# What is Cinelaunch?
**Cinelaunch** is a film finance platform focused on improving the process of project packaging in the entertainment industry.
**Cinelaunch** is pioneering the future of project packaging in the entertainment industry, transforming the way movies and TV shows are conceived, packaged, financed, and brought to life. The platform demystifies and streamlines the intricate journey of launching entertainment projects, making the process more straightforward, quicker, and cost-effective than ever before. At its core, Cinelaunch is a cutting-edge SaaS FinTech solution designed specifically for the entertainment industry. It offers a suite of tools that save time and reduce costs for producers, agents, managers, directors, and other industry professionals by simplifying project management, financing, and execution.
### Guides: Jump right in
Follow our handy guides to get started on the basics as quickly as possible:
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[For Investors](/introductions/for-investors)
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[For Producers](/introductions/for-producers)
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[For Audiences](/introductions/for-audiences)
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### Fundamentals: Dive a little deeper
Learn the fundamentals of film financing to get a deeper understanding of how investing in movies works:
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[Tax Incentives](/film-financing-fundamentals/tax-incentives)
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[Minimum Guarantee (MG)](/film-financing-fundamentals/minimum-guarantee-mg)
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[Distribution Deals](/film-financing-fundamentals/distribution-deals)
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[Pre-Sales Agreement](/agreement-types/pre-sales-agreement)
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**Good to know:** Make your way through these sections in chronological order if you'd like to take broad look and learn everything the CINELAUNCH Knowledge Base has to offer!
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# For Investors
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**Fun Fact**: The global film market is predicted to grow +84.92% over the next 5 years. \
In that same period, the S\&P 500 is predicted to grow 44.3% In that same period, the US housing market is predicated to grow 28.34% In that same period, gold is predicted to grow 24.67%
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The annual expenses of the U.S. motion picture, industry was estimated at $36.8 billion U.S. dollars.\
That’s $36.8 billion dollars of investment capital that goes into what became a total of $101 billion dollars in revenue.
The best part is: A movie is an asset that keeps making money long-after the expenses go away. Through streaming royalties, geographic distribution, licensing options, VOD rentals, copyrights, et. It’s like real estate without the overhead.
### Well CINELAUNCH unlocks the ability to invest in the alternative asset class of movies!
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CINELAUNCH makes the process of vetting through QUALIFIED film projects incredibly efficient.\
For a projects to even be featured in the Launchpad: It needs to go through a series of approval processes.\
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**This is NOT an Indiegogo or a Kickstarter alternative.**\
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We're constantly developing partnerships with accredited film festivals, screenplay competitions,\
entertainment industry professionals and development organizations to structure our "engine."\
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This is all for the sake of ensuring only the most high-quality, investable, structured film project proposals\
are put in front of our board of directors, and eventually, the potential project investors.
# For Producers
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**Good to know:** Beyond the base functions, CINELAUNCH is a fully-loaded film-finance super-app with loads of features to make early-stage film producing manageable.
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Financing a film is a convoluted, extremely inefficient process at nearly every level. If you look at the processes for funding and developing projects in any other industry, it's changed along with the times. Though for some reason, the film industry tends to refuse to change. **Until now!**
### For producers, CINELAUNCH is a no-brainer.
If your project is accepted into the platform for an equity offering, it's a streamlined, hyper-effective way to raise capital for your movie. Whether you're bringing in funding from a large amount of fractionalized community-investors, or a smaller amount of high net worth investors and established financiers: CINELAUNCH utilizes smart contracts to make the equity ownership process simple, fast and effective for the long-term.
Quickly tokenize ownership for all OR a select percentage of equity in your movie to make the process SMOOTH and FRICTIONLESS for raising outside capital. Plus this model enables liquidity in an asset class previously considered to be illiquid.
### Beyond the obvious...
CINELAUNCH is a value-focused toolkit for film finance and pre-production on the technical side.
