Entertainment is a complex and constantly evolving industry that employs a variety of business models for the production, distribution and monetization of content. While there are many ways a company can make money in entertainment (and even more ways to lose it!), our plan is to focus on areas in the value chain where having a built-in audience provides a competitive advantage.
Our goal is to develop a slate of projects diversified across genres (i.e. comedy vs. horror), medium (i.e. feature films vs. television) and risk profile (i.e. high risk early stage projects vs. lower risk late stage projects). As a startup attempting something that has never been done before, we view many of our early projects as experiments that allow us to better understand our business and prove — to ourselves, our investors, and the industry — the value that a fan-owned company can provide.
As of this writing (April 2021), Legion M has utilized many different business models, including the ones listed below:
Feature Film P&A Projects
“P&A” is an industry term for “print and advertising,” and generally refers to the money spent by a distributor to release and market a feature film. As of April 2021, Legion M has had three feature film P&A projects: we partnered with NEON for Colossal, Electric Entertainment for Bad Samaritan, and Bleecker Street for Save Yourselves!.
We believe that Legion M can provide significant value for distributors during the release cycle of a film. From encouraging viral sharing of content that raises awareness to organizing opening night meetups at theaters around the country, Legion M’s community has a demonstrated ability to create authentic, grassroots buzz. We can’t make a bad movie good, but we believe we can help a good movie find an audience and increase its chances of becoming a hit.
We have contracts in place for all of our Feature Film P&A projects, and while the terms of these deals vary substantially, all involve Legion M providing either cash or “in-kind value” to the distributor in exchange for a potential payout tied to the success of the film.
The Company also has potential to earn revenue from merchandise sales for Colossal and Save Yourselves!. The merchandise for Colossal (our very first project) is limited to shirts and posters, but over time our merchandise capabilities have grown, and the merchandise lineup for Save Yourselves! is quite large, and includes wholesale sales and sublicensing Save Yourselves! to third party manufacturers.
In addition to revenue (if any) that Legion M earns from our feature film P&A projects, we also believe that partnering with distributors for projects like the ones described above provide value to the Company. Most of the activities we engage in when promoting a film (e.g. PR, social media marketing, comic-con activations, meetups, etc.) are also great for promoting Legion M, and we’ve found that partnering with distributors to release films is a fantastic way to engage our community and help us grow the Legion.
Feature Film Production Financing
Generally speaking, production financing refers to the money required to make a movie. As of April 2021, Legion M has invested in production financing for four films: Field Guide to Evil, Mandy, Jay and Silent Bob Reboot, and Archenemy.
In each of these cases Legion M has made a cash investment in the film in exchange for a potential cash return based on the film’s success. The terms of these deals vary widely and are typically subject to a number of different contracts with the various parties associated with the film. The risk and potential return associated with these investments depends heavily upon the terms of the specific deal and where we fall in the “waterfall” -- the model that determines how (and in what order) revenue earned by the film is distributed amongst all of the stakeholders. Thus far, Legion M has participated in relatively low-risk positions at the top of the waterfall (e.g. fixed-return investments backed by existing sales agreements that are paid before other stakeholders), as well as high-risk positions at the bottom of the waterfall (e.g. a percentage of the “backend” that gets paid last, but is uncapped). In some cases we’ve also been able to cross-collateralize across other revenue streams (e.g. the “Reboot Roadshow” live tour for Jay and Silent Bob Reboot and the Johann Johannsson soundtrack for Mandy) and/or secure other terms (e.g. guaranteed minimums) that can help diversify our investment and improve our odds of achieving a positive return.
Legion M has also been able to leverage our position as an equity investor in each of these films to tap into other revenue streams, including consumer products sales, which is discussed in the “Consumer Products and Media” section below.
In addition to revenue (if any) that Legion M earns from our feature film projects, we believe that participating in the financing of feature films like the ones described above provide value to the Company. Because our involvement with these projects begins before the film has been completed, there are often opportunities for us to get our members and investors involved in the production process. We believe that providing fans the opportunity to “come along for the ride” during the events leading up to commercial release (e.g. raffling off set visits, providing priority access to join as an extra, hosting livestreams with creators, inviting fans to see the festival premiere, etc.) creates grassroots support and buzz that can help increase the odds of success once the film is released. And, as with our P&A projects, most of the activities we engage in when promoting a film (e.g. PR, social media marketing, comic-con activations, meetups, etc.) also serve as great ways to promote the Company, engage our community, and help grow the Legion.
Film Distribution
In April of 2019, Legion M announced our first foray into film distribution — a partnership with Screen Media to acquire the North American distribution rights for the documentary Memory: The Origins of Alien. Under this partnership, we’re sharing (in a 50/50 split) all the costs and revenues from the North American distribution of the film across all outlets for the next 20 years. Screen Media is providing the expertise required to distribute the film, while Legion M is providing marketing muscle we believe will help make it successful.
