Robert “Bob” Maerz, Vice President and Chief Executive Officer of Orlando-based Allen Schwalb Group, Corp. talks with Opportunist’s Managing Editor Leslie Stone regarding his company’s role in the sports and entertainment industries, its proprietary method for choosing projects and its unique $10 million private placement investment offered on the Offerboard.
Bob Maerz joined the Allen Schwalb Group, Corp. (ASG) last year when the company expanded its management team and advisory board with the addition of nearly a dozen entertainment industry experts and specialists from production to distribution. Maerz and film and sports financier Allen Schwalb, who founded and has managed ASG’s corporate entities—Star Partners, Inc., Star Partners International, Inc., and Professional Sports Investments, Inc.—for over 30 years, are creating a multifaceted entertainment powerhouse that will offer many services to the sports and film industries.
ASG is comprised of and manages its affiliates, subsidiary companies and joint ventures: Star Partners, Inc., Star Partners International, Inc., Star Partners Aspire, Inc., Star Partners Sports, Inc., and Professional Sports Investments, Inc.
During the 1980s, Schwalb raised more than a quarter of a billion dollars ($250 million) for three major motion picture studios, Warner Bros., Metro-Goldwyn-Mayer, and United Artists, to finance such blockbuster films as “Superman II, III, IV,” “Rocky V,” The James Bond movies “Never Say Never Again” and “Licence To Kill,” “Rain Man,” “Moonstruck,” “A Fish Called Wanda,” “Thelma and Louise,” “The Right Stuff,” and “The Color Purple”—to name a few. Including independent films and professional sports team franchises, Schwalb raised almost one-half billion dollars ($500 million).
Maerz was previously a registered representative at Harris Financial Company and Legg, Mason, Wood, Walker, Inc.—both New York Stock Exchange member firms—and later founded his own investment firm and concentrated on the entertainment media industry. During his career, he has served as executive producer for rock videos, feature films and syndicated television shows, and has assisted with the facilitation of in excess of $400 million dollars in financing transactions. These transactions were for both public and private companies across multi-industries from food, real estate, environmental, oil, media and technology. As Chairman and CEO of MSH Entertainment Corporation (MSHE: OTCBB), which he took public through a reverse merger, Maerz raised in excess of $18 million dollars, acquired two companies, and was able to position MSHE to be purchased by a NASDAQ listed animation and production company. After providing investment banking consulting services to numerous companies over an eight-year period, in 2010 Maerz co-founded Cygni Financial, a Louisiana based company that provides capital for the pre-funding and financing of state media tax credits for the motion picture industry. Cygni operates in both Louisiana and Georgia. Maerz works with and has affiliations with several New York based financial firms.
Opportunist: How did you and Allen Schwalb meet?
Bob Maerz: We met through a mutual friend who is a combination investment banker and music industry executive. When I found out Allen was re-entering the film industry I knew we had many personal synergies and felt that we would eventually join forces. Allen is such a contemporary and so versatile in his ability to move with the markets and especially his expert knowledge in how to take advantage of the tax incentives available today. What started as a friendship and mutual love of music has grown into a close personal relationship and is now truly one of the great opportunities of my lifetime. He’s the man who gave us some of America’s favorite movies of all time! Who would’ve guessed that the financing of all these classic films was done right here in Orlando? It’s really wonderful and opportunistic to be sitting here with Allen and I relish the opportunity. What I really enjoy about working with him is that we are both contemporaries and we have mutual extensive contacts in the investment, sports and entertainments industries.
Opportunist: What prompted ASG to bring its sports and entertainment operations together?
Bob Maerz: A film slate by itself is a depreciating asset, in that it realizes its greatest revenue in the first few years of its release. Films don’t create any long-term value unless you have films such as Allen has financed that become classics and are perennial moneymakers. Since Allen’s background in sports is just as strong—he has all of the experience, associates and contacts—we were encouraged to put everything under one umbrella corporation. Sports, which is an asset play investment, is entertainment driven as well. Historically, Allen has given investors the opportunity to invest in specific films and professional sports team franchises, such as the Charlotte Rage and the Orlando Predators [Arena Football teams] and other entities he was financing. As a result, we thought why not give investors the opportunity to invest in Allen and his Midas touch. Therefore, we called the company the Allen Schwalb Group (ASG) of companies and spent over five months working together reorganizing and consolidating our operations.
