Angel Studios CEO Neal Harmon on Learning from Failure And Letting the Audience Shape the Slate

Today, I’m thrilled to introduce you to Angel Studios CEO Neal Harmon . Who defies the typical Hollywood mold. Raised as the third of nine children in a Mormon family on an Idaho dairy farm, Harmon now leads Angel Studios, headquartered in Provo, Utah, alongside two of his brothers, who serve as executives, and another brother running one of the studio's episodic series.

Over the past year, Angel Studios has reached new heights, released the unexpected blockbuster Sound of Freedom and fostered the success of the popular Biblical series The Chosen. This year, the company plans to release six wide-release films, including the period biopic Cabrini.

Despite its rising profile, Angel Studios remains a bit of an enigma to Hollywood insiders. Harmon, who has given few interviews, is now starting to share Angel’s story with talent agencies exploring alternatives to traditional studios. Angel Studios’ approach to “faith-based” content is broader than many would expect. While Sound of Freedom tells the gripping, action-thriller story of a real-life activist combating child trafficking, Cabrini focuses on the overtly Christian narrative of 19th-century Catholic missionary Francesca Cabrini. The studio’s diverse slate even includes comedy and sci-fi.

Harmon’s path to the entertainment industry began in the early days of YouTube, where he and his brothers honed their digital marketing skills before launching the streaming service VidAngel . After a legal dispute with major studios, Harmon pivoted to create Angel Studios, backed by $10 million raised from individual investors. Unlike the traditional Hollywood green-light process, Angel leverages a "guild" of 250,000 online volunteers who evaluate and shape projects. Some of these members also invest, bringing an innovative, community-driven approach to film financing. Another unique strategy is their “pay-it-forward” ticketing, enabling passionate viewers to buy tickets for others, fueling word-of-mouth marketing.

With Angel Studios making waves in Hollywood, Neal Harmon’s unconventional approach is transforming not just the faith-based genre but the entire industry’s business model.

So, what would attract me to have a discussion with Neal? Investing of course. Specifically, it led to our discussion centered on the question: Is investing in movies an appropriate investment for ultra-high-net-worth individuals, family offices and institutional clients??

As Managing Director at Wellspring International Capital Partners, LLC , I specialize in providing highly sophisticated, capital markets-based solutions to ultra-high-net-worth individuals, family offices, and institutional clients. I’m often asked about unconventional investment opportunities. Investing in film offers a unique blend of potential high returns, portfolio diversification, and the chance to support creative projects.

?The purpose of me sharing this post as an example of film as an investment opportunity is strictly for informational purposes. Please note that I do not have access to, nor am I offering, any specific film investment opportunities.

Having met Neal in-person at the recent One Planet Summit in New York City, Neal began our discussion by stating: “Investing in film is like a real estate investment, but with a Hollywood twist.”

He conceded that both real estate and film investing require upfront capital for potential returns. However, unlike traditional real estate properties, films can possibly offer the unique advantage of generating revenue across multiple global markets and diverse channels such as theatrical distribution, streaming platforms, TV deals, rentals, and even the enduring sales of DVDs. He posited that one of the attributes that sets film investing apart from real estate is the often-faster pace at which potential returns can be realized compared to the average real estate deal.

Here are some key points he discussed during our conversation:

• Security in Film Investment: Similar to real estate, film projects can be secured through pre-sales and minimum guarantees.
• Lower Barrier to Entry: Investing in films can require a smaller initial commitment compared to real estate.
• Pre-Sales and Minimum Guarantees: These elements help mitigate risk by securing revenue commitments from distributors before production begins.
• Completion Bonds: These bonds act as insurance to ensure that the film is completed and delivered.
• Global Reach: Unlike real estate, which is bound to a location, films have the potential to earn across international markets.
• Leverage: Tax incentives and pre-sales can help investors minimize upfront costs while maximizing potential returns.

While he believes film investments offer dynamic opportunities, my guidance is any investor considering a film investment, or any investment, should approach this space with caution. While films can provide diversification for investors seeking high-risk, high-reward opportunities, there are several factors to consider before committing.?

