Economics of film financing

The new economics of film financing usually means that we are working alongside an equity provider (investor) to jointly provide 100% of a film budget.  Since the depression in 2008 (let’s call it what it really was) a number of investors have emerged but are generally more astute and sophisticated with how they deploy their capital.  That means it’s tougher for Producers with lower quality product or who are not disciplined with their budgets, but it’s good news in the long term for the health of the industry.

The banks look at the Producer and the decisions they make when putting together a film.  The biggest decision a Producer will make is which sales agent they retain to sell the film in both the international and domestic markets.  The temptation is to give the film to the first company that says “yes,” but you need to be more discriminating and find the best possible company that fits the film.  We look for a Producer to be disciplined in his/her budgeting and work hard at the front end of the process to keep above-the-line costs to a minimum.  Also, be realistic about timing of the funding process and hire a good lawyer!

It’s all about knowing the market and who you are ultimately lending against. My time is spent talking with the foreign buyers so that I’m as up to date as possible on the good, the bad and the ugly.  Then, when we are analyzing advance rates on buyers or a gap position on a film, I can call on those relationships to determine the best position for the bank.

Compared to years ago, the studios are all but gone from the indie space.  Occasionally we see them picking up some foreign or domestic rights, but they have otherwise put all their eggs in the tent pole sequel/prequel/remake/remake again basket!

Indie Producers are nothing if not resourceful and you really have to be.  There’s no right way or wrong way – just getting it done and getting the film made is an achievement.  How it works out financially is another story.  Typically it’s a combination of a bank loan (senior debt) and equity, but there are many other sources of financing such as soft money, crowd funding, brand integration, etc.

With recent developments in crowd funding, particularly VERONICA MARS, it is obvious that for projects with wide enough appeal to the correct demographic that crowd funding has become a legit source of funding for mainstream indie movies.  In recent months more and more of these sorts of films are utilizing this very “democratic equity” and it is now part of the conversation with producers on a regular basis.

 

 

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