Opportunist: What are ASG’s strengths and competitive advantages?
Bob Maerz: ASG’s uniqueness lies in its ability to simultaneously focus on sports and filmed entertainment. There is a tremendous opportunity for cross-pollination. Several major talent agencies have acquired sports agencies. Many of the major agencies such as Creative Artist Agencies [CAA], Relativity and other film companies are now representing many athletes along with their stable of actors. Athletes are looking for agencies with a broader spectrum of services besides contract negotiation. We obviously cannot, and do not, promise them the opportunity to come to us and to appear in a film (even though there is that opportunity). However, we can assist them in producing their own film or music album. In addition, we can provide a platform from which to launch their project.
We have developed relationships with many major investment banks and wealth management firms. Our mantra, which we want to impress upon our sports star clients especially, is that it is very important for them to achieve financial security and to still have the money they made five years after they retire. Countless players file for bankruptcy due to mismanaged finances. Our clients are realizing the benefits of their association with us after just two or three months under our advisement, and we are working with several high prospective draft choices already.
We are a vertically integrated film facilitator having the ability to aggregate scripts, have them tested, rated, make suggested revisions, and then subject to the revisions, assist with the facilitation of the financing, production and distribution.
We structure our deals so that writers, producers and directors have more equity in their projects. The same holds true with some of our professional athlete clients. They had salaries but no equity. This was something that was not available for Allen to offer 20 or 30 years ago because transactions of this nature were structured differently. We are giving individuals a rare opportunity to be an owner. I have to believe in what I do and have skin in the game. What ASG has to offer is hard to beat. To our knowledge, there is no company out there that is offering this same opportunity.
Opportunist: How has the film industry changed in recent years?
Bob Maerz: It has had a complete 180-degree metamorphosis. A few decades ago, the majority of films being produced were studio films—only approximately 15 percent were independent films looking for what we have to offer. Today, 85 percent of films being produced are independent films.
Opportunist: What does ASG offer these independent film companies?
Bob Maerz: If a major studio produces a film they have the complete marketing apparatus for their project. With the independent film community, the common belief is if you get money to produce your film your job is done but you’re really only half done. Distribution and Prints and Advertising are often the missing ingredient, and that is where we come in. Out of the approximately 1,000 films that get produced in our country every year, about 100 are studio affiliated films, the balance of the films are independent films, and of them maybe about 100 to 200 may be able to arrange for distribution. The others will never see the light of day.
Up until now, these independent producers have been running around trying to get together all of the services they need to produce a film. They knock on one door for this and another door for that. If they knock on our door they will find a one-stop-shop. We have the requisite connections to assist in the financing to see projects through to completion. Also, we can help package the project and handle the copyrights and obtain the bonding.
Bob Maerz: We only accept films that we believe have potential for profitability. Our experienced team of film project reviewers does the conventional reviewing, which includes dissecting the script and critiquing it on story structure and plot. We have also developed a proprietary algorithmic system to review, rate and score entertainment projects based on content submitted by entities from private equity groups, hedge funds and investors to producers, directors, writers, filmmakers and distributors to studios, advertisers, sponsors and the public in general.
Some writers and script owners are amenable to change and some aren’t. Out of every one hundred scripts we receive (we receive approximately two per day), we typically select eight to ten. Subject to qualifying under our methodology, we can offer them the opportunity to qualify for all of our services through our program.
Opportunist: How does ASG find film projects? What genres do you focus on?
Bob Maerz: That’s one aspect about our business that people often have a hard time understanding. They always want to know ‘Where do you get the scripts?’ Allen and my response is, ‘I don’t know … they find us.’ Personally, since I have been in this business, primarily as an Executive Producer, there have always been an abundance of creators, writers, producers, etc. who seek you out for financing.
