In a rare move for a small Vancouver-based film and television production company, Network Entertainment has gone public. The company started trading on the TSX Venture Exchange as Network Media Group Inc. (TSX-V: NME) in early January.
�It is an unusual move in this city; it�s probably quite a unique move in the production side of things,� said Derik Murray, founder of Network Entertainment and now CEO and executive producer with the new public company. �But we�re certainly excited by it.�
Network, which has approximately seven core employees, was founded in 1999. Its work includes the 2002 Gemini Award-winning Legends of Hockey TV series and biographical documentaries such as the 2010 Academy Award-nominated Facing Ali and, premiering this month, I am Bruce Lee.
Murray said that access to capital was a key reason the company went public.
�We need to be in a position where we can greenlight multiple productions of scale and have ourselves in a place that we�re well-capitalized to be able to endure that process,� he said.
Paul Gertz, Network�s president and COO, added that the company hopes going public will give it new clout in the industry.
�Our dream is to build a world-class studio and facility here in Vancouver,� he said. �In order to do that – whether that�s our own projects, whether that�s mergers, acquisitions, strategic alliances, whether that�s bringing in talent from Canada, the U.S. or around the world – having a public entity, and having your stock able to be used as currency, allows us to attract that kind of talent or those kinds of relationships as well.�
Network went public through an acquisition by capital pool company Andele Capital Corp. Andele, a shell company, then changed its name to Network Media Group Inc. Murray said that, in the wake of the transaction, Network is developing a far larger volume – and scale – of projects than it could previously.
�We now have 20 productions in development, and we are filming what�s called sizzle reels and creating pitches and taking these projects to New York, to L.A., to our agents,� he said. �Having this foundational capital in place allows us to really accelerate our development opportunities – which is effectively the road to success.�
However, while Murray and Gertz are optimistic about Network�s future, BC Film + Media vice-president Robert Wong cautioned that history has shown that going public can be a risky move for B.C. film companies.
�In the past, companies that have tried to do this have not been very successful,� he said.
Wong added that, in his view, the film industry isn�t well-suited to the public markets.
�It�s so hard to sell film and television that I just can�t see the return on investment as an investor.�
Lisa Coulman, a partner in PwC�s audit and assurance practice, said that for a production company, top benefits of going public are access to capital and talent attraction.
On the negative side, she said, going public can be expensive – particularly if it�s through a traditional initial public offering process. Once public, she said, companies will need to allocate new resources to fulfil financial reporting obligations.
�The small guys really do struggle with that because it becomes �paying the accountants versus paying the creative guys.��
Coulman added that once production companies are public, they�ll face performance pressures that could conflict with the industry�s sales cycles.
�If you�re a private company, you tend to get to think long term, and for a production company that�s really important because they monetize their productions on a long-term basis,� she said. �Whereas when they go public, you get very focused on three-month performance.�
Coulman�s bottom-line advice to production companies considering going public? �Look at all opportunities to get money [first], because there are pros to going public but there are also cons.���
