Film Finance Overwhelm

As I’m unwinding from AFM last week, it occurs to me that while many of you are experiencing Distribution Overwhelm, even more of you are experiencing Finance Overwhelm. Why? Because unless you have 100% cash in bank to make your film, what can you do to get your project off the ground?

The way I see it is we’ve entered a time where ‘cobbling together’ different forms of film financing is necessary to make the whole. Sure, private equity (or cash) still plays a role in this new model, but there’s also other methods that need to be explored and implemented to finance your film

Case in point – many filmmakers today are using private equity or cash for development funds, tax incentives and pre-sales for production funds, and crowd funding for finishing funds. Is that too many financing components? Let me put it to you this way….


Ignore a diversified approach to film financing at your peril!


So how and where do you begin on this journey then to cobble together financing for your film? Let’s forget the private equity or cash component for a moment b/c that’s usually the hardest piece of the puzzle, and let’s focus on financing components we actually have more control over in order to create some initial momentum with your project:

Tax incentives – you’ve probably heard this before but if you’re not investigating locations to shoot your film that offer tax rebates and credits, you’re simply being irresponsible. Research both U.S and international states, countries, and provinces which offer attractive tax incentives for you to shoot your film there. Use the individual Film Commission offices as your starting point and they’ll walk you though the process and procedure, which in my experience are shockingly simple. Get budgets drawn up for shooting in different locations so you can compare where you’re able to make your film in the most economic way possible.

Partnering With Production Companies – This may not seem like an obvious choice at first but let’s just say this – if you don’t have a track record yourself, if you’re a first or second time producer, writer, or director and you want to fast track your production, you should consider partnering with a more experienced Producer or Production Company and leverage their track record to get your project made. There are so many other benefits to this approach too – not least is the fact that if you manage to attract a bigger producer with a track record to your project to partner with you, you can ride their coat tails for this project, get introduced to their whole network of ‘relationships’, and be in a prime position for your next project to go it alone, using all the contacts you made. I’ve seen this happen many times, and it seems sometimes what holds people back in this scenario is their pride. Wouldn’t you rather swallow your pride and get your film made?

Pre-Sales – Here’s the facts: Pre-Sales are not dead. I don’t care what anyone says, Pre-Sales are alive and kicking for the right projects. And that’s the key here – the right projects. What does that mean? That means for projects with a killer concept, an experienced director attached, and great cast, pre-sales are in fact a reality. Now I know this might seem like a long shot for some of you but hear me out….If you are a first time director, focus on a killer concept and cast. If you are a first time producer, focus on attaching a ‘name’ director. You can in fact build a package that attracts pre-sales, it takes time, and often money (development funds) to pull things together but it’s possible.

Crowd Funding – Crowd Funding has actually been around for a while but only recently popularized by sites like Kickstarter & Indie Go Go. However, as many of you know, Robert Greenwald has been crowd funding his movies for years. His moves, being cause-related in nature, actually quite nicely lend themselves to being crowd funded (by people who are passionate about his causes). But what about if you have a narrative feature (as opposed to a cause-related doc)? The truth is, Crowd Funding can work for you too but the success of your campaign will be predicated on your ability to build an audience for your film while you’re still in the financing stage. No easy task but by leveraging the internet and social media, ti’s entirely possible provided you have a subject in your film, or are covering a topic or theme that people are actually interested in. Have you researched the concept of your film yet to determine if in fact there’s a potential audience for it that will be interested in seeing it? That’s the key to crowd funding right there.


These 4 components are what I see as the basic building blocks of a Film Financing plan in today’s market. And by building blocks I mean you should be using a combination of a few if not all of these to get the job done!


So what are your thoughts about Film Finance Overwhelm? Which of these methods have you used successfully, or not so successfully? And what questions do you have about any of them?

I’ll be kicking off one last Virtual Intensive for 2010 dedicated to Film Finance Overwhelm because I know that many of you are looking ahead at 2011 and you want to get your films made next year come hell or high water!

In my Virtual Intensive – Film Financing 2.0 Essential Training - I’ll be covering these 4 components of financing in-depth over the course of a few weeks. Take a look at the details of this small group program, and grab a seat before it sells out. Join the movement to get your film financed for 2011!