Allen currently receives about two scripts a day. Once our digital platform is operational, (GOPOPS) we estimate that we will receive, budget, and perform a preliminary profitability test (more comprehensive testing is available if merited) of over 1,000 film projects per year.
We are cross genre. We don’t do racy or sexy films or very vivid blood and guts or shoot ‘em up killing films. Allen always was associated with family and socially redeeming, socially responsible movies, such as ‘Rain Man,’ ‘The Color Purple’ and ‘The Right Stuff.’ In the near term we will likely do a zombie film because those are very popular right now and do well. One of our current films, a biopic on the life story of Louis Armstrong, is testing very well.
Opportunist: Please tell us about your faith and family division, Star Partners Aspire, Inc.
Bob Maerz: The faith and family genre is one of the fastest growing genres in the film industry. We recently arranged a six-picture deal with Lisa Arnold, one of the notable writers, producers, and directors of faith and family films. Lisa’s film ‘This is our Time’ won the International Christian Film Festival in 2012 and now her new blockbuster film ‘God’s Not Dead’ is doing extraordinarily well in worldwide box office sales. Lisa lives in Louisiana and I’ve known her for years. We have recently commenced pre-production on our first Star Partners Aspire film ‘Caged,’ which will be shot in Louisiana and Greece.
Opportunist: What is ‘Caged’ about?
Bob Maerz: It’s a sordid subject about the kidnapping, trafficking and enslavement of women and children around the world, which is very timely. We are working closely with Trafficking Hope based in Baton Rouge, and A-21, the worldwide policing organization for human trafficking. We will utilize the same marketing machine used for ‘God’s Not Dead’ and if it does one-tenth as well as ‘God’s Not Dead’ it will be a considerable success. Allen will be speaking at the FILM-COM symposium in Nashville in June. We are also moving forward with our sequel to ‘It’s A Wonderful Life,’ the perennial Christmas film that is the most loved and watched film of all time.
Opportunist: Has the backlash about the proposed sequel subsided?
Bob Maerz: There are certainly people out there who are dubious of a sequel; conversely, there are also a lot of people who will want to go see it. As one newspaper in Ireland reported, even the naysayers are probably going to go see it.
Opportunist: How does ASG derive its revenue?
Bob Maerz: We have multiple income streams that are derived from our wide range of services to filmmakers, producers and production companies, including consulting fees, advisory fees, film slate management fees and executive producer fees. We also receive income from profit participations and equity ownership interests in films, film projects and film companies. In the sports industry we have multiple income streams that are derived from our wide range of services. These services include contract negotiations, marketing, sponsorships, financial consulting, and corporate finance services to current and potential professional athletes and professional sport team franchise owners.
We are also able to tap into the income synergies that exist between the sports and entertainment industries, including potential crossover of licensing, sponsorships, merchandising and sports film projects. Obviously, any cash flow and profits that we generate from those sources will enhance our earnings, book value and shareholder value.
Opportunist: Is there a robust overseas market for U.S.-produced films?
Bob Maerz: Most of the increased box-office revenues (over $11 billion) are from ticket price increases; however, the overseas markets are burgeoning, especially in the BRIC countries of Brazil, Russia, India, and China, where the numbers of theaters and box office revenues have more than doubled in the last few years. About 7,000 theaters enter the market every day in those markets. Today the film revenue for a film is approximately 70 percent of the worldwide box office. This again is a complete turnaround from 30 years ago when most revenues—approximately 70 percent—were generated domestically.
Opportunist: Is ASG poised to take advantage of the explosive growth in mobile entertainment?
Bob Maerz: Yes. People today are watching movies on their laptops or handheld devices wherever and whenever they want. This has impacted the film, TV and music business—and not always in a good way because of endemic piracy. The Apple model, as insiders call it, seems to work. If you don’t charge more than $3.99 per film or $1 a song consumers will buy them. Places like China have invested so much money in their own theaters and are now financing films, so they will be paying more attention to the theft of intellectual property and working to curtail rampant piracy. They won’t tolerate it.
