Abstract
During the current investment boom, any Intellectual Property, especially of film, is one of the long-lasting destinations that capital pursues. As a result, the new model in the film capitalization, a high-priced bet agreement between the producer and the distributor, appeared in the capital market. This model exists some characteristics as high valuation and high risk, once encountered force majeure; they will make the whole film capital market vulnerable. This paper takes “Lost in Russia” as an example, through the analysis of VAM in the process of film capitalization, further explores the operability and risk of film capitalization.
Highlights
What is the definition of “VAM”? On November 14, 2019, the supreme people’s court officially issued the Understanding and application of “Minutes of the National Court Work Conference for Civil and Commercial Trials”, which exactly defined the “VAM”
The “VAM”, usually manifests as a bet agreement in the minutes, refers to the agreement designed by the investors and the financiers to adjust the valuation of the future target company, including equity repurchase, monetary compensation, etc. in order to solve the uncertainty of the future development of the target company, no piles of information and agency cost, and to balance the interests of investors, shareholders, creditors and companies in accordance with the law
The so-called “bet” with the target company, refers to the agreement signed by the investors and the target company, the target company financing from the investors, the investors become the target company’s shareholders, when the target company within the agreed period to achieve the target set by both sides, by the investors give the target company reward; instead, the target company shall repurchase the investor’s equity or/and undertake the obligation of monetary compensation to the investor in a pre-agreed manner (Supreme people’s court, Understanding and application of “Minutes of the National Court Work Conference for Civil and Commercial Trials”, 2019)
Summary
What is the definition of “VAM”? On November 14, 2019, the supreme people’s court officially issued the Understanding and application of “Minutes of the National Court Work Conference for Civil and Commercial Trials” (hereinafter referred to as the “minutes”), which exactly defined the “VAM”. The so-called “bet” with the target company, refers to the agreement signed by the investors and the target company, the target company financing from the investors, the investors become the target company’s shareholders, when the target company within the agreed period to achieve the target set by both sides, by the investors give the target company reward; instead, the target company shall repurchase the investor’s equity or/and undertake the obligation of monetary compensation to the investor in a pre-agreed manner (Supreme people’s court, Understanding and application of “Minutes of the National Court Work Conference for Civil and Commercial Trials”, 2019). In the form of film resources, the producer sells its intellectual property rights (such as distribution rights and broadcasting rights) in exchange for a large capital inflow from the distributor to facilitate the completion of film production On this basis, both two sides will achieve win-win results and mutual benefit. The cost the distributors paid was mainly the price of guaranteed issuance and various publicity costs, such as the patch advertisements’ and the billboard advertisements’ cost (Zhao, 2020)
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