Q: For a $1000 investment what kind of payback could we expect? What is the turn around time on our investment? I know this is all pending on how well the movie does, so can we get a estimate based on your best movie sales and say on a mid range?

A:Asking what the "return" will be after 6 or 12 months isn't really an accurate way of looking at this. What you're asking for can be viewed as a "holding period return." Basically, if I buy something for $1000 and in 6 months I sell it for $1050, my annual holding period return is 10% (1050/1000 = 5%. 5% * 2 6-month periods in a year = 10%). If you buy something for $1000 and in 12 months sell it for $1050, your holding period return is 5%. By asking for the return over a 6 or 12 month time period, you are assuming that you can buy in and then later sell out. These investments are not like stock where you can go into your account and hit sell and call it a day. In my opinion, the best way to value this investment is as a perpetuity (technically a 99 year annuity due to the life of the copyright, but that's close enough for me call it a perpetuity). When valuing a perpetuity, you have to ask yourself what is my discount rate. You can view the discount rate as "how much will I need to be compensated for not using my money today" or "what else can I use the money for?" Then you apply the formula Price = Dividend / (Discount - Growth). The dividend is how much you get per year. The growth is how much (in percentage terms) you expect dividends to grow.

So, assume that you get $500 in dividends per year for the life of the investment (so no growth).

Scenario 1: You have no debt and spare cash. You can invest your money in the market and get 8% return on average. Your discount rate is 8% because you can use that money to generate a 8% return. In this case, you should be willing to pay AT MOST $6250 for the investment because regardless of whether you buy this perpetuity or put it in the stock market, you'll still net a gain of $500 per $6250 invested; you are indifferent If you can buy the perpetuity at say $6000, then you would earn an 8.3% return and profit.

Scenario 2: You have no debt and no spare cash. You can borrow from the bank at 10%. Your discount rate is 10% as any money you have can be used to pay off debt that is costing you 10% per year. In this case, you should be willing to pay AT MOST $5000 for the investment because if you buy the perpetuity instead of paying off your loan, at the end of the year you would gain $500 from the perpetuity and have to pay $500 in loan payments; you are indifferent. If you can buy the perpetuity at say $4000, then you would earn 12.5% per year. You would get $500 in dividends but only need to pay $400 in interest payments (10% of $4000). You would pocket $100 as profit.

Scenario 3: You have credit card debt at a rate of 20% and spare cash. You can borrow from the bank at 10%. Your discount rate is 20% any money you have can be used to pay off debt that is costing you 20% per year. In this case, you should be willing to pay AT MOST $2500 for the investment because if you buy the perpetuity instead of paying off your loan, at the end of the year you would gain $500 from the perpetuity and have to pay $500 in credit card payments; you are indifferent. Same concept as Scenario 2 for profit.

At the end of the day, I would say that if you have cash laying around, invest in this. You could put it in the stock market, but the markets are bad and you'll probably lose money. Any dividend is better than losing money. If you can borrow at a low rate, consider borrowing to invest. Borrowing to invest is known as leverage and is VERY risky with HUGE upside and downside potential. If you're up to your nose in credit card debt, do yourself a favor and pay off the credit card debt.

As far as turn around times, we lately have been going from planning to release in about 120 days, but sometimes as little as 60 and as many as 200.

Q:How often are dividends mailed out?

A:Dividends are mailed quarterly (March, June, Oct, and Jan).

Q:What kind of return can be seen from a $10k investment? Can you give a ballpark figure?

A: It depends how you choose to divide it up and between what kind of movies. See above.

Q: This sounds like you are selling securities, not property. What is the difference? Did you run this by a lawyer?

A: We do have a lawyer and have run this by him, in detail. He even helped us come up with the plan. Executive Producer agreements are extremely common in the music, tv, and movie businesses. The executive producer provides a percentage of a project's funding in exchange for a percentage of copyright ownership, which entitles him or her to a share of the revenue generated by the project. In addition, if we ever failed to make revenue payments, the contract gives the investor the right to reposess the copyright and claim ownership of it. This is not a sale of company stock or securities. As an investor, you are purchasing equity in an intellectual asset (the movie) and the copyright thereof, not the company itself. We are not selling stock in my company. Copyrights are not considered company securities. Copyrights are covered by personal property laws and sales of copyrights are treated the same. Copyrights are fully transferable and mortgageable. To clarify: "Copyright is a personal property right, and it is subject to the various state laws and regulations that govern the ownership, inheritance, or transfer of personal property as well as terms of contracts or conduct of business." This means copyright holders are free to sell or transfer their copyright as they see fit. The selling point being that the eventual amount of mechanical copies produced and sold will hopefully make owning a percentage of the copyright a very worthwile venture.

Q: Can an investor also promote the DVDs through adult websites, earning money through revshare and copyright? Whats your revshare for webmasters?

A: Absolutely, we have a couple different affiliate and reseller programs, depending on how you prefer to promote the product.

Q: Can we get copies of the DVD's we invest in?

