In 2017, North America, the world’s largest movie market, saw a steep decline in box office revenues. Still, North America, that is to say the United States and Canada, generated a total of $40 billion in box office sales for theatrical distribution. That did not include multiple ancillary revenue streams such as: 1) other platform distribution 2) merchandising 3) music, including soundtracks 4) celebrity image name and likeness merchandising 5) product endorsements and 6) personal appearance revenues for stars. Not bad for a “decline” in the industry. Still, employing sound immigration, tax and investment strategies, the U.S. film industry could do much better.
The Global Market Is Exploding
As revenues from North American box offices were declining last year, global film revenues grew widely. For example, in 2017, China took in almost $9 billion in movie revenues, that is to say, over 20 percent of global box office film revenues. That was second only to North America. According to Claudia Lin Margolis, an international business consultant working in the Asian market with The Wolfe Law Group, China is expected to overtake North America’s lead in next few years. That is because of a huge wave of new construction of movie theaters, its growing demand for movies in general, and its interest in co-production work with U.S. filmmakers. India, with over one billion people, like China, is also a growing market for the consumption of films and for co-productions between Hollywood and Bollywood. There is every reason to expect India also to emerge as a major international film market competing with North America, China and other countries. When you consider rapid changes in technology such as multiple distribution platforms for movies, including satellite, cable, DVDs and streaming via the internet like Netflix – all this adds up to a spectacular future for the film making industry globally and especially for U.S. filmmakers and the distribution of their films worldwide.
So the question is how can a U.S. filmmaker employ sound immigration, tax and investment strategies to attract capital for his or her film and capitalize on these growing foreign markets to make even higher returns than in the past?
How To Make More Movies and Earn Way More Money
The answer is simple.
A U.S. filmmaker, with the help of immigration, tax and financial advisers, can find a foreign investor already working in the entertainment or allied industry abroad to help him or her set up a U.S. company. The new company is created as a film finance and production company with film distribution rights in the investor’s home country and elsewhere. For investing say, a minimum of $350,000 U.S., the investor’s foreign company becomes a 100 percent owner of the new U.S. company.
For the U.S. company’s first project, it invests say as little as, $250,000 in a film to be produced by the U.S. filmmaker. Obviously the filmmaker needs to be first rate. I have in mind people like David Ward, who won an Oscar for The Sting and wrote the screenplays for Sleepless in Seattle and Major League, or Alfred Sapse, an entertainment attorney who has produced some 20 major films. The exact amount can be tailored to the investor’s financial capabilities and the film’s budgetary requirements.
The foreign investor, as a manager or executive of his foreign company wishing to transfer to America to work in the U.S. entity, gets: 1) A U.S. L-1 work visa for the investor and his or her family to live and work in the United States. The visa is usually issued for three years and can be renewed for up to seven years. It can also be converted into a EB-1C green card. The investor gets a work permit, the spouse can also get an Employment Authorization Card and the investor’s children can attend school at U.S. domestic tuition rates. 2) An executive producer credit on the film. 3) The opportunity to work with and learn the film business from a top-rate U.S. professional filmmaker.
The foreign investor’s U.S. company gets 1) Distribution rights for the film in the investor’s home country and 2) Such rights in any other agreed territories. 3) An agreed “piece” of the gross or net revenues of the film.
A New Way To Finance Independent Films
The intersection of this model with current independent film production and distribution practices opens the door to making independently financed films using foreign-sourced investor funding. The investor puts up say, $250,000, which goes to the filmmaker’s company for the project. Each project should be a separate company and can involve different amounts. The filmmaker uses the funds to finalize the script and the company starts pre-production. The script is the key, however. Then, the filmmaker and the investor seek out a production budget based on 1) the script and 2) the filmmaker’s credentials and 3) the foreign investor’s credentials and support. Between the script being finalized, pre-production, principal production and post production and then ongoing distribution, each film may safely take up to seven years which aligns nicely with the L-1 visa maximum time frame. The foreign distribution component ensures that this is not just a “one film” production company, but an ongoing business. Fees for immigration, tax and financial advice will probably take up most of the balance of the investor’s $ 350,000 investment.
Better Results For Investors
Obviously the investor cannot get a guarantee that the film will be produced. However, minimally he or she will get an interest in the script which may prove to be a very valuable asset in itself and valuable exposure to the U.S. film industry. For Chinese or Indian investors who have not yet applied for EB 5 visas, this proposal leading to an early entry into the U.S. with an L-1 work visa may be especially interesting. For Chinese or even Indian investors who have applied for an EB 5 visa but are subject to a backlog in processing, this L-1 visa idea could be used to access the U.S. while awaiting the over 10 year projected processing approval time. For investors from other countries, this plan could be used with an E-2 visa if their country has an investment treaty with the United States. Such a visa would make the project even more viable since the investor would not necessarily need a connection previously to the entertainment industry or a foreign based company to start with.
Gary Wolfe, a leading international tax attorney, especially likes this L-1 and E-2 visa approach to U.S. film making because such visas enable him to help foreign investors avoid the significant U.S. tax exposure present in other forms of U.S. immigration options. What is even more important is that these L-1 and E-2 visas can be obtained within a few months and the investors do not have to wait years to move to the U.S. with their families.
The future of U.S. film making is bright for those who are prepared to take up the challenge. What is more, very similar rules to the L-1 rules outlined here can be employed by filmmakers in Canada to help them in their efforts as well – while taking advantage of Canadian government and tax incentives. By accessing these global resources North American filmmakers can make more movies and earn way more money – leading the way into a bright future for all.
This article is reprinted from an article formerly published in the Forbes.