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1. You mentioned you wrote an article 2 years ago on the topic of equity investment by advertisers. What do you see as different in how it has been carried than what you predicted or suggested 2 years ago?

Here are the main differences: (1) it has been slower than I thought, (2) it has proceeded faster for television than for films, (3) it is much more complex than I imagined, and (4) advertisers don't care as much as I assumed about getting a "Presented By" credit - they care more about getting their product shown.

2. Is the equity investment type of financing by advertisers a riskier investment for the advertisers and/or the producers than the more traditional financing by banks?

It is far less riskier for both sides, because the "return" to the advertisers is partially in the form of the value of the publicity and promotion. Thus, they tend to be more relaxed on the economics, so it easier to make both sides happy.

3. Can you give an example of a creative financial structure you may have done to reflect the trade-off of certain controls ceded to the advertiser in exchange for enhanced economics to the producer.

One example was granting the advertiser (a) approval rights over the script, (b) veto rights over competing products, (c) a required minimum on-screen time for the product, (d) minimum required distribution requirements, and (e) inclusion of an ad on the DVD. In exchange, the producer received a substantially higher producer fee than normal, and the advertiser accepted less than is customary with respect to recoupment of investment and back-end profits.

4. What exactly does a distributor need to approve from your list of: creative control, funding, money out, adjacent advertising, credits and special events?

In one case, the distributor needed to agree (a) not to edit the film, (b) to meet certain minimum distribution requirements, (c) to make direct payment of the advertiser's participation, (d) to include a particular ad on the DVD, (e) to honor the advertiser's credit entitlements, and (f) to permit the advertiser to have a special premiere for customers.

5. Is there any issue or demand by an advertiser that you believe a producer should not agree to because you have seen it always ruin the film?

It's all about money. For enough money, I would give the advertiser final cut.

6. What created the “seismic shift” of equity investment in films by advertisers? Was there an example of an advertiser that was extremely successful in its investment that it made the industry jump on the bandwagon?

The trend is caused by (a) the financing vacuum left in the wake of the collapse of the German stock market several years ago and the difficulty of closing the gap with pre-sales and (b) the ability of consumers to zap out commercials with television recording devices. Thus advertisers and producers are like loose electrons and protons that naturally attract each other.

7. You listed a lot of companies who are going forward with equity investments in films - do you know how successful these ventures have been for them? If successful, I imagine this will definitely be a trend that is here to stay.

It is too early to tell.

8. Are the issues you raise for equity investment in films also applicable to TV shows?

Yes. In fact, a lot of the action is happening with TV.

9. What is the approximate percentage of the total cost of the film that an advertiser needs to invest in order to have a right to have significant control of the production or at least some input?

It has to be enough to plug the financial gap between the budget and pre-sales. This might be as low as 25% of the budget.