As part of the media value chain, original branded content provides very good opportunities as an alternative investment asset class through ownership and intellectual property rights (IPR) coupled with higher top-line revenue streams and waterfall cash flows.
Today, there are many branding projects such as reality series, scripted series and franchise series which are attracting capital investment from; federal/state grants; private equity funds / family offices and; senior debt from lenders. In addition, there are opportunities for brands to participate via product placement(s). With subsidy funding support from federal/state grants, downside risk is further mitigated.
A key driver for successful branding asset opportunities is effectively utilizing Structured Project Finance via limited recourse and non-recourse basis. With a project development (pre-production) timeline of 6-12 months, limited recourse (collateralization and/or hypothecation of branding assets) and non-recourse (administrative and beneficiary transactional contracts, production, sales, tax rebates, cable networks licensing, production company, merchandizing etc.) provide a viable “sacro-sanct” basis with sound “back-to-back” arrangements.
Accordingly, as part of the project development process, it is important to properly prepare capital expenditure (CAPEX) and operating expenditure (OPEX) budgets covering the entire Development-Production-Distribution phases. A detailed cash flow and financial model (proforma) is essential for each project along with details of Rate of Return on Equity (RROE), Internal Rate of Return (IRR), Debt Service Coverage Ratio (DSCR) and payback period.
Once credibility and proven-track record are established over a 3-5 year timeline, a portfolio of projects can be developed, produced and distributed in an economically viable manner. In addition, increased branding asset opportunities can be further enhanced via special purpose vehicles (SPVs) such as holding companies (Holdco’s), operating companies (Opco’s) and related structures.