For **ALL** projects, whether greenlit as an equity offering or not, CINELAUNCH is accessible for productions to use as a film production finance super-app! For budgeting, package-development, incentive optimization, task tracking and business management.
# For Audiences
#### CINELAUNCH is a whole new way for audiences and fans to get involved!
In the past, there's been various ways for individuals passionate about projects to support them: Donations, pre-orders, merch, etc. But the problem? When the film WINS the audiences don't.
**CINELAUNCH** has finally created a way for audiences to financially support a project they're passionate about with the ability to be financially-rewarded when the film turns out to be a success!
Most other industries make this a possibility! From music fans to card-collectors. And now, finally, the film industry is able to unlock that same potential.
# Distribution Deals
**Film distribution** is the process of making a movie available for viewing by an audience. And this includes theatrical exhibition, TV broadcast, VOD streaming, and DVD sales.
An expert film distributor can help get a film shown in cinemas and streamed on major VOD platforms. They understand how to market films and how to help you get films shown to an international audience. A production can sell a film independently, but working with a distributor allows you to access more opportunities and make a higher profit generally.
A production must find a film distributor, then sign a contract with them. This [film distribution contract](https://filmmakermagazine.com/99280-the-fine-print/) will include a **term length**, which outlines how long the distributor will have the rights to the film. This contract comes with a premium and a performance-based revenue model usually.
### Distribution Deals Before Production Begins
One does not need to make a finished film to secure a distribution deal. **Pre-sale distribution** is a guarantee from a distribution company that they will represent a given film once the project is complete. A film distributor might be interested in a film early-on if the film already has a **built-in audience**. For example, it might be a sequel to a successful movie or have a star actor attached. Occasionally, distribution companies will approve of the film if they like the script, genre, or filmmaker’s previous work as well.
Read more on Pre-Sales Distribution in the next section!
# Minimum Guarantee (MG)
#### This is still in the same vein as what we previously talked about with pre-sale agreements... When a production is able to sell distribution rights to their projects before beginning production on their project in order to have capital to actually fund the creation of the project.
In these pre-sale agreements, the distributer agrees to advance a certain amount of money upon delivery of a certain project. THIS is called a minimum guarantee.
Typically, 10%of the mg is payable upon signature of the agreement and the remaining 90% is payable when the producer delivers the project.
BUT, if a project needs access to that remaining 90% to fund the production of the project, there are still options!
Most notably: Minimum Guarantee Financing.
### What is Minimum Guarantee Financing?
This allows one to monetize these distributor commitments upfront, taking out a collateralized loan against these distribution promises as soon as the papers are signed.
# The Waterfall
#### The waterfall is how money from distribution deals, foreign sales, and other film revenue streams flows to the investors in a film project.
#### The top of the waterfall is the money source, and the bottom of the waterfall is generally the filmmaker.
*They normally look something like this...*
#### ***If*** the buyer is paying an MG or a License fee to the sales agent:
1. Buyer License fee/MG
2. Distributors fees/wire transfer fees.
3. Sales Agents Commission (20-35%)
4. Sales Agent’s Recoupable Expenses (up to cap)
5. Producer’s Representative Fees (If applicable, 5-15%)
6. Production Company fees
1. Debt
2. Equity Investor Investor (Until recoupment+10-20%, then 50% of future profits)
3. Crew Deferments
4. Producer share
#### *If* the buyer is offering a revenue share deal, then the waterfall will look more like this:
1. Individual Sales (Total)
2. Buyer’s Commission (20-30%)
3. Distributors fees/wire transfer fees.
4. Sales Agents Commission (20-35%)
5. Sales Agent’s Recoupable Expenses (up to cap)
6. Producer’s Representative Fees (If applicable, 5-15%)
7. Production Company fees
1. Debt
2. Investor (Until recoupment+10-20%, then 50% of future profits)
3. Crew Deferments
4. Producer share
Technically speaking, this "waterfall" refers to the order of repayment of investments in a film financing arrangement.
