Review - Blackfinch Media EIS Portfolio
Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.
Whilst some areas of media have been in a downturn, others have been thriving. Music rights and TV distribution belong to the latter category and this EIS looks to capitalise on that.
- Exposure to two companies
- Film scores
- TV distribution
- Intellectual property asset backing
Blackfinch has been in existence for over 20 years. Its offerings include EIS, SEIS and an IHT service. Within the management team are renewable energy experts, property experts and - importantly for this EIS - music and media specialists. Terry Back is the asset specialist in this area.
Investors in this portfolio invest into two companies: a TV distribution company, Back Catalogue Distribution, and a music publishing business, First Score Music, which concentartes on film scores.
MusicFilm companies don't normally hire someone to write the music score until the film is approximately 90% finished, according to Blackfinch. At that point, First Score Music is appointed to hire a composer and then retains the rights – typically for 70 years.
The first film featured Johnny Depp. The company expects to eventually invest in 25 projects.
There are four income streams: box office sales, cable TV (every time the film is shown the rights holder receive a cut), downloads and album sales, and synchronisation (the placing of music in adverts for example). Blackfinch estimates box office sales will repay about half the initial capital invested.
In addition, according to Blackfinch music rights so the catalogue could be sold. Each deal will be structured differently, but the whole portfolio will eventually be sold as one.
The TV distribution deal is similar to others in the market, it is a tried format. The TV distribution company gets commissions from the likes of the BBC with approximately 70% of the filming budget in place. The EIS advances the other 30 before the programme is made, sometimes a year in advance of filming. The TV distribution company will typically only benefit from international sales.
To aid finding deals, Blackfinch has formed agreements with a firm called Cutting Edge, to help on the music publishing side, and DCD Rights, for the TV distribution side. According to Blackfinch both companies are invaluable and experienced in their fields.
Each company will have a maximum of £5 million invested in it. Thus far £4.7 million has been raised across the two companies.
The target return is £1.05 - £1.20 per £1 invested after four years.
Blackfinch anticipates this as a four-year investment. Due to the nature of the underlying investments and the long-term royalty nature of the revenue stream, there will be ready buyers. However, at this stage none are explicitly identified.
This is the first EIS fund of this kind Blackfinch has launched and that itself brings risks. However, as well as having an internal specialist, Blackfinch has formed external links to experts in each field. Again helping mitigate risk is the fact that both companies are already trading and have “live” deals. The biggest risk seems to be the exit route for investors.
Blackfinch charges its fees to portfolio companies rather than the client, helping preserve full EIS benefits. There is an upfront portfolio establishment fee of 2% and an annual charge of 2%. The performance fee is 25% of all returns above £1.05 per £1 invested. Blackfinch may charger monitoring fees to the underlying companies.
Rather than traditional asset backing such as freehold property, this EIS has intellectual property rights as backing. Whilst not as tangible as bricks and mortar, there is an accessible second hand market for Blackfinch to tap into.