For those who want more transparency from the Academy of Motion Picture Arts and Sciences – and that was certainly a core request in producer Michael Shamberg’s open letter to Academy leaders last week – it doesn’t get any clearer than the view presented in a 178-page offering document that introduced the group’s latest bond issue about two months ago.
The new bonds are meant to fund continuing work on the Academy’s $482-million movie museum, set to open in December. Like two earlier offerings, they were backed by the state-operated California Infrastructure and Economic Development Bank, and sold by Wells Fargo. With a face value of $100 million and an annual interest rate of 5%, they sold at a premium, which means the Academy Museum Foundation, after covering about $1.4 million in costs, reaped $137.1 million for its project, bringing the yield for bondholders down to 1.14%.
But the really interesting details lie behind a curtain that was drawn back in the interest of financial disclosure. That is, once you actually find the document. It resides on a Web site called “EMMA,” an acronym that stands for Electronic Municipal Market Access. A search for “Academy” will get you the Academy for Personalized Learning, but not the Academy of Motion Picture Arts and Sciences. For that, you search “California Infrastructure and Development Bank,” and up pops a link to the film Academy’s Series 2020A Green Bonds. From there, it’s a short trip to the kind of stuff that Academy watchers, and members, have been wondering about for years.
Where to begin? For one thing, a footnote on Page 5 reveals that fully $91,170,955.62 of the proceeds – down to the penny! – was to be transferred instantly to the Academy Museum Foundation for “reimbursement of capital costs already incurred.” In other words, most of the money was already spent or committed. Another ray of clarity shows that $419 million of the overall museum cost relates to construction; the remaining $63 million will go toward exhibitions and programming. A scary bit of truth reveals that the Academy, having borrowed around $440 million in three bond issues since 2015, will have repaid a total of $659,091,520 in principal and interest when the debt wraps up in 2046.
So even relatively cheap money gets expensive over time.
On the fundraising front, the offering document delivers a bit of a shocker, at least to those of us who have been focused on assurances that the Academy has already hit 95 percent of its target. Actually, says the disclosure, only $145 million of the $317 million “capital portion” of the donations has been received or earned as of Dec. 31. The rest was still due from promises and bequests that will take years to materialize – hence, all the current borrowing.
About the Academy and its annual Oscar show – revenue from which now backs the bonds – the offering document was far more precise than anything this reporter could find in the annual report or anywhere on the charming but somewhat opaque Oscars.org Web site.
The member counts were exact. As of Dec. 31, the group had 9,921 total members, counting all the retirees and a handful of non-voting associates. The voting members numbered 9,599, including retirees; and the active members totaled 9,049, of whom 8,841 were voters, while the rest were associates.
Active membership in the various branches is marked by wide disparity. The actors branch was the largest, with 1,316 active members at year’s end. The casting directors branch was the smallest, with just 128. Directors, executives, producers, visual effects, marketers and publicists, and sound artists all had between 500 and 600 members in their branches. But the short films and animation branch showed a bulge, with 739 active members.
The detailed account of Oscar-related revenue was a revelation. As it turns out, the domestic show, broadcast on ABC, accounted for about 87 percent of viewer-related revenue in 2019–$107 million of about $122 million–while revenue from Buena Vista International sales in the rest of the world covered the rest. International revenue has been growing, to $15 million, up from about $11.7 million in 2015. But domestic payments fell in 2019, to $107,060,000 from $109,179,200 the year before. (The audience split is closer to even; the 2020 show had 23.6 million viewers in the U. S, and 26.9 million abroad, the document says.)
Clearly, the Academy is in danger of seeing another drop in the wake of a poorly rated 2020 show. That’s because, even though ABC has guaranteed rising payments every year, the payments, as the offering document explains, are “subject to reduction in the event of certain advertiser disputes in paying billed amounts based on a breach in the execution of the advertiser’s media buy.” Also, ABC may pay bonuses in a good year, but could trim payments if it decides, for instance, to “reduce the length of the pre-show.”
As for the effect of coronavirus on the new bonds, a daily sales tracker on the EMMA site tells the tale. The bonds are shown as having been priced at $139.184 on Feb. 21, before the full impact of the virus hit financial markets. They rose to $141.888 on Feb. 28, when the economy still seemed stable. But they were all the way down to $107.599 on March 23, as California locked down. On Monday, April 20, they were quoted at $128.217.
On Nov. 1, 2030, when $100 million in principal comes due – and $53,208,333 in interest is to have been paid – their likely value is as uncertain as almost everything else in the current financial world.