When I started Raindance I had no idea what I was creating. I also had no idea how to monetise intellectual property.
One of the first painful lessons I learned about IP happened in 1995. I’d been running Raindance for a few years and had met a lot of screenwriters. I’d made friends with the then two directors of HandMade films. HandMade’s ownership had passed from George Harrison to another company. Gareth Jones and Hilary Davies were running the company from an office in London’s Golden Square. They asked me if I knew any new writers from the world of Raindance. I asked what kind of script they were looking for. They told me they were looking for the next ‘Withnail and I’ – their most recent hit.
I mentioned this story to a few of the screenwriters I was working with at the time and a few months later I barged into their office with a brand new screenplay: ‘Withnail and I’ – 10 years later. Gareth and Hilary took one look at the cover title and threw me out of their office. You see, Bruce Robinson, who wrote the original ‘Withnail and I’ owned the characters he had created in his film. I had just been taught one of the single most important lessons on how filmmakers monetise intellectual property.
Intellectual Property: The New Economy
With the crash of the stock market, and the impending retail doom, investors are shuning traditional bricks and mortar investments. This makes what you create worthy of investment consideration by traditional investors. But first you need to understand the different areas where money can be made for ideas. And before you seek investment you need to make sure you protect your ideas (intellectual property).
Intellectual property is what investors call intangible assets. To include:
- Trademarks (brand logos, words, slogans and jingles)
- Patents (technical inventions)
- Copyrighted materials (written materials, scripts, drawings, computer code)
- Designs (industrial design of products)
- Domain names (website URL’s)
- Trade secrets (method of workflow only known to select individuals)
- Other (goodwill associated with a brand like Disney or Raindance)
Each of these intangible assets have varied types of protection through one or more of:
- Common law
- Confidentiality agreements
- Non-disclosure agreements
- Physical barriers
What makes intellectual property unique?
A tangible product, like a car or coat lose value through use. Intellectual property does not. Intellectual property can often be used by more than one person at a time. For example, when different artists cover the same song.
An artist or creator needs to evaluate their intellectual property’s assets. Each property type has different strengths and weaknesses.
Financiers never write the cheque until they robustly check all the facts and figures. This is called due diligence. If you were a real estate developer assessing an idea for a new block of apartments, you would enter into a phase of due diligence. In this phase you would test all your assumptions about design, construction costs and marketing projections. Upon satisfactory result you would then seek the finance and execute and create tangible property.
So too filmmakers and screenwriters should do their own due diligence and evaluate their ideas before they execute them. If you are serious about monetising your ideas using one of the known monetisation routes then due diligence is crucial.
Traditional intellectual property monetisation routes
Large film companies create scorecards of each intellectual property’s strengths. This gives them a method of each intagible assets value. It can also highlight marketing assets.
Independent filmmakers have often invested their own time and money into developing their projects. However, there are many advantages to forming a development partnership with another company, or investor. This allows the filmmaker to spread the risk (and profit) while combining resources.
Items to consider:
- How ‘success’ and profit distribution is defined
- How sub-licensing and sub-contracting rights are defined
- How indemnity and liability issues are handled
- How consequences of dropped targets are to be handled
- How profit incentives are to be distributed
Remember to clearly define who owns the intellectual property and the related assets that are generated under the terms of the co-development partnership.
The brilliant Canadian philospher Marshall McLuhan coined the phrase ‘Golden Village’ in the 1960’s. Look at this succinct video clip where he explains what he means.
The reason this is so relevant to filmmakers today is because licensing your intellectual property to other territories or to other media than you originally intended is the new golden goose. Like gaming, for example. Investors are very interested in anything that can have a cross media application, and one that can work on-line as well as off-line. And of great interest is intellectual property that can spawn merchandise as well.
When you create intellectual property that can converge into other media you can increase the monetisation possibilities of your property. It can also give you a market advantage over your competitors and give you and your ideas a market advantage.
When you create additional licensing opportunities for your intelectual property assets you can also spread the costs of upfront investments on research and development.
Two licensing examples
In 2017, Roger Corman at the age of 91 sold the rights to 270 of his films to Shout! Factory and China’s Ace. Titles like Rock‘N’Roll High School, Piranha, Bloodfist, Black Scorpion, Eat My Dust! and Humanoids From The Deep. In this licensing deal Shout! produces English language remakes, and Ace the Chinese ones.
In 2020 Raindance licensed it’s higher education model to a private investment group in Dubai. They keep the rights to several Asian countries and fronted the acquisition and renovation of a building to house classrooms and studios. Raindance Dubai provides the curriculum and trains the trainers. The Dubai group provides the marketing and infrastructure.
Items to consider:
- Field of use
- Territorial limitation of use
- Sub-licensing rights
Any form of property can be pledged to raise capital. A lender may require you to pass the ownership of the intellectual property to them until the loan is repaid.
Raindance was offered a tantalising opportunity to vend the entire Raindance brand to an American entity working with a top West Coast university. The idea was to use this intellectual property asset to raise money to launch an online training platform. In the end Raindance backed out because of the 6-figure legal bill for reclaiming the intellectual property rights should the venture fail.
Items to consider:
- Term of loan
- Release of intellectual property title
- Default provisions
Exisiting patent or copyright deals often have a predictible revenue stream. These streams can be attractive to investors seeking a return based on the asset’s credit quality analysis and, of course, due diligence.
In 1997 David Bowie raised $55 million to buy back his pre-1990 music rights from his manager. He was then able to offer the investors a significant return on their investment. Now called ‘Bowie Bonds his was the first using intellectual property as security.
Sometimes in commercial property, assets are combined and pooled. The combined value is then used to raise finance, and each party or property draws against the principal according to the terms of the agreement.
Sometimes a portion of underutilised intellectual property can spin out to a new legal entity. The advantage? These assets can be better utilised and exploited without the drag of other priorities of the whole.
An excellent example is the launch of the Monty Python Youtube channel in 2006 to both exploit the brand and to stamp out online piracy.
As with any monetisation strategy, the secret to unlocking money is to derisk the venture. Using the advantages of local tax incentives, plus creating a diverse range of applications for your idea you can monetise your intellectual property.