My take-away from our conversation was some of the specific risks of film investing may include, but are not limited to:

1. High Risk of Financial Loss: The film industry is unpredictable, and many films fail to recoup their production costs.
2. Long Payback Period: Returns on film investments can take years to materialize.
3. Limited Control: Investors typically have little influence over the creative and business decisions of a film project.
4. Market Saturation: The crowded entertainment landscape makes financial success challenging.
5. Limited Liquidity: Film investments are not as easily sold or transferred as traditional assets like stocks or bonds.
6. Unpredictable Audience Reception: Even promising films can underperform due to shifting tastes or external factors.
7. Complex Financial Structures: Films often involve complicated financing and profit-sharing arrangements.
8. External Dependencies: Economic downturns or changes in consumer behavior can heavily impact a film’s success.

These disadvantages highlight the importance of thorough due diligence and consulting with experienced industry professionals before investing in a feature film.

An example of the risk involved in investing in a film was illustrated in an October 18, 2024, article for CNBC Entertainment, writer Sarah Whitten (1) provides a snapshot of one of the biggest box office disappointments so far in 2024, based on production budgets estimated by IMDb (2) and box office tallies to date from Comscore, Inc. (3):

“Joker: Folie a Deux”

• Estimated production budget:?$200 million
• Global box office:?$166 million
• Release date:?Oct. 4, 2024

Warner Bros. Entertainment “Joker: Folie a Deux” fell short of opening weekend expectations in October 2024, securing just $37.6 million domestically after initial box office forecasts called for close to $70 million in its first few days in theaters.

“Joker: Folie a Deux” suffered the biggest second week drop of any DC studios (4) film, a whopping 81% fall. For comparison, its predecessor snapped up $96.2 million during its opening weekend and $248.4 million globally?in its first three days.?

What went wrong? “Joker: Folie a Deux” failed to lure back its most ardent fans or inspire new moviegoers to flock to cinemas. Critics widely panned the flick, as it currently holds a 33% rating on review aggregator Rotten Tomatoes (5) and a rare “D” on CinemaScore (6).

I would also strongly suggest when considering investing in a movie for the first time, it’s crucial to approach it cautiously and take steps to protect yourself. For those considering film investments, it’s important to perform due diligence. Investigating the script, cast, budget, distribution plan, and legal protections can help make an informed decision.

In conclusion, while investing in films can be an exciting and potentially lucrative venture, it’s crucial to thoroughly assess all risks and seek professional advice to ensure it aligns with your broader investment strategy.

With the insights gained from years of managing wealth for institutions and recognized as one of a select few advisors on the Raymond James Private Institutional Client (“PIC”) desk, I leverage a deep network of resources and an institutional approach to craft tailored investment strategies designed to meet the complex financial needs of my clients. My expertise lies in collaborating with strategic advisors, such as attorneys, CFOs, and CPAs, to create bespoke financial solutions, offering exclusive access to private market investments. I am ideally positioned to serve your most sophisticated financial needs, whether you are an ultra-high-net-worth individual, family office, endowment, or other institutional account with $50 million or more in assets.

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Russell Ballew and not necessarily those of Raymond James. Expressions of opinion are of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Past performance does not guarantee future results.

?Sources:

(1) Sarah Whitten article: https://www.cnbc.com/2024/10/18/joker-folie-a-deux-2024-box-office-flops.html#:~:text=The%20feature%20only%20collected%20%2438.2,after%20the%20first%20hit%20theaters.

(2) IMDb is the world's most popular and authoritative source for movie, TV and celebrity content. Find ratings and reviews for the newest movie and TV shows. https://www.imdb.com/

(2) Comscore is a trusted partner for planning, transacting and evaluating media across platforms. With transformative data science and vast audience insights across digital, linear TV, over-the-top (OTT) and theatrical viewership, they are a powerful third-party source for reliable measurement of cross-platform audiences.

(3) DC Studios?is an American film and television production company that is part of?Warner Bros. Entertainment, a subsidiary of?Warner Bros. Discovery?(WBD). It is responsible for the production of films, television, and animation based on characters from the?American comic book?publisher?DC Comics. The studio has been led by filmmaker?James Gunn?and producer?Peter Safran?as its co-chairmen and co-CEOs since it was formed in November 2022.

(4) Rotten Tomatoes is considered by many as the world’s most trusted and recognized source of movie and TV reviews, Rotten Tomatoes and the Tomatometer score have served as the most reliable home of entertainment recommendations for over 25 years. We offer authentic reactions in a broad range of reviews from professional critics and everyday fans alike in addition to helpful, easily digestible what-to-watch roundups.

(6) Comscore is considered by many as the industry leader in measuring movie appeal. We provide unbiased measurement of audience response that helps gauge movie appeal and success by polling movie audiences on opening night for their reaction to the latest major movie releases.