CLICK HERE FOR MORE INFO ON FILM FINANCING 2.0 ESSENTIAL TRAINING

JOIN OVER 10,000 SUCCESSFUL FILMMAKERS

AND LEARN HOW TO MAKE MOVIES THAT SELL

Comments

  1. Mark Lund says

    Regarding tax incentives, Massachusetts has a terrific program. It’s a 25% transferable tax credit with a minimum spend of $50,000. What’s great about this program (which I understand is rare with state tax incentives), is that a producer can opt to receive 90% of their tax credit back from the state as CASH. Certainly a great thing for those finishing funds or, in the case of my business plan, the marketing budget. For more info, here is the Mass. Film Office web site http://www.mafilm.org/

  2. Bil Clement says

    Thanks for broaching the Incentive Advantage. In New Mexico, in addition to multiple-genre background-scapes and the nation’s ‘gold standard’ 25% incentive program, we boast the 3rd largest film crew population in the US. Be careful though: once you taste the ‘land of Enchantment’, you may not want to go home!! http://www.nmfilm.com/

  3. Stephanie Bell says

    Thanks for this advice Stacy. I’ve been utilizing two out of the four methods (tax incentives & crowd funding) for my feature “The Devil of Appalachia.” After attending AFM this past month, I have also realized that I need to partner with a production company with a track record. We’re also working on attaching great talent (I already have Frank Whaley attached for one of the leads), however, this is the biggest challenge I face as my director is a first-time feature film director (although his shorts & webseries have won multiple awards). Therefore, the pre-sales element is one that I also find quite challenging.

    That being said, we were able to raise $8K through Kickstarter which has been tremendously helpful for development funds. I definitely recommend those sites, and there’s a new one called InvestedIn.com that people should also consider!

    Our DOA website is http://www.thedevilofappalachia.com – come check us out!

  4. Sam Blan says

    Don’t forget product integration. Any viable projects with a killer concept would be at a major disadvantage without exploring this option which through our international sales company we have been able to shepherd a number of films that have gained financing using this vehicle.

  5. Steven Ritz-Barr says

    In regard to partnering with successful Prod. companies…I think the reason for not fining production partners is not so much because of Pride, but timidity or fear. It is hard to find people you can trust. And that causes a kind of paralysis. It must be overcome because as you say it is very important to find these people — probably best to find them at film markets. I recently had some positive meetings at AFM.

  6. Chuka Nwosu says

    Hi Stacey, I just joined in on your blogs. I would have loved to attend the training workshops, but I don’t reside in America. I am a Nigerian up and coming filmmaker. Over the years I have conceived ideas for film. Finally, I think am ready to break forth. I will stay connected to your site and hope to be in your classes in the future. I have gained alot considerably, already, from your mail and write-ups, thank you.
    Best Regards chuka

  7. Angelo says

    I would add one more: think outside of the US. The rest of the world is bigger and more receptive to independent filmmaking. Moreover, there’s more money and interested in lower budgeted films outside of the US. Add to this the international production company experience (#2) and Pre-sales opportunities (#3) and Tax incentives (#1) and the world doesn’t look so hard. You can always crowdfund in the US, and do post or pick-ups and reshoots locally to take advantage of US/State tax incentives as well

  8. Brad Max says

    Re: partnering with a producer, I think there are some grey areas. For example, assume a feature script has attracted strong interest of a small but experienced feature Producer from the country that’s the subject. Writer and Producer meet and Producer introduces Writer to other producers (Producer insists that’s important), Producer’s lawyer, a director, etc. All goes very well, they’re talking $3-5MM budget, going to major funders, and ultimately studios who Producer knows and who know Producer. To protect creatively and to help pitch for funds, Writer will stay involved as writer/co-producer. So, in the case with a smaller producer, larger indie budget, very strong in-country incentives, sophisticated potential funders, and studio possibilities, for a writer to partner with a producer may require a co-producer role and helping raise development funds of $25,000 plus, to have a really well developed package for film commission, investors, talent, pre-sales, studios, etc. No?

  9. Stacey Parks says

    Thanks for the feedback and comments everyone!

    @ Stephanie – great job on the Kickstarter campaign! People are starting to raise more and more money with their crowd funding campaigns when done properly – so do let us know how yours goes!

    @ Sam – thanks for the tip on Product Integration. I don’t know of any success stories in this area, or at least people getting financing from products, so don’t be shy about sharing the details here if you feel comfortable. What kinds of films, budgets, cast, genre, etc…..

    @ Nick – thanks for sharing that link on co-pro financing. Yes, Europeans are used to this ‘cobble together’ approach especially using multiple co-productions. The one downside of co-pro’s can be all the red tape and the length of time it takes to get everything together. Would you agree?

    @ Penny – no word on Section 181 yet unfortunately….

    @ Angelo – yes I totally agree with you. That’s a great formula!

    @ Brad – huh? LOL. I think I need to read your question a few more times to see exactly what you’re asking here?

  10. GMoon says

    Signed up for the Virtual Intensive and I’m equally excited and nervous! My partner and I feel like we’ve been spinning our wheels so I’m hoping to gain some traction after the training.

  11. Brad Max says

    @ Stephanie – Your web site looks great. Are you at liberty to say what the $8,000 was used for generally and when in the process it was raised?

  12. KGP says

    Hey Sam Blan –

    Saw your post on product integration & am hoping you can discuss what level of equity could be expected/sought out & for what level of branding/integration. Could you provide any specifics on your experience with this?

