Contents

 

 

About NeoClassics Films

NeoClassics is an international distributor of independent feature films with our distribution operations run out of Culver City and our administrative headquarters in Vancouver, Canada. We focus on theatrical distribution in the United States to create cash flow and to add value to the ancillary rights streams and foreign rights. We also have a foreign sales division. NeoClassics is incorporated in Canada.

 

NeoClassics targets high quality independent films from filmmakers around the world. Our 12 theatrical releases to date include films from Australia, France, Belgium, U.K., Canada, China, Jordan and most recently Turkey. Our films have typically garnered strong reviews and critical recognition. Among them are a Cannes winner, Sundance winner and Berlin winner, as well as winners of a host of other festivals. One of our films, CAPTAIN ABU RAED from Jordan, won 24 awards on the festival circuit. Recently, we released successfully the highly acclaimed French film THE HEDGEHOG, from Pathe, and 1453 CONQUEST OF CONSTANTINOPLE, the most ambitious Turkish film ever produced.

 

With a focus on World Cinema, we are carving out a unique niche as a distributor of feature films in the fastest growing sector of the film industry, creating opportunities for cash flow and profits from pictures often overlooked by the distributors of more conventional studio product and larger independent films. At the same time, we are providing talented filmmakers from around the world a genuine opportunity to have their wonderful films viewed by a large audience in theatres in North America and other countries. The budgets of our distributed product, while often small, cover the full range for independent films with French spy thriller FAREWELL reaching 18 Million Euros.

 

We are very excited about the relationships we have been able to build throughout the industry and have a highly professional management team with considerable studio experience. I personally spent some ten years in Business Affairs and as a Senior Attorney with ICM and Warner Bros. Inc. prior to successfully founding and managing a number of public companies including Pan African Mining Corp. and African Queen Mines Ltd.

 

NeoClassics has now concluded its third year of distribution and is successfully transitioning from a development stage company to a viable, revenue generating company. We have devoted a good part of the initial capital raised to date to expenses for start-up, corporate branding and awareness, organizational and platform development, and building relationships with producers and exhibitors. In 2011 we narrowed our loss to $89,000 from nearly $800,000 the preceding year, on increased revenues and sharply reduced expenses. NeoClassics' costs are among the lowest in the industry while we pride ourselves on top quality marketing and distribution campaigns. We have now developed our ancillary platforms across all media, including NeoClassics Home Entertainment, and are well positioned to operate profitably going forward.

 

We continue to receive good recognition in the industry, recently closing deals with Lions Gate, Starz and NetFlix. THE HEDGEHOG represented the second film we have licensed from Pathe, France's largest studio, and distributed successfully in the U.S. We are rapidly developing as a serious player in the indie sector and have the right combination of business acumen, experience and creative vision to create significant returns for our investors while distributing film product from around the world with which we are all proud to be associated.

[Top]

 

The Nature of Film Distribution

Motion picture distribution encompasses the exploitation of motion pictures in theatres and in ancillary markets such as home video, pay-per-view, pay television, broadcast television and other markets. Motion pictures may continue to play in theatres for up to six months following their initial release, depending upon the nature of the release campaign and public acceptance of the film. NeoClassics contemplates shorter release schedules, typically up to 90 days, except for extremely successful pictures. Concurrently with their release in the United States, motion pictures generally are released in Canada and may also be released in one or more international markets.

 

The motion picture then generally becomes available for distribution in other media, after typical holdbacks as follows:

 

  • Months After Approximate Theatrical Release Release Period
  • Domestic home video and DVD 4-6 months open
  • Domestic pay-per-view 4-6 months 3 months
  • Domestic pay television 6-10 months 12-21 months
  • Domestic network/basic cable 30-36 months 18-36 months
  • Domestic syndication 30-36 months 3-15 years
  • International home video and DVD 6-12 months open
  • International television (pay or free) 18-24 months 18-30 months
  •  

    A distributor typically acquires rights from the producer to distribute a motion picture in one or more of the markets described above. The distributor typically agrees to advance the producer a non-refundable minimum royalty or guarantee (advance), which is to be recouped by the distributor out of the profits generated from the distribution of the motion picture in whatever markets it has acquired. Generally, the producer also is entitled to receive a participation equal to an agreed-upon percentage of all net revenues received from distribution of the motion picture over and above the advance once the advance is recouped. NeoClassics will generally seek to acquire worldwide distribution rights for all films it licenses from third parties. If that is not feasible, distribution rights in all media will be sought for either the North American or International market places. Rights will be acquired for terms ranging from five years to perpetuity, with a target of 15 years or more for all but very special films.

     

    Theatrical Distribution

    The theatrical distribution of a motion picture generally involves the manufacture of release prints, the promotion of the picture through advertising and publicity campaigns and the licensing of the motion picture to theatrical exhibitors. New initiatives for digital distribution of films to theatres are developing and NeoClassics intends to be at the forefront of this movement. The size and success of the promotional advertising campaign can materially affect the revenues realized from the theatrical release of a motion picture. The costs incurred in connection with the distribution of a motion picture can vary significantly, depending on the number of screens on which the motion picture is to be exhibited, the actual cost and scope of the media advertising expenditures and campaign and the ability to exhibit motion pictures during peak exhibition seasons. Competition among distributors for theatres during such seasons can be great. Similarly, the ability to exhibit motion pictures in the most popular theatres in each area can affect theatrical revenues. Collection of the distributor's share of box office receipts may involve delays and occasionally renegotiation with exhibitors.

