Abstract
The aim of this paper is the definition of a daily index representing the risk-return on investments in the American film industry. The index should be used to predict the riskiness and the expected return of movie projects at the level of the overall industry and then to determine a premium for insurance for such an investment. Such an index can inform the decision making in relation to risk but also timing. Though not currently legal in the United States, such an index may be relevant at some point in the future or in other countries for film production companies as well as venture capitalists interested in investing in one or a slate of motion picture productions or more broadly in the holdings of a media conglomerate, an exhibition chain, or some other aspect of the media landscape.
Highlights
IntroductionWhen Paul Walker died in a car wreck in California on 30 November 2013, several kinds of typical insurance—auto and life—were necessarily activated
Insurance and the Motion Picture IndustryWhen Paul Walker died in a car wreck in California on 30 November 2013, several kinds of typical insurance—auto and life—were necessarily activated
These traditionally begin with the international theatrical market and continue through video-on-demand (VOD) and the shrinking but still breathing home video/DVD market, each of which plays a key role in determining the ultimate profitability of an individual motion picture
Summary
When Paul Walker died in a car wreck in California on 30 November 2013, several kinds of typical insurance—auto and life—were necessarily activated. Such insurance, which generally cover directors and any other key personnel working on the film, is similar to “key man” life insurance partnered with business interruption protection Boyle (2001) It is one of several forms of insurance that filmmakers, producers, production companies, and their investors utilize to mitigate the risks associated with marshaling creative and technical labor at a high cost and under sometimes unusual circumstances into a sellable commodity that only has the potential to recoup its investment. Investors that put their money into film are severely limited in the kinds of risk mitigation they can engage beyond those that Hollywood film studios and production companies have long employed: casting well-known actors, adapting intellectual properties already familiar to audiences, hiring directors with a track record of success, or working in popular genres.2 None of these serve as guarantees of success.
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