As the distributor of the film (in partnership with Screen Media), our investment is the money and time spent to acquire, market, and distribute the film. These costs include everything from the fees paid to acquire the rights from the filmmakers to the costs associated with booking theaters, manufacturing DVDs, cutting trailers, designing/printing posters, and buying advertising. However, as the distributor, Legion M and Screen Media will earn a portion of theatrical ticket sales, DVD sales, VOD sales/rentals, licensing/advertising fees paid by streamers, merchandise sales, etc. through the year 2039. It’s worth noting that the film was released in 2019, which was the 40-year anniversary of Alien, but we will still own the rights to this film when the 50th and 60th anniversaries of the film roll around in 2029 and 2039.
In addition, Legion M has secured merchandising rights associated with the film (including the rights from the H.R. Giger estate to offer free gifts with purchase and rights from the Dan O’Bannon estate to sell licensed merchandise) and offer a limited line of merchandise related to the film.
We believe distribution is a potentially powerful business model for Legion M. We believe the Legion M community can provide a competitive advantage in selecting, marketing and distributing a film, and as with our other projects we believe that many of the activities we engage in when promoting a film release (e.g. PR, social media marketing, comic-con activations, meetups, etc.) also serve as great ways to promote the Company, engage our community, and help grow the Legion.
Marketing Partnerships
In April of 2019, Legion M announced a marketing partnership with Fox Searchlight (a division of Disney) where Legion M earned revenue, co-marketing support, and exclusives for our members in exchange for supporting the release of Tolkien.
From a financial standpoint, this is a powerful business model for Legion M – it’s like a P&A project but with guaranteed revenue and zero capital at risk. The model only works for certain projects (i.e. Legion M is not a “gun for hire”), but for the right film it can be a win/win for everyone involved. In the case of Tolkien, Legion M provided considerable value by leveraging our community to build awareness and buzz, while the film provided not just revenue to the Company, but also exclusive opportunities for our investors (e.g. Hollywood premiere tickets, limited edition meetup pins) and a great way to introduce Legion M to the worldwide community of J.R.R. Tolkien enthusiasts.
Tolkien was our first experiment with a marketing partnership, but we’re eager to explore this model further, as it opens the door to many projects (including larger studio films) where other models may not be an option.
Consumer Products and Media
Ever since our community began, there has been demand for Legion M merchandise that allows our members and investors to show off their Legion M pride. As the community gets larger, that demand grows. Today we have dozens of Legion M items in our store ranging from socks and beanies to t-shirts and mugs.
In 2018, through our investment in the film Mandy, Legion M acquired a license to produce merchandise for the film, and has had great success selling items ranging from t-shirts and hats to replica props and Halloween masks. We believe our ability to generate additional revenue tied to our projects is valuable for both Legion M and our partners.
Since our success with Mandy, Legion M has acquired merchandising rights to a number of our other projects including Archenemy, “The Left Right Game,” Jay and Silent Bob Reboot, The Emperor’s Blades, Memory: The Origins of Alien, and Save Yourselves!. For some of our projects we sell the project media itself, including DVD’s, Blu-Ray’s, digital movie downloads, books, albums, and comics. In 2020, we expanded into consumables with the addition of Cheddar Goblin and Macaroni and Cheese (from the film Mandy) and Archenemy “Space Whiskey” to our consumer product portfolio.
Our Consumer Products and Media Revenue comes from a number of different sources:
Direct to consumer sales through the Legion M channels (including our shop.legionm.com online store and Amazon storefront)
Wholesale sales of Legion M product to 3rd party retailers (e.g. Hot Topic)
Sublicensing to 3rd party manufacturers for their products (i.e. earning royalties by allowing a 3rd party to create and sell products of their own)
Today, consumer products and media sales represent a significant component (72% in 2019 and 72% in 2020) of our revenue. From an investment perspective (e.g. if we evaluate the time and money we invest in consumer product initiatives using the same criteria we use to evaluate our project initiatives), consumer products offer a number of unique advantages:
The risk of launching a new products is relatively small – particularly now that “print on demand” technology eliminates the risk associated with inventory requirements for many items like t-shirts, posters, hats, etc.
The time required to achieve returns on a new product line is orders of magnitude shorter than film and TV projects. For example, while it can take years to see a return on a successful film project, it’s possible to start making money from merchandise related to a film even before it is released.
Revenue from merchandising comes directly to Legion M, from which we pay royalties that get put into the waterfall (the distribution of funds amongst all the stakeholders of a project as dictated by the applicable contracts between all the parties). This is a more advantageous position than other models where revenue is collected by others and comes to us (when applicable) via our position in the project waterfall. For projects in which Legion M has a position in the waterfall, it’s even possible that a portion of the Consumer Products and Media Revenue we contribute into the waterfall could come back to Legion M.
We also believe that the investments we make in consumer products related to our projects pays dividends beyond the revenue they generate. It’s not a coincidence that successful entertainment companies like Walt Disney and Warner Brothers have robust consumer product divisions to monetize their IP, as branded products are an excellent way to drive awareness and build and nurture fandoms.