The waterfall outlines when an investor is set to receive his/her return on their investment(ROI). Typically a film in theatrical release will incur costs concurrent with the release( Prints and Advertising) which must be added to the cost of production to determine the cost of the film for revenue distribution purposes.
#### For Example:
Let us assume the ticket cost is one dollar. From that dollar, a portion is retained by the film exhibitor. The exhibitor pays a higher rental fee the earlier to the release date the film is exhibited. Typically that is about 66% of the ticket price. The distributor also earns approximately 35% as its fee for distribution and adds to that number amounts it advanced the producer( such as print and advertising, loans for production, etc) From whatever money is left of the one dollar. That amount needs to be accounted to the film's investors. Typically that investor receives between 110% and 120% of their investment and thereafter the producer and they share the profits of the films revenue stream 50/50.\
# Tax Incentives
In the last decade, state governments have enacted numerous movie production incentives (MPIs), including tax credits for film production.
Across the United States, state governments, local municipalities and film offices offer a variety of tax credits and tax incentive programs to bring entertainment productions to film in their states. Incentives vary a whole lot and are always changing: political climates, economic factors and even staffing at the state level can all affect your production.
Tax incentives allow film productions to save money on taxes, get discounts on local goods, and even receive cashback from the state, making a considerable difference to the overall budget of the project project.
Understanding all these different incentives and how to maximize the benefit from each is crucial in effectively producing a large-scale production.
#### The incentives are usually given in exchange for employing domestic workers and using local resources, which can be an effective way to encourage regional economic development.
The amount of the tax credit / incentive varies according to how much money was spent on qualified production activities, as well as how many jobs were created by those expenditures.
### Different Types of Tax Incentives in Film Production:
**Tax Credits:** \
Film tax credits are incentives that are given to filmmakers in the form of a **refundable tax credit.** These credits are given by state and local governments, as well as other regional entities such as counties or zones. The goal is to promote economic development through film production and filmmaking in general.
Main types of Tax Credits to understand...
***Refundable***:\
A refundable credit will be given as cash if the taxpayer’s total tax due is less than or equal to their total earned credit amount for the year; otherwise, they will not get anything back.
***Nonrefundable***:\
Non-refundable credits cannot reduce your federal taxes below zero so you may need additional sources of taxable income in order to utilize these deductions fully.\
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**Transferable Refundable Tax Credit:** \
The production company can transfer their tax credits to a local company to reduce or eliminate their tax liability, allowing them to become a value-based "asset" for the production.
**Grants:** \
The state issues a tax-free payment to production companies for filming.
**Film Tax Rebates:** \
Film tax rebates are paid to production companies by the state, usually as a percentage of the company's qualified expenses. They are similar to grants, but they are taxable.
**Tax Reliefs:**\
Tax reliefs are designed to make it easier for the industry to create and produce films in Britain. The film tax relief is a government incentive offered by HMRC in the UK (Her Majesty’s Revenue and Customs) which has been available since around 2007. It offers up to **25%** off on qualifying expenditure incurred in Britain as long as certain criteria are met.
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# Film License
In common usage, a **license** refers to any limited **grant of rights to a film**, with the owner retaining other rights to the film.
**`For example:`**\
`A pre-sale is merely a license entered into prior to completion of a film. Thus, licenses encompass a broad array of grants of rights, ranging all the way from a one-day pay-per-view television license to a grant of all worldwide rights for a term of 25 years.`
# Co-Productions
### The term “co-production” originally designated an agreement entered into between two film companies in two different countries pursuant to a co-production treaty between the two countries.
Pursuant to these treaties, if the film was produced in part in each country, the film would qualify for certain quota and subsidy benefits in each country. Each film company would own the rights within their respective country.
However, the term “co-production” has mutated over time to refer to any agreement between two or more film companies relating to the production and ownership of a film.
