Reality dawns

Individual investors in single films take on major risks

Patrick Imeson and Christopher Cain were casual friends, often talking about ranching at community events near their Colorado homes. Then at a party in Aspen a few years ago, Cain mentioned he'd like to come out of retirement. Curious, Imeson asked what Cain used to do.

"Make movies,"Cain said. "You know what I do?" Imeson responded. "I make investments."

The way things look now, that may have been a costly conversation for Imeson. While banks and private equity consortia recently have pumped billions into diversified studio slates, many movies are still financed the older -- some say riskier -- way: by individual, one-off investors. Imeson agreed to raise $8.8 million to finance Cain's next movie; about $6.7 million of that came from Imeson and a partner.

"September Dawn," Cain's provocative thriller, opened August 24 on 857 screens. Seventeen days later it was gone. Total domestic boxoffice: $1,066,555. Total production cost:$10.1 million. P&A: another $10 million.

Imeson and the other novice film investors will likely lose money. But the deal sounded like a good idea at the time. With the U.S. fighting Islamic jihadists, "September Dawn"is about home-grown religious terrorism: the story of a band of Mormon gunmen who killed 120 settlers on a wagon train to California 150 years ago. The fact that the film is a religious parable was a big draw for investors like Imeson. Plus, Cain has a track record,having directed "Young Guns,"which earned $45.7 million in domestic boxoffice in 1988.

But the film was controversial. The Mormon church has long recognized the role its members played in the slaughter, but the film implies that then-church leader Brigham Young condoned the attack, which was never proved.

That controversy, and the filmmakers' willingness to make analogies to the current U.S.war on Islamic terrorists, helped get press for the film, as Cain and star Jon Voight made the rounds on cable news and talk radio. Unfortunately for the investors, the free publicity didn't translate into ticket sales.

Based on the domestic theatrical take, David Davis, an entertainment valuations expert with FMV Opinions, estimates that up to $5 million more in ancillary revenue could be headed toward "September Dawn"from international boxoffice, TV rights, a Sony DVD release and other sources.

But Imeson figures the movie needs to take in $23 million in total revenue before A-round (production) and B-round (P&A) investors can turn a small profit. To hit that number, he calculates the movie would have needed to bring in about $15 million in domestic theaters, or about 14 times more than it did. If the projections hold, those who put up production coin would get nothing back, and all money -- not enough to recoup their investment -- would flow to the P&A financiers.

Davis says Cain and company were trying to buck significant odds by sinking all their capital into a single movie rather than going the more common, institutional-investor route and planting money in a portfolio of films.

Imeson, though, says the two months it took him to raise the needed funds taught him some lessons about film finance.

"We learned that people who knew a lot more about investing in movies were willing to put $150,000 into it, but the big money wasn't there," he says.

ON THE MONEY: On Nov. 7-8, the Nielsen Co., parent of The Hollywood Reporter, will join with Dow Jones to present the Media and Money conference at the Grand Hyatt in New York. The event will include discussions with some of media and entertainment's top dealmakers and investors, including Viacom chair Sumner Redstone; Time Warner president and COO Jeffrey Bewkes; Michael Eisner of the Tornate Co.; Roy Salter of the Salter Group; Daniel Snyder, owner of the Washington Redskins; Michael Lynne, co-CEO of New Line Cinema; Relativity Media CEO Ryan Kavanaugh; Chip Seelig, managing director of Dune Capital; Norman Pearlstein of the Carlyle Group; Columbia Pictures COO Bob Osher; and Jeff Berg, chairman and CEO of ICM, as well as panels moderated by THR executive editor Paula Parisi and New York bureau chief and business editor Georg Szalai. For more information, visit