Chapter 228： internal rate of return

In Dunn's view, Michael Ovitz's idea is too traditional.

Michael Ovitz believes that the reason why he was able to attract investment for the film is because he was in charge of the film crew, and he could persuade investors to invest in the film with the signboard of a big director and a big star.

Even, according to the investor's preferences, he can change the director or star, or provide a brilliant role for the investor's "Xiaomi".

Through this method of controlling the crew members, it is recognized by investors, and then fulfills its service commitment to the film company, and completes a series of all-round package services such as stars, crew members, and investment.

This kind of thinking, of course, is correct. Movies are the creation of stars, but they are not the way to make big money. The reason why many rich people invest in movies is often not for making money, but for favor, face, image promotion, or to please their little girlfriends.

This kind of thing is very common in the enlightenment stage of the film market.

For example, in Hollywood in the past, there was a very popular BD relationship.

b is sugar_baby, d is sugar_daddy, to put it bluntly, it is the relationship between godfather and goddaughter.

However, with the change of social atmosphere and the maturity of the film market, this kind of relationship has almost disappeared in Hollywood, and it only survives on the fringes of the entertainment circle. This type of girl usually has a specific name, called "wannabes", which refers to people who want to be a star but haven't done it yet.

On the other side of the developing country, with the vigorous development of the film market, the "godfather" culture has gradually emerged, followed by "wannabes", that is, "peripheral women".

Dunn has a vision beyond the times. His vision is naturally broader and more accurate than that of Michael Ovitz. He knows the financing mechanism that should exist in a correct, healthy, rational and mature film market.

It is by no means relying on big stars or peripheral women to guide investment!

Tang En said with a smile: "Michael, I think... your thinking is too narrow."

"Um?"

Michael Ovitz wasn't too happy.

Dunn is unparalleled in the production of movies, he admits that, but when it comes to the company's strategic vision, he has never been convinced by anyone.

Otherwise, at Disney, he would not have had a violent conflict with Michael Eisner, and he would have just followed his orders.

Tang En said slowly: "Michael, times have changed, and the star's appeal to the movie's box office is gradually weakening. In the past, the method of attracting investment through the brand of big stars and big directors will gradually lose its effect."

Michael Ovitz's tone was not very good, "Celebrities are not good? Well, then tell me, apart from celebrities, what else can attract investors?"

"Of course it's enough profit!" Tang En answered immediately without hesitation.

Michael Ovitz said lightly: "Yeah, if you can see enough returns, then the whole world must be rushing to invest in movies. The point is, most of those investors are laymen, they don't understand movies, and they don't have stars. How to convince them? With one mouth?"

Tang En laughed loudly and said, "Of course one mouth won't work, even with President Reagan's eloquence, he can't do it!"

Michael Ovitz raised his brows, looked at Dunn deeply, and narrowed his eyes, "Listen to your tone...Is there a way?"

"certainly!"

Tang En proudly raised his chest, showing an indescribable confidence.

Michael Ovitz dubiously said: "If you can really solve this problem, that is to point out a clear way forward for Hollywood, and the entire Hollywood will thank you, and Disney's problem will be solved."

Tang En said with a smile: "I'm still young after all, so I can only put forward a general idea and specific details, and I want you to help improve it and contact the investor."

Michael Ovitz waved his hand, "Of course, this is not only helping you, but also helping amg company."

Dunn reached out and asked the secretary for a carefully prepared document and handed it to him, "The first set of data, in 1975, the average production cost of American films was 5 million US dollars, and in 1987, this figure reached 2,000 US dollars. 10,000. In 1999, the average production cost exceeded 40 million US dollars, and the marketing cost also reached 15 million US dollars. It is conceivable that in the next few years, this data will continue to grow, and investors can no longer only look at When you get the name of a few movie stars, you take a huge risk and invest in it.”

Michael Ovitz looked at the information provided by Dunn with a heavy face, "With a substantial increase in budget costs, even if the conditions in the overseas market remain unchanged, it is impossible to finance enough budget funds through the pre-sale of copyrights."

"That's right, that's the truth!" Dunn snapped his fingers, and a smile appeared on his face, "The second statistic is the good news, the film company's internal rate of return."

"Internal rate of return?"

A little surprise flashed in Michael Ovitz's eyes.