These types of arrangements resemble either a partnership (when there is a sharing of profits and losses) or a separate ownership (where there is no sharing of profits and losses).
# Pre-Sales Agreement
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"Pre-Sales" refers to the component of film-financing where a production pre-sells content rights long before ever actually making the content.
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### To put this into more detail...
#### Pre-sales agreements are commitments from distributors to purchase the rights to sell your intellectual property in a particular territory for a given period of time. Filmmakers take those commitments to a bank and use them as collateral to get loans to make their projects.
It’s not unusual for films to get funded with [pre-sale distribution agreements](https://en.wikipedia.org/wiki/Film_finance#Pre-sales) (also known as “pre-sale financing”). And this involves signing a distribution agreement and gaining a cash advance to help cover some, if not all, of the film production budget.
Distributors might pay this out in full, through installments, or guarantee to pay a set amount as soon as the film is complete. But keep in mind that pre-sale financing can be a risky strategy. If a production fails to complete their production, they will still need to pay back the distributor in full.
Even if one can’t secure a distribution deal during pre-production, they still need to be thinking about their eventual audience. This target audience will determine the ideal distribution strategy. Film distributors do give preference to projects that come with a foundation audience. Having a strong social media following can help you gain a film distributor as well generally.
### A simplified explanation...
`Hank the filmmaker wants to make a movie. He finds a domestic distributor in the United States who’s willing to give him $2 million. (That includes his fee.) In exchange, they’ll get to distribute the movie everywhere, forever.`
`Hank thinks this is a great idea, so he takes their cash, uses it to make movie, pockets his fee, and turns the finished product over to the distributor. The distributor adds the content to their library and now they can exploit it anyway they like. They might show it in theaters, sell it to streaming services, or license it to TV networks. If they have complete control of the rights, they could license the IP to toy manufacturers, cereal brands, and theme parks.`
`Hank’s distribution agreement`` `*`might`*` ``entitle him to some overages (profit). But even if he is entitled to overages, the method of calculating Net Profits will make it so he never sees a fucking penny of that unless a) the movie does unbelievably well, and b) he has a lawyer who can bully the distributor into making a deal that pays in success.`
`The gist here is that by pre-selling the rights, Hank gets the money to make the movie. He didn’t have $2 million or more from another funding source, so this was the`` `*`only`*` ``way he could make his film.`
# PFD Agreement
#### A production/finance/distribution agreement, most commonly referred to as a “PFD agreement,” is when a distribution company (studio, VOD company, streaming platform, etc) hires a production company to produce a film, and the distribution company agrees to directly finance production of, and to distribute, the film.
Under these agreements, the production company is little more than a dependent agent of the distribution company and is subject to the complete control of the distribution company on all aspects of production.
The grant of distribution rights to the distribution company is always of all rights **in** **perpetuity** throughout the world, making the distribution company the complete and absolute owner of the film. The production company often retains a theoretical interest in net profits, if any, generated by the film, and often not even that.
# Negative Pick-Up Agreement
### A negative pickup deal is a contract entered into by an independent producer and a movie studio conglomerate wherein the studio agrees to purchase the movie from the producer at a given date and for a fixed sum.
The negative pick-up deal is similar to a PFD agreement except that the distribution company, usually a studio or VOD brand, agrees to pay a fixed price upon delivery of the film. Because the distribution company does not advance the cost of production, the production company must obtain a loan to finance production, and the lender will almost always require a completion guarantee to guarantee completion and delivery of the film to the distribution company in order to trigger payment. Because of the introduction of the lender and the completion guarantor, these transactions are more complex than a PFD agreement.
