A New Approach to Film Finance

CineNow Limited has launched a ₹1,350-crore Secured Participation Fund, aiming to bring professional standards to film financing. This sector faces significant instability and tough economic conditions. The fund's structure is designed to tackle specific challenges in India's film industry, even as the wider media and entertainment sector grows.

IP as an Investment Product

At its heart, CineNow's model treats film intellectual property (IP) as a financial asset rather than just a creative work. The fund invests in a group of film projects, securing investor capital with a primary claim on the film's IP and its various revenue rights. These rights include theatrical releases, digital streaming, satellite broadcasting, music, and merchandising. This strategy aims to create multiple income streams and spread risk across projects. A major shift from older methods is the fund's focus on increasing a film's value during its production. CineNow believes a film's worth grows significantly from script to distribution. By focusing on this value growth phase, the fund aims to generate returns even before a movie is released, making investment performance less dependent on box-office success.

Challenges in the Film Sector

This fund launch comes at a crucial time, as India's film sector experiences a downturn while the overall media and entertainment industry expands. The broader Indian media and entertainment industry reached over ₹2.5 trillion in 2024. However, film revenues reportedly fell about 5% to ₹187 billion last year, despite over 1,600 film releases. The number of major Hindi blockbusters also decreased, with only 11 films earning over ₹1 billion, down from 17 the year before. Additionally, income from digital streaming and satellite rights has decreased by about 10% as platforms focus more on profitability than buying content aggressively. This situation points to a fundamental problem: the pressure to repay debts or cover funding needs often leads to selling rights too early, which limits potential gains for producers and investors. CineNow's model aims to address this by providing a way for investors to get cash back sooner before release. This allows rights holders to wait for better market conditions and reduces reliance on early, less favorable sales. The fund is registered in the British Virgin Islands, using offshore financial structures for tax advantages and regulatory flexibility.

Early Exit Through Tokenization

A key feature of the CineNow fund is its use of tokenization to offer investors an early way to access their money. Investors who join early can choose to exit about 12 months after the fund closes, by which time the film slate is expected to have increased in value. This option to exit before a film is released is a major innovation for film finance. It allows investors to potentially profit from their investment without depending on theatrical success or long waits for other revenue streams. Investors who stay in the fund will continue to share in revenues from streaming, satellite rights, and other uses after the films are released. This two-stage return plan marks a clear break from older models, where returns largely depended on box-office performance, often tying up investor money in single projects for a long time. While tokenization can offer better liquidity and clearer tracking, it also faces challenges such as market fluctuations, regulatory uncertainty, and the unpredictable nature of a film's commercial appeal.

Potential Risks and Challenges

While CineNow's structured approach aims to solve key problems in film finance, significant risks remain. The fund's success depends on accurate IP valuation and the effective execution of its plan to grow value in stages. This could fail if market conditions change unexpectedly or production schedules slip. The tokenization feature, though promising liquidity, needs well-developed secondary markets for film IP, which are still new and have evolving regulations. Ultimately, the commercial success of the films themselves will determine investor returns; tokenization cannot prevent a film from failing. The fund relies on strong oversight, including independent administration and legal review. This highlights how crucial strict adherence to rules and transparent operations are for investor trust. Global regulations for tokenized film assets are still developing, which could affect long-term investor confidence. Careful contracts are also needed to manage intellectual property rights for tokenized assets. Unlike publicly traded companies with clear financial measures, CineNow, as a fund manager, operates with less transparent financial reporting than listed companies in other sectors. Valuing the fund's assets will be critical and influenced by market forces and internal estimates.

Market Trends and Outlook

India's Over-The-Top (OTT) streaming market is expected to grow significantly, with annual growth rates projected between 15.6% and 17.79% until 2030. This growth is fueled by wider internet access and a rising demand for varied content, creating a strong environment for film consumption. CineNow's model views film IP as an asset class driven by consumer demand, potentially stable even during economic uncertainty due to its multiple revenue streams. This initiative is part of a larger trend towards packaging intellectual property for investment and exploring alternative assets, helping investors diversify away from volatile traditional investments.