A Private Placement Memorandum (“PPM”), also known as an
offering memorandum, is a legal document that outlines the objectives, risks
and terms of an investment in a private placement of capital. It provides potential investors with valuable
information about the risks associated with the offering, enabling them to make
an informed investment decision. It also
serves to protect those making the offering, as full and accurate disclosure can protect them
from liability down the road.
In the film and television industry, risk disclosure is
paramount, as very few industries have higher risks and higher rewards. It truly is the “ultimate alternative.” Consider the 2002 film “My Big Fat Greek
Wedding,” which cost $6 million to produce, and grossed $369 million worldwide. The film is among the most profitable of all
time, yielding a 6,150% return.[1] At the same time, countless films have been
box office bombs, many starring A list actors.
Consider the 1995 film “Cutthroat Island,” starring Geena Davis, which
lost approximately $105 million - the biggest financial disaster in movie
history.[2]
Trailer: Cutthroat Island (1995)
With so little predictability in the film and television
industry, one can see why it’s in the best interests of both the potential
investors and those making the offering to be upfront and clear about the risks
of investing. In addition to the
customary risks of investment, film and television has unique risks that can be
broadly categorized as follows:
- Having an A-list cast, producer and/or director is no guarantee of success;
- Risk mitigation tactics (film slates, for example) can prove ineffective;
- Audience tastes cannot be predicted;
- Marketing plans can fail;
- Equipment can fail and technology can become obsolete;
- Intellectual technology infringement (piracy) is a serious threat to profitability; and
- The unexpected can happen: terrorism, strike, inclement weather, serious injury/death.
In an industry so rife with risk, it’s necessary to seek
counsel, whether you are the investor or the one seeking investment, from an
attorney who is familiar with both entertainment and securities regulation.
