Terminator 2, Basic Instinct, Total Recall, Rambo, Rambo III, Platoon, The Big Easy, Johnny Mnemonic and Showgirls.
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