Comic Books
In early 2019, we used Kickstarter to launch presales of a comic book and consumer product line for Girl with No Name, a feature film on our development slate. The comic book was developed by Legion M based on a story adapted from a segment of the film script. In less than 6 weeks, the Kickstarter campaign closed with over $125,000 in sales from over 2,800 backers, making it the most-backed comic book project in the history (at that time) of Kickstarter, despite the fact it was a brand new, never-before-released IP.
From an investment standpoint, comics represent a relatively inexpensive (compared to film and TV) way to develop and monetize IP. And while we believe comic books are an interesting potential revenue stream for Legion M, we’re particularly interested in ways that we can use comics to prototype, subsidize, and facilitate the development of film and television projects.
For example, the Girl With No Name comic book was essentially a first pass at storyboards for a Girl With No Name feature film. The process of developing the comic book gave our director and producers a chance to flesh out the visual style of the film, and to also get feedback on their creative decisions from fans. As part of the Kickstarter, we created opportunities for backers to engage through an online development meeting, shared Pinterest boards, etc., where they provided feedback that could prove invaluable to the development of the feature film. Most of all, this effort provided commercial validation, elevating Girl With No Name from “an award-winning script” to “an award-winning script behind the one of the most successful comic book Kickstarter projects of all time,” which we believe has increased our chances of getting the feature film made.
While the Kickstarter ended in 2019, Legion M continues to sell both the comic book and merchandise related to Girl With No Name in the Legion M store as well as select comic book shops.
Live Event Production
Legion M has produced two major live events — the “Celebrating Stan Lee” handprint ceremony and after-party in 2017, and the “Excelsior!” tribute to Stan (benefiting the non-profit charity The Hero Initiative) that we hosted in early 2019 shortly after Stan passed away. In both cases, we incurred the effort, costs, and risks of hosting the event in exchange for the revenue generated from tickets, merchandise, food/drink, and sponsorship sales.
Neither of these events were intended to generate a profit. This was due to a number of reasons – not the least of which is the fact we didn’t feel it was appropriate to profit from the handprint ceremony (which was billed as “the fans’ gift to Stan”) or a memorial benefit. That said, the revenue generated by these events helped subsidize the costs of what we believe were extremely effective ways to generate exposure and build goodwill within the industry and fan communities.
Both of the events included a long list of industry participants and guests, including Kevin Feige (head of Marvel Studios), Mark Hamill (Star Wars), Laurence Fishburne (The Matrix), Kevin Smith (Jay and Silent Bob Reboot), Chadwick Bozeman (Black Panther), Todd McFarlane (Spawn), and many, many more. Both events also generated extensive news and media coverage from around the world, and provided an opportunity for Legion M to “open the gates of Hollywood” and bring our members/shareholders to events that are typically reserved for industry insiders.
In addition to these major events, Legion M has hosted smaller events, including the “Legion M Lounge” at the Sundance Film Festival and at San Diego Comic Con, and the “Fan Oasis” at Los Angeles Comic Con. While these events are typically free (i.e. there is no ticket sale revenue) we have had some success selling sponsorships. Again, our goal with these events to date has not been to generate a profit (although we’d certainly love to if we could find the right sponsor), but to offset the costs of marketing efforts that allow us to promote our projects and grow our community.
Development, Packaging and Producing
Development generally refers to the earliest stages of the content production cycle, when production companies invest time, money, and “sweat equity” to develop, package, and sell movies, TV series and other entertainment projects.
Examples of development activities include reading and evaluating scripts, brainstorming ideas, writing treatments, providing feedback to writers, licensing IP, packaging talent (e.g. showrunners, actors, directors), finding sponsors, creating budgets, and pitching projects to studios, streaming services, networks, distributors and other potential partners. The goal of development is typically to package a project and then sell it so the project can be produced.
Legion M has dozens of projects in the development stage. This includes projects like “ICONS: Face to Face” where we invested cash to film a pilot, The Emperor’s Blades and Ghosts of Manhattan where we licensed rights to existing novels to develop into a film or TV series, as well as projects like “Airship Cowboys” and “Stunt Team: Drive” where there is little or no cash required and our investment is primarily the time we spend working with partners to develop the idea. Many of our development stage projects have not been publicly announced.
From an investment standpoint, development projects are generally very high risk/reward, meaning that the odds of any given project making it into production are very low, but if you are successful in developing your project into a successful property, the rewards are potentially high.
Working with Endeavor Content and other partners, we’ve actively pitched projects to partners including Netflix, Amazon, Hulu, Apple TV+, FX, Sony, HBOMax, and more. As of this writing (April 27, 2021) we have not sold any of these projects, but each pitch we make is an opportunity to launch a new movie, series, or franchise. In the meantime, we have been able to create consumer products and media revenue streams for development projects like Girl With No Name, and The Emperor’s Blades to offset some of our internal development costs.
