It might be worth seeing that portion in black and white.
The unknown is whether they really will be able to “pick the right titles and market them properly” which apparently is no small feat. There’s a lot riding on the Regal arrangement, but their history shows that if they fall down, they pick themselves up and try something else. I’m still not convinced, though, that they learn the right lessons from their mistakes, but I am still hopeful.
TRANSCRIPT:
ERIC. Doug.
Q. How does Hannover House plan to fund new title acquisitions if the majority of Twelve revenues are going to eliminate the debt?
ERIC. The question was, “How does Hannover House intend to acquire new title acquisitions if the majority of Twelve revenues are going to retire Twelve debt.” It’s a good question. And it comes back to the statement that Fred and I said earlier, is that 2010 has been a windfall for the company in ways that aren’t necessarily shown on the Balance Sheet. We have gone from being a boutique DVD distributor in Arkansas to being one of the invited key players at all the major film festivals for the acquisition of films.
We have been approached to handle All’s Faire in Love, which is being distributed internationally, video, and television through MGM/UA. Why would they come to us for a deal like that? Well, it’s a good title for their video divisions, but it’s not big enough for MGM’s theatrical division. They want to come out with the new James Bond film on 3,000 screens, and so something like All’s Faire in Love which is 40, 50, maybe 100 theatres, it’s great for their video label, but it’s too much of a distraction for the theatrical. This is a great opportunity for a company like Hannover House, and we have been offered a huge number of titles on deals that vary from no advance at all, to P&A being provided by the production companies. So the acquisition of titles on a going-forward basis is not a problem for the company. The problem is going to be picking the right titles and marketing them properly.
We are one of only twelve companies in the United States that has full-service distribution, where we sell to theatres, we sell to international, we sell to television, and we have our own direct video label that does not have to go through a major studio. There are other companies out there that have theatrical only and they have to go through a major studio. And there’s benefits, as you pointed out with Twelve, in going to a major studio for certain titles, but there’s also negatives. The negatives are you lose control of the cash flow, you lose control of the release date, the packaging, the price point, you can’t package your smaller titles with the bigger titles because the major studio maybe doesn’t want your smaller titles. So we feel that we’re in the best position of any other independent out there right now, perhaps except for Anchor Bay Entertainment because they’re very similar to us in what they’re doing. They’re primarily DVD and Blu-ray but they also have theatrical titles and their own video label.
But we feel really encouraged because there’s only a couple of places where people with high quality mid-level films can take them to, and we’re one of those places. And people saw that we opened Twelve on 231 screens. We didn’t do the box office, but they saw the billboards and the taxi tops in New York City and the TV commercials and they saw our trailer, they saw our actors on the talk shows and on all of the Entertainment Tonights and the Access Hollywood, all those programs, and they said, “You know what, these guys, they made noise for this move, they went out and made noise. Maybe we should consider them for our film.” So acquiring titles on a going-forward basis is not expected to have the same dollar cost that happened to us in 2010 when we had to buy our way into the club.
FRED. And I will say that paying for those releasing costs will be done in a variety of ways. First of all, we’re optimistic that there will be positive cash flow from Twelve even after paying the creditors for Twelve. Secondly, Twelve’s not our only source of income. We have other income coming in on a regular basis. Thirdly, we have excellent relationships and excellent, very good terms with vendors that we can use for releasing costs. And lastly, we are certainly not averse, and we’re talking on a daily and weekly basis with the same and other sources for venture capital / investment banker funds for our larger releases.
ERIC. So if a really substantial title came to the company and we needed to pay an advance that we were unable to do, we might in that particular case reach out to a private investment group and say, “Would you like to co-venture with us. You put up the advance and we’ll give you a portion of our distribution fees.” And we have used that in the past, we hope to use it a lot less in the future because we don’t want to dilute our fee basis, but so far acquiring new titles has not been an issue.
AI