**`For example:`**\
`If a filmmaker had a budget of $1 million for a film project, she would “sell” the film by promising to deliver a completed motion picture substantially the same as that described in the screenplay in exchange for a payment of $1 million. Once the negative was delivered, the film studio would then have the obligation to finish the prints for the film, pay for its marketing and distribution, and split profits, if any, with the filmmaker on the agreed-upon percentage basis. The negative pick-up is the filmmaker’s “field of dreams”—if she shoots it, the money will come.`
The negative pick-up arrangement often operates very similarly to studio financing. Each major decision may be subject to review by the distributor. The distributor will require that the script be followed, the agreed-upon casting not be changed, the length of the film be acceptable, and the film be eligible for a particular MPAA rating, typically a PG-13 or R. Any major deviations must be approved by the financier or the filmmaker risks the company stopping payments or claiming that she has breached the agreement.
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The amount paid for a negative pick-up need not be the same as the production cost of the film, although the distributor will often seek to cap the payment at this amount. If so, the filmmaker must be sure to include budget items for herself and others who have invested sweat equity as the basis for negotiations with the studio. To add these items later in the negotiations will result in little or no personal payments.
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# Sales Agent Agreement
### Under this type of agreement, a sales agent acts as the film owner’s agent in consideration for a commission. Thus, there is no grant of rights from the owner to the sales agent.
However, if the sales agent is exclusive and has the authority to enter into licenses for and on behalf of the owner, **then the sales agent resembles a licensee.**
Because a sales agent does not pay an advance to the owner, and because the sales agent’s distribution expenses are typically relatively low, the sales agent is usually entitled to a relatively **low distribution fee.**
# Rent-a-System Agreement
In a rent-a-system agreement, a producer licenses certain film rights to a distribution company, typically a studio, for a **limited term**, but the distribution company is **not required to pay an advance** to the producer to either finance production or take delivery of the film.
### In fact, in some cases the producer pays all distribution expenses relating to the film.
In exchange for the absence of fixed payments by the distribution company, the distribution company agrees to a **very low distribution fee,** and the remaining revenues are remitted to the producer. In essence, the **distribution company avoids any risk** of loss relating to the film, particularly if the distribution company does not pay distribution expenses, and the producer bears the full risk and reward of the success or failure of the film.
Because of the absence of financial commitment by the distribution company, and the limited upside from the low fee, distribution companies have little incentive to adequately market and push a rent-a-system film, so **such films often flop.**
# Favored Nations Clause
Favored Nations (FN) and Most Favored Nations (MFN) clauses play a significant role in entertainment contracts, ensuring no party receives more advantageous terms than another. These clauses are prevalent in music licensing, actor agreements for film/TV/theatre, and investment contracts for entertainment projects. For instance, in music licensing, if a producer agrees to pay a publisher a certain fee, an FN clause ensures that if any other party, like a record company, is paid more for a similar right, the publisher is compensated to match that higher payment. Such clauses maintain fairness and parity among parties, preventing disparities due to information asymmetry or bargaining power differences.
The application of FN/MFN clauses requires careful consideration of their scope, both in terms of the contract terms they cover and the comparables against which they are measured. The scope might include various contract aspects, such as payment amounts, timing, perquisites, and more, aiming to broaden protection for the beneficiary while keeping it specific enough to avoid disputes. Additionally, determining the comparables—whether all actors on a project or a specific subset like investors at a similar funding level—is crucial for the clause's effective enforcement and ensuring equitable treatment among similarly situated parties.
Enforcing FN/MFN clauses can be challenging due to confidentiality obligations and the inherent information asymmetry in negotiations. Parties may not know if they are entitled to adjustments under an FN/MFN clause without access to others' contract terms. Solutions may include auditing production company records or specific provisions allowing for the sharing of contract terms for enforcement purposes. Ultimately, whether to include FN/MFN clauses in contracts depends on various factors, including the parties' bargaining power and legal budget. These clauses offer mutual benefits but require meticulous drafting to mitigate potential risks and disputes.
# Features Coming Soon
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**Good to know:** We're constantly working on implementing new features to improve the process for our platform producers as well as our investors! Check-in below to see what's coming down the line.
