Film Investor Lingo... ROI versus IRR

Posted on December 06, 2017

Don't let film investors confuse you with jargon!

Film Producers - don't let financiers confuse you with financial jargon. If a film investor asks what his/her potential IRR on a project is estimated to be, they are looking for an estimate of the annualised interest rate they can expect. After all the necessary disclaimers and disclosure of the assumptions you are making, you can give them an idea what you are shooting for. The return objectives will vary drastically across investors, whether it's a relative or a cold-hearted wall street type just looking for a return. But if you can credibly estimate 15%, that should satisfy most. The IRR you estimate will also depend on the financial structure of your project and where the investor will sit in the waterfall. Things to de-risk your project in the investor's eyes: using tax credits/shelters and attracting distribution, and hopefully presales. Don't confuse IRR with ROI, which is an estimate of the investment gain the investor might make, but not accounting for how long they have to wait! Below is a slide I did for a Cannes financing panel a couple of years ago. If you talk in IRR language, your potential investor will see you are thinking about things from their perspective! Please drop me a line if you have questions! Best of luck in the trenches! See you there! David