We have developed relationships with Freestyle Releasing, Freestyle Digital Media and Allied Integrated Marketing and are moving to align ourselves with all the major digital platforms. Currently about 20-to 25 percent of people are watching films and TV on their mobile devices. In addition, we have been planning and are creating our own digital platform to service our content.
Bob Maerz: Overall about 12 films every 18 months. We plan on financing and producing about three films a year through our Star Partners Aspire Faith and Family Division. You can shoot a high quality film for $500,000 to $1 million dollars. That’s where digital technology comes in. ‘God’s Not Dead’ was made with a budget under $1 million and has grossed nearly $70 million since it opened in March. We have a pretty strident risk mitigation model that will cover 70 percent of investment. We will also take advantage of the tax credits and incentives that are offered by over 40 states and most specifically Louisiana and Georgia where the credits can be as high as 38 percent. Foreign pre-sales also mitigate the downside risk. Both tax credits and pre-sales are important risk mitigation components of our financial model. We may not always know what we will net on the upside, but we aren’t going to lose anything. Preservation of capital is our policy in this business.
With Star Partners, Inc. Slate division, we will be financing upwards of approximately eight films every 12-18 months. These are cross-genre features that will have budgets of approximately $2 million to $35 million. Again, as with Star Partners Aspire Faith and Family films, we mitigate any capital risk with testing, pre-sales and taking full advantage of the tax credits. These films will all be positioned for full theatrical release and are to be funded with institutional capital that is being arranged by our Wall Street investment partners.
Opportunist: How did ASG become involved with Offerboard?
Bob Maerz: Allen signed contracts with several notable investment banks in New York to create a unique wealth management investment product consisting of three $100 million slate of films. The first slate of eight films is currently in the process of being financed. I have a fairly strong network of private equity groups, money managers and hedge fund managers who have raised money all over the world. Through one of my long-time friends and attorney, an ASG proposed $10 million private equity offering was shown to the group who was bringing the decades old and successful Australian Small Scale Offerboard (ASSOB) to the United States. The very capable people of Offerboard were attracted to ASG’s private placement investment because of Allen’s previous successful history, reputation and credibility, and our seasoned management team. Also, they were attracted to ASG due to the fact that ASG has numerous sources of revenues and potential profits—we are not just a pure film play. After signing an Agreement with Offerboard in January, we spent the first part of this year in due diligence with them. They have received the final approvals from FINRA. Offerboard is affiliated with the Broker Dealer Finance 500 in Irvine, Calif.
Opportunist: What are your year-end goals for 2014?
Bob Maerz: My goal is to ultimately make the Allen Schwalb Group a very profitable endeavor. I believe we can exceed the Wall Street projections. Our first film with Star Partners Aspire and Lisa Arnold should give us a big boost, we should have a few of our NBA players drafted and signed, our digital platform should be live, and we, hopefully, will be closing our slate financing, from which we receive management fees. Therefore, we are on our way to creating an enhanced valuation for ASG and for our investors. We are planning on subsequently listing our stock on the NASDAQ market. To qualify for a NASDAQ listing, among other things, a company must have the assets, the revenues and earnings, and the requisite number of shareholders. I feel we will have most of the components to qualify within a year; however, we need 1,000 shareholders. My hope is that with articles like this in Opportunist magazine and the added visibility that Offerboard gives us, investors will like our story and decide to invest in ASG.
Allen and I really understand the investments markets and we carefully watch the IPO market. I have to believe in what I am selling and I have to say that I would match ASG with any company out there. The success of Offerboard and what they have done, as well as Allen’s background and all the experienced ASG officers and advisors who have agreed to be part of this great team, has allowed us to create a dynamic company and investment offering. We have multiple income streams and zero debt, and we are practically recession proof because people want to see movies and watch sports to escape reality when times are tough.
Leslie Stone is an award-winning writer/editor with more than two decades of experience covering business, finance, real estate and lifestyle issues for newspapers, magazines and online publications. Originally from Virginia, she currently resides in Florida. Follow her on Twitter at @lescstone.
The Allen Schwalb Group of Companies - http://allenschwalb.com/
The Allen Schwalb Group on Offerboard - http://www.offerboard.com/offerings.asp