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# Social Impact Entertainment
Social Impact Entertainment (SIE) is a broad term for stories that incorporate educational, inspirational, or awareness-generating elements. SIE productions are defined by their impactful messaging within the storylines, whether prominently featured or subtly integrated to raise awareness about specific social causes. SIE productions are not just overt documentaries. An SIE production might simply have a diverse cast or director or highlight a specific geography or cultural element; and projects of any genre, content, length, or format can qualify as SIE.
Ultimately, what constitutes SIE is determined by the investors, donors, or grantors supporting the production. They are passionate about the impactful aspects of the production, and they signal their support through direct investment or by converting philanthropic funding (from donor-advised funds, foundation grants, direct donation, etc.) into investment capital in the SIE production.
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# Donor-Advised Funds
A Donor-Advised Fund (DAF) is an anonymous charitable giving account that allows donors to contribute assets, receive an immediate tax deduction, and make a significant impact with their philanthropy. Currently, over $250 billion is held in DAFs in the U.S., waiting to be accessed.
However, many DAF donors are unaware that their philanthropic funds can be used to invest in Social Impact Entertainment productions, which are projects that incorporate educational, inspirational, or awareness-generating elements into their storytelling. This provides an innovative avenue for donors to amplify their impact by supporting causes they care about while promoting awareness and engagement of social issues through compelling media content.
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# Private Foundations
Private foundations are nonprofit organizations funded by a single source, such as a family or corporation, to support charitable causes through grants. Unlike public charities, which rely on broad public support, private foundations are typically endowed by a single entity and focus on distributing funds to other nonprofits rather than running their own programs. Private foundations’ philanthropic efforts often reflect the values and interests of their family founders or corporate leaders. Notably, private foundations must grant out at least 5% of their net assets annually for charitable purposes.
Private foundation grants can also be used to support Social Impact Entertainment productions (typically through fiscally-sponsored, mission-aligned nonprofit organizations). This approach allows foundations to fund a wide range of initiatives while also meeting their required charitable contribution allocations. By having their grant funds invested in productions designed to create positive social change through media and storytelling, foundations can amplify their impact and promote awareness of issues important to the foundation or which reflect well upon the foundation (or its corporate sponsor).
# Recoverable Grants
A recoverable grant is a form of philanthropic funding that combines elements of both a traditional grant and an investment. Recoverable grants are given to a nonprofit organization by a private foundation with the expectation that the funds will be repaid if certain conditions are met. Private family or corporate foundations supporting a Social Impact Entertainment production may structure their support as a recoverable grant to achieve financial returns if the production does well, with the funds returning to the foundation.
Recoverable grants are often used to fund projects or initiatives that have the potential to generate revenue but may not be able to secure traditional financing, such as entertainment productions. For foundations, recoverable grants provide a way to support innovative and potentially high-impact projects while preserving the financial upside if the production generates financial returns. If the production is successful, the grant funds can be recovered by the foundation and redeployed to support other philanthropic initiatives.
# Fiscal Sponsor Program
A Fiscal Sponsor Program (FSP) is an arrangement in which a nonprofit organization (the fiscal sponsor) offers its legal and tax-exempt status to another company or project (the sponsored entity) that does not have its own tax-exempt status. This allows the sponsored entity to receive charitable donations and grants that are typically available only to tax-exempt organizations.
Accessing private foundation grants and donor-advised fund (DAF) donations to aid in project funding is a recommended strategy for Social Impact Entertainment (SIE) producers. However, foundation grants or recoverable grants and DAF donations are not easily accessed without an FSP; but not all FSPs are the same, and fundraising parties may want to identify more robust programs that cater to the specific needs of SIE producers. For example, select FSPs have greater flexibility on the types of funds, assets, and structures that can be received into the FSP as well as the ways in which funds can be allocated out of the FSP, including enabling grantors and donors to have their philanthropic funds invested in the productions of their choice. Some FSPs even offer strategic advice on how best to use philanthropic funding and provide fundraising support to SIE producers.