Dunn said with a smile: "The internal rate of return is the rate of return for movies. Even though Columbia Pictures has lost money in the past few years, the rate of return for movies has never been lower than 14%. Especially in 1997, because of the production of "Men in Black" ", "Air Force One", "As Perfect", "My Best Friend's Wedding" and a series of films, the internal rate of return is as high as 23%!"

Columbia Pictures has been losing money since it was acquired by Sony.

But this does not mean that the films produced by Columbia Pictures have been losing money!

Columbia Pictures has been losing money year after year because of the difference in management styles between the United States and Japan, which has led to a surge in operating costs, as well as the salaries of more than 10,000 employees in the global distribution department.

Since Columbia Pictures was acquired by Sony, many original partners of Columbia Pictures have turned to other film companies.

As a result, Columbia Pictures has a large global distribution division that doesn't have enough films to distribute, and naturally can't make ends meet.

But the movie revenue, although not comparable to Warner, Fox, Universal and other companies, has not been bad.

Michael Ovitz didn't quite understand what Dunn meant, "What does this mean?"

Dunn waved his hand, "Don't worry, listen to me. In the past few years, 20th Century Fox and Warner's films have been the most successful in the box office market. Here I have a detailed internal rate of return form for Fox in the past 5 years, you Check it out. The lowest IRR was in 1995 was 17%, and the highest in 1997 was 36% because of the release of Titanic!”

Michael Ovitz frowned and didn't understand Dunn's intention at all.

Dunn's voice rose a little, and his expression was a little excited, "Michael, didn't you notice? If the film company's operating costs and employee salaries are removed, and the film's expenses on project establishment, slashing, cooperation and breach of contract are eliminated, then the film company will The rate of return will be the most coveted investment industry in the world!"

"But... how is it possible to exempt these operating costs?" Michael Ovitz asked in a deep voice.

Tang En said with a smile: "It is of course impossible to exempt the company's operating costs. But the investment you have drawn for the film company is aimed at the film, not the film company, right?"

Michael Ovitz's eyes lit up suddenly, as if realizing something.

Tang En struck while the iron was hot and continued: "Any film company cannot guarantee that all the films it produces will make money, but the internal rate of return of each film company has good data. What does this mean?"

Michael Ovitz quickly said: "This shows that the use of big-money film projects to make up for loss-making film projects, this large-scale film output is the source of the excellent internal rate of return for film companies."

"Yes, that's the truth!"

Dunn slapped his hands and looked very excited. He had always been afraid that Michael Ovitz was a stubborn old stubborn, and his half-hearted opinions could not tell him.

Now it seems that Michael Ovitz's vision and vision are indeed superior.

In a few words, Tang En let him understand the truth contained in it.

Michael Ovitz also looked excited, Dunn's proposal, like the hand of God, opened a new window of his life for him.

In the past, he believed that big stars were the foundation for attracting movie investment So after building a "one-stop shopping" service for the amg agency, he has been poaching some big Hollywood stars to join. .

However, the relationship between Michael Ovitz and Disney is cold, and there is almost no possibility of cooperation, resulting in the reluctance of first-line stars to join AMG, which naturally shattered his idea of ​​pulling investment for the film company.

But Dunn's words...

Let him finally understand a truth, movie stars are not the biggest guarantee of being favored by investors at all, but the excellent, excellent and surprising internal rate of return of movie companies!

If you only invest in one movie, even if the biggest directors and top stars join, there is still the risk of investment failure.

However, taking a large-scale investment similar to that of a film company, investing in 20 films in a row, and using profitable projects to make up for the loss-making projects, after such large-scale investment, even Columbia Pictures, which is the bottom of the six major companies, will be able to make up for it within a year. You can also get a minimum 14% return on investment!

When you are lucky, it can even exceed 20%. If you encounter movies like "Titanic" and "Spider-Man", the rate of return will even exceed 30%!

This document provided by Dunn allowed Michael Ovitz to successfully find the ultimate killer to attract investors!

And Dunn is not finished yet, his next sentence made Michael Ovitz excited and almost cheered——

"You know, I have some friends on Wall Street. According to data provided by Merrill Lynch, Wall Street hedge funds usually seek an internal rate of return between 12% and 18%, but once they encounter a stock market crash like this year, You will face a loss of more than 20%. In contrast, large-scale film investment is the transaction with the lowest risk and the highest return!"

(Sanqi Chinese)