how to value their films or libraries.
REPOST of the LinkedIn Article
By Stephen J. Kerr & Sarah Nean Bruce
Stephen Kerr, has been an appraiser of film and television properties for more than 25 years. He recently finished the valuation of three more film libraries for the owners/distributors of those titles. In 2014, he published an article while consulting with a number of film sales agencies and distributors about the challenges they were facing. In 2017, he updated that piece.
My firm has been valuing book, music, software, film and television (intellectual) properties for more than 25 years and we have also studied the valuation techniques of many other firms as well, and for the most part, it comes down to “apples to apples”.
Break down the film, or films, by director, star(s), genre, original box office (or DVD) revenue and foreign/domestic exposure.
Contact other producers or distributors with similar genre films (with the same director/stars if possible) in their library. These are your “comps”. Find out how those films performed over their lifetime. Once you have a great enough sampling of “comps”, determine an average baseline value for similar titles. If you ask the right people, you might be surprised how forthcoming most rights holders are with this information, they have nothing to hide and often gain valuable information about their own films in the bargain.
Researching the past sale price of similar films is a bit tricky, but there is a lot of published and unpublished information about past film sales available on the internet. Again, it is wise to turn to your friendly competitors and other rights holders. You will probably find, as we do, that you can develop a consensus of thought about any particular film based on its genre, star and director. Example: If you find that 5 to 8 year old films (like yours) were sold from one rights holder at $7,000, another at $9,000 and another at $12,000, then you can form a consensus market value of similar titles at about $10,000. That is your baseline value.
Our firm gives each film in a library a rating (1 Worst – 4 Best) depending on the film’s past financial performance, the presence of known “movie stars”, the age of the film, and the film’s director, producer and debut reviews. We total the points for each of these factors and create an average (Example: 2.3). So, if the consensus, general market value of films of a similar nature is $10,000, then you apply your multiple (for example purposes only: 2.3). Fair Market Value $23,000.
Applying a discount. You may need to discount the film’s value based on many possible factors; among them are the number of territories sold/unsold (and currently still under contract), the availability of clear chain-of-title information, and the quality of the original print. If the print has not been digitized and is not in high definition (standard def), then that becomes a factor too. In one recent valuation, we had to give standard definition “B” and “C” titles zero value. We add up the discounts and apply them. It usually comes in at .50 to .80. This is your discount rate. For example purposes only, let’s assume that we have created a discount of .67. We multiply our film’s gross value of $23,000 times .67 to arrive at a Fair Market Value of $15,410.
That is a very accurate assessment of the value of this property.
You may be wondering why we first create a rating point system and apply it to an average industry consensus of similar films, and then discount that gross value to arrive at a Fair Market Value. We do this to make sure that we are treating each film fairly and accurately. Just because a similar Kevin Sorbo or Mark Harmon picture sold for $22,500 in 2013, that does not mean that's what your film is worth. You will need to rate all of the elements of the film and apply any discounts to be accurate.
The days when DVD was king are over, and films today are very much valued on their digital distribution rights. If those rights, or elements, are not available, then the value can fall to the floor.
We understand that this is not a cookie cutter valuation method, but it forces you to look at all the positive and negative aspects of a film and apply a numerical value to them. I promise you that if you use this process you will feel that you have a handle on the true market value of your film property, or properties.
If you need any help with this process, or would like us to conduct an impartial valuation for your company, please do not hesitate to contact us.
STORY-TELLING & STORY-SELLING
A series of conversational articles and brief essays on
The Art & Science of the Entertainment Media Business
Written by Stephen J. Kerr & Sarah Nean Bruce
Bel Âge Médias | Santa Monica, California
+1 310 666-6474 | www.BelAgeMedias.com
firstname.lastname@example.org | belagemedias@ME.com