So before we Greenlight spending millions of dollars of capital on any given project, there has to be significant interest from the market. And there has to be either presales, minimum guarantees or other sources of funding through the tax credits that supplement the production and basically cover the cost of production. So that keeps our capital at risk very controlled and very low as well as this still gives us lots of upside and future benefit from participation in those projects when they do come to market from a royalty standpoint.
Bill Brewster: Can you expand a little bit on why now, right? Like why is the company sort of evolving into this business at this time in its life cycle?
Mark Roberson: Yes. Bill, I mean, it’s something that we have been looking at and talking about really for quite the last few years in terms of — before we pull the trigger on it. In terms of how we evolve our entertainment business from its core roots, which is a great business, solid cash flow, profitable business with a long operating history, and how we evolve that business into other areas of entertainment. This was a logical adjacency. We believe too that it has a fair amount of headroom for growth that adds on to our core business and where we can create value. And we see this cinema — really, the entertainment business overall continuing to evolve. That evolution was accelerated through COVID. It’s a disruptive — it’s an industry that’s being disrupted from a streaming standpoint.
And the demand for content is continuing to rise. The demand for content that can be made economically and efficiently, I think, is going to grow faster because at some point, these streamers have to make money. So you have to be more efficient, more effective in terms of your approach to producing high-quality content. And I think that’s where smaller nimble content producers like Strong Studios can excel.
Bill Brewster: Do you think — just looking at where the capital cycle is and whatnot, if streamers decide to start pulling back on their spend, is there — I mean, is this a fairly low risk? Like is there going to be demand at the end of the tunnel, no matter what? Or is this a project that can be shut down if necessary, without like big exit costs? Just kind of curious how you’re thinking about if aggregate content spend were to slow, how — what our exposure is there.
Mark Roberson: Yes. Bill, I think — go ahead, Kyle.
Kyle Cerminara: I can address that. So right now, we have very little capital invested in any specific project, and when I say very little, like less than a few hundred thousand dollars in any specific project. We did have more than — we had over $1 million invested in Safehaven. And we’ve now derisked Safehaven and received all of our money back, paid off everything related to the development cost, and we still own a substantial portion of the back end when that sells. So that’s a good model for us, where we can find projects that are interesting. It’s somewhat analogous to like an asset management business where we are building these ….
Bill Brewster: Kyle, I don’t mean to cut you off. But did — you went dark on my line. Did you go dark on everybody’s line?
Kyle Cerminara: I don’t know. I don’t think so.
Bill Brewster: Okay. I’m just — because — okay, sorry. I can read the transcript. But it was an interesting point you were making and I wanted to make sure that it was captured. So I apologize.
Kyle Cerminara: Sure. No worries. Well, what I was saying — can you hear me now, Bill?
Mark Roberson: Yes, yes.
Kyle Cerminara: Okay. What I was saying was that we have limited capital exposure right now to any of our projects. And when I say limited, I mean certainly less than $1 million, and in many cases, it’s a few hundred thousand dollars per project at most. And that’s like — when I say a few hundred thousand, that’s like our largest projects have like a few hundred thousand of exposure. And we’ve really fashioned it as like an asset management business that — like we’ve done with other businesses, where we raise capital for the projects or we don’t do them. And we let the market decide if the project is a good one or not. And if there is investor demand for the opportunity, we’ve presented it, we’ve given investors an opportunity to invest in it.