     

    Home Video / DVD

    The home video distribution business involves the promotion and sale of DVDs (Digital Versatile Discs) to wholesalers as well as local, regional and national video retailers (e.g., video specialty stores, big box outlets and discounters, electronics stores, convenience stores, record stores, kiosks, online stores like Amazon and online rental services such as NetFlix and other outlets), which then rent or sell such DVDs to consumers, primarily for private viewing. Major feature films are usually scheduled for release in the home video market within four to five months after theatrical release to capitalize on the theatrical advertising and publicity for the film.

     

    The growth curve of the domestic home video market has slowed somewhat from the year over year double digits it has been enjoying since the advent of DVD approximately ten years ago. DVD homes have now surpassed the highest ever number of VHS (videocassette) homes, and DVD sales now represent the largest component of domestic revenues generated by motion pictures. Growth-focused distributors and retail outlets look forward to HD/DVD and Blu-Ray formats reinvigorating that double-digit curve they so enjoyed.

     

    The number of outlets designed to serve the rental market has remained essentially flat for the past several years, explained very easily by the growth of NetFlix (with more than 6 million members) even while grocery stores, kiosks and others have entered the market, and standalone stores have gone into attrition. Pricing in the sell-through and rental markets for mainstream product has stabilized at parity, while certain specialty product tries to pursue more value per disc. Prices for most product are below $30, while big box stores seek to drive that down further. Historically, new technology introduction has spurred growth in motion picture sales, but some of the newer and emerging technologies such as broadband Internet and others could increase the competition for consumer eyeballs impact the home video marketplace.

     

    Pay-Per-View

    ay-per-view television allows cable television subscribers to purchase individual programs, including recently released motion pictures and live sporting, music or other events, on a "per use" basis. The subscriber fees are typically divided among the program distributor, the pay-perview operator and the cable system operator, with half or more going to the distributor.

     

    Pay Television

    Pay television allows cable television subscribers to view HBO, Cinemax, Showtime, The Movie Channel, Encore, Bravo, BET, Lifetime and other pay television network programming offered by cable system operators and satellite operators for a monthly subscription fee. The pay television networks acquire a substantial portion of their programming from motion picture distributors.

     

    Broadcast and Basic Cable Television

    Broadcast television allows viewers to receive, without charge, programming that is broadcast by affiliates of the major networks (ABC, CBS, NBC, Fox, CW (created by a merging of the WB and UPN), independent television stations or through cable and satellite networks. In certain areas, viewers may receive the same programming via cable transmission for which subscribers pay a basic cable television fee. Broadcasters or cable systems operators pay fees to distributors for the right to air programming a specified number of times.

     

    VOD

    Video On Demand has previously been included with (cable and closed-system-based) Pay Per View transactions, however, with the rise of broadband connections, and the advent of services such as NetFlix downloads, Amazon Unbox to Tivo services, Apple iTV, and the like, we are on the leading edge of the changes in content access that were anticipated in the Internet bubble in the 1990's. The technology is actually here, and the connectivity to the home video entertainment center will be complete within no more than a couple of years. Consumers will begin to have the access they have only previously experienced in hotel rooms, but they will be able to store the film locally for repeated viewings, just as they do with a DVD or tape. Just as in the early days of DVD, there may be a Wild West feel to the market, as suppliers and technology companies blur the lines of their businesses, while telcos reach for content plays and content companies move with their technological underpinnings and those in-between, like Comcast, Cox, HBO and others all seek to be in on the expanding pie.

     

    International Markets

    In addition to their domestic distribution activities many motion picture distributors generate revenues from distribution of motion pictures to international markets, including theatrical, home video, television and other platforms. There has been a dramatic increase in recent years in the worldwide demand for filmed entertainment. This growth is largely due to a growth and upgrading of screens, the privatization of television stations, the introduction of direct broadcast satellite services, growth of home video, as well as the increased cable penetration in certain markets.

     

    Non-Theatrical Markets and Other Rights

    Revenues also may be derived from the distribution of motion pictures to airlines, schools, libraries, hospitals and the military, from the licensing of rights to perform musical works and sound recordings embodied in a motion picture, and merchandising rights to manufacture and distribute games, dolls, clothing and similar commercial articles derived from characters or other elements of a motion picture. Development of strong indigenous film industries with higher production values in many countries has also contributed to growing revenues.

     

    New Media and New Technologies

    New means of entertainment product delivery (some outlined in VOD above) are constantly being developed and offered to the consumer. The total impact of emerging technologies such as delivery of motion pictures on the internet cannot be fully defined. However, most analysts are now predicting significant growth while not overly cannibalizing existing markets. Of course there is not an infinite supply of consumer attention span, and a shifting of transactions from brick and mortar stores to digital outlets (for example) should definitely being anticipated. Some product as well may find its most suitable market through emerging technologies. NeoClassics is positioning itself to take advantage of these new markets as they develop. Management believes that control of content will ultimately be the key determinant in driving new media distribution.

    [Top]