    Thanks!

  13. Sam Blan says

    Sorry for the delay in response. I did not realize there were replies. Happy New Year everyone.

    As far as specifics, just a little background in the world of integration. About 10-20 years ago, this whole industry didn’t really exist in the independent world. It was all payola. Meaning, if you had a connection here or there, or a product knew of a big indie they would strike a deal to incorporate the product.

    This has been going on for years in television and the studios have dedicated people that work specifically into incorporating brands. SO what happened that it started to include indies? Well, technology is what happened. As DVR/TiVo has become more of a staple of American life, the days of commercials is slowly winding down. Brands are now looking for as many ways to incorporate themselves into the psyche of their consumers (i.e the 30 second spots are now incorporated before you watch almost any video online). This trend is only going to increase as people glaze over commercials more and more. Some statistics from Variety report that the all important demographic of 18-49 by the end of 2012 shows that 52% will have DVR/TiVO capabilities. Others report the number as high as 64%. One thing is certain, brands are looking for viable projects.

    So what does that mean? Well, if a film sits on 4 legs (private equity, tax incentives, foreign pre-sales, and product integration), many pundits would state you could receive as much as 25% of your budget from product integration. I like to be conservative and say this number is more around 15%.

    What kind of projects? Well, first they are going to look for a project that is commercially viable. Remember, it is easy for companies to gauge their ROI when it comes to television because of the Nielsen ratings. It is a much trickier proposition when it comes to films. The bottom line is, brands are looking for the maximum amount of exposure, which is good, because as a filmmaker, hopefully so are you. A lot of it hinges on common sense too. I doubt that Neutrogena wants to be showcased in a film about Zombies. Then again, if it is has a big cast and done in a comedic way, they might. It is most definitely a case by case basis.

    Lastly, in my own personal experiences, I have linked a number of films to a specific branding company I work with. There are currently about 3 prominent ones that I know of, but the one I have worked with the most is Brand-In. I have a specific deal with them, so if any Producers want to approach our company, we can help move them in the right direction. Hope this helps.

  14. John Cones says

    Stacy:

    I agree that for many indpendent films, the financing may have to come from several sources. For many years, I’ve encouraged filmmakers to recognize that there are three phases in the life of a motion picture that can and are often financed separately: development, production and distribution. The five most common film finance/distribution scenarios that I discuss in one of the articles at my site (www.filmfinanceattorney.com) illustrate some of the different combinations of financing these three phases. It is important for filmmakers to understand this concept in order to then move to your multiple sources of financing. For additional details re investor or equity financing my 15 year responses to questions from filmmakers is archived at the site under the heading “Finance Forum”.

    Keep up the good work.

    John Cones, Attorney, Author, Lecturer

  15. Ralf Voellmer says

    Great post! Good comments, too.

    Financing movies, especially independents, is a truly nonstandard field. There are many ways to skin a cat, and even more ways to produce a movie.

    My background is in hedge funds and alternative investments. My business partner and I started analyzing the film sector several years ago, and have presented our findings at seminars in Hollywood and New York.

    We found there’s a big disconnect between serious investors and independent filmmakers. Hedge funds, private equity firms, and private investors exposure to films, but most of the time they are presented with pitches that boil down to this: my film will be a good investment because it is a good movie.

    If you take a more investor-friendly approach and speak their language, you increase your odds of getting real investors ready to invest in all phases of a film’s lifecycle: preproduction, production, distribution, promotion, and exhibition.

    We have started writing about the topic on our online magazine, The Quantitative Method (www.thequantmethod.com). The first installment of our series on film financing/film investment is at http://bit.ly/kpf6wQ

    There are many investor-centric approaches which still leave full creative control to the filmmakers. I think you’ll find it helpful.

  16. Kim Lee says

    One of the main reasons films are not being financed these days is because of the overwhelming scammers/con artists trying to make an easy few million bucks for themselves and leave the investors high and dry. These con artsists never have any intention of making the movie, as long as they pay the writer off and the lawyer who wrote up the offer memorandum for the financing. It’s a great scam for cons because as we all know, film financing is a private investment therefore 100% risk is on the investor and if they don’t make any money, they have signed off on their investment knowing that is the risk they are willing to take. A lot of these scammers get a name or two of Hollywood B rated actors to sign on or maybe even a director but they are just using that so they can name drop and act like their film is really going to happen when in fact, it isn’t at all. All I can say is stear clear from investing in films where the producers are a couple of nobodies afterall, you never know the financial background the people trying to raise the financing for the film, more than likely they owe back taxes and God only knows what else! Ever since Blair Witch Project people want in the fast cash, a 2M movie that made the producers rich basicaly over night. Dream on scammers and con artists you have been exposed!!!!

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