A: Alot of people have asked if you can get free copies of the video you invest in and the answer is YES! Absolutely! We have no problem giving you copies of the video for you and your friends. We will even "front" you copies of the video if you think you can sell them to people, retailers, etc. If you sell them, pay us a negotiated per disc fee and if they don't sell, just return them to us, because we can definitely sell them. We also have $5 gift cards that give you 30min of free time on our video on demand theater that we can give investors - free of charge. The cards are free - no matter how many you need, just ask. I've literally got 10,000 of these cards sitting right next to me. Our research shows that customers who receive free minutes are 75% more likely to purchase videos in the future. We'd love to have you give these away for us, or even sell them if you want - we won't charge you for them.

Q: Is it possible for Canadians to get in on this?

A: Yes, Canadians are absolutely welcome, as are citizens of the UK and most other countries. If you're wondering about yours, just ask.

Q: Do you offer direct deposit/wire payments for revenue shares? Will direct deposit work with a Canadian bank?

A: Yes, we can wire or deposit your funds to you each month. Also, foreign banks shouldn't be a problem at all

Q: I am interested in what determines how much money I will earn on the investment. If lets say you are looking for $5,000 to be invested total on a movie, and I bought up all 5k of that, will I split profit 50/50 with you? Similarly if I bought 1k on that 5k total investment would I then recieve 10% of the total profit?

A: Each movie has a predetermined 'fundraising goal' listed next to it. This fundraising goal is determined by the amount it has/will cost to produce the movie as well as how much equity is left for purchase. If a movie is listed as having 50% equity available for purchase and a fundraising goal of $5,000 - this means that the movie cost about $10,000 to produce and 10% equity shares in this movie are priced at $1,000. This should give you the information needed to figure out the going rate of any share in any video listed.

Q: Are the fund raising goals 50% of the total production costs? So investing $5000 in a film with a fund raising goal of $10,000 (half of actual cost) would result in getting 25% of what that film sells monthly?

A: Yes, your math is correct. We fluctuate a bit here and there depending on the cost of the movie and the demand i've noticed, but that's a basic bottom line. We also never charge any additional expenses against the person buying in. We'll never deduct any of our costs from your monthly payout, that's what your initial payment was for. You simply earn a share of the revenue generated from the property you own, i.e. the video's copyright itself. All expenses are figured in as our responsibility, not yours, since you're just purchasing a share of the copyright, not the liability or expenses associated with our activities related to the video. This way you start earning your percentage immediately.

Q: The question I have is about longevity in sales - the porn industry puts out so many features every week that companies have to constantly put out new material just to stay on the shelf. If it takes a year or more to earn back a $1000 investment, what kind of sales is that movie going to get after the one-year mark? I would suspect most porn movies drop off in sales pretty quickly.

A: DVD sales are only one aspect of porn profit. Alot of people make the mistake of assuming that DVD sales are the majority of revenue but they actually are not. DVD sales do indeed die off relatively fast (though not as fast as everyone thinks), but things like broadcast, on-demand, pay per view, streaming video, licensing, downloads, IPTV networks, mobile purchases, etc. tend to stick around for years. Especially the on-demand and internet stuff, because people tend to search for movies based on the performer, theme, or studio, as opposed to looking for the newest releases. Also, keep in mind that broadcasters (TV, cable, pay per view, and satellite networks) don't usually broadcast anything until it's been on the market a while. It can take up to a year for a DVD to really get a good share in the DVD market, and then another year for it to gradually die down. The other aspects mentioned above, however, keep the video alive for years to come. Once a video is 'dead in the water' we also have the option of selling or licensing it for use in compilations, as well. Then once it's 10+ yrs old, or a new format pops up, then you can re-release it as a "classic" (much like VCX is doing with old VHS titles). The cycle can continue forever. There's many more opportunities for revenue outside of just the "new release" section and companies with a strong catalog of good titles are able to keep those titles profitable for extremely long periods of time.

Q: How do tax laws work for something like this? Would I have to pay full taxes on every check I received, effectively taking ~30-40% off my returns? Can I depreciate my initial investment against the income so that I at least recoup my initial investment tax free?

A: Yes, everything does get claimed. The last thing we need is tax problems, that's the first part of my business I make sure to keep on the up and up (but definitely not the last!). You are purchasing co-ownership of an asset. This asset just happens to be something that we can make physical mechanical copies of (i.e. intellectual copyright) and sell for a profit. You earn revenue from each individual sale, licensing payment, etc of this particular asset. Imagine you owned something, like say a TV, and you rented your TV out for extra income. This works the same way. It's as if you're buying co-ownership of my TV and we plan to rent it out for profit. Except instead of a TV, you're buying co-ownership of a copyright on a porn movie, and we (my company) sell and license copies of it for profit. Now go from there.
For more info, here is what the IRS website has to say about it:
"You generally report royalties in Part I of Schedule E (Form 1040), Supplemental Income and Loss. However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc., report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold."

If you are interested in investing in one of our videos, please view our proposal detailing the opportunity, ROI potential, and market facts. After reading the info, email us at sales@hellhousedungeon.com to figure out which type of video project you prefer to be involved in.