Development Entertainment

Let’s get Hardcore – Film Financing – Part 1

As a creator and more recently a producer, I've encountered my fair share of financing options, people and opportunities. Despite everything you may have heard, most of it is not exactly true. There are several great options, if you know what it is you seek. However, to get there, you need a strong, solid plan and a lot of patience. Did I mention you need to adapt to learning new skills? No? Yes. One of them being to adjust your way of thinking to match the financing party.

The magical word for any type of project: Financing. The biggest joy, once it goes through, and the biggest nightmare to get to. Why? For a variety of different reasons. Working on the massive franchise we’ve developed, I believe the word used by accredited producers was “behemoth”, I’ve learned a lot about the nature of the business, including every little detail on the legal aspects. Becoming a producer means one must be the “Jack of all trades”. When I was pushed into the position (yes, I admit), I had to sit down with myself and see what my strengths and weaknesses were:

  • Business Planning – Intermediate to Advanced
  • Strategic Planning – Advanced
  • Presentations – Advanced
  • Legal Aspects – Rookie
  • Pre-Production – Intermediate
  • Production – Rookie
  • Post Production – Advanced
  • Sales – Intermediate
  • Negotiations – Rookie

In short, I had a lot to learn. In three years time, I believe I learned a lot of things as to how the entire system works. Besides the usual parts that you may read on every other site, I will be placing a different type of perspective. You see, it’s not about just the Catch-22 parts of a deal, it’s also about the psychology of the financier. However, you rarely get to meet the people with the actual money, as they tend to stay rather behind the scenes for various reasons, most of which revolve around security. Therefore, you will be dealing mostly with executive producers, who will be acting as intermediaries between you and the people with the money. If you are lucky enough, they will also fulfill another segment of their job description, which is handling the business aspect that goes between you, the filmmaker and the financiers.

Financing_Spreadsheets
When packaging a film, be prepared to do a lot of paperwork, including a huge budget. So, be prepared to make a lot of phone calls.

Now, what is the biggest key to financing? One word: psychology. You have to think and act as if it was your own money put in a project you know nothing about, in a business you know nothing about. Believe it or not, most of the financing people have spent their lives in that field. Most of the parts they know are real estate, oil rigs, mining, stocks, deeds etc. Anything that has to do with transactions. At least the bulk of them does. They differ from the creative people and they naturally translate everything to the following simple phrase:

What do I need to invest? When do I get it back? What profits should I expect and when?

The ones who don’t know about film

Very few have the imagination that creators have, so we must see things from their perspective. For months I had the opportunity to talk directly to a financier, who would always bring up parts of his business, which were oil rigs and mining operations. During our talks, I had to parallelize the film industry with the elements that were familiar to him. The people of money tend to focus on their work and rarely look outside their predefined spectrum. They have every reason to act the way they do since it has served them well.

Those who have decided to invest in the film industry, seem to understand a very essential parameter:

Film funds are “exotic” in nature. They are unaffected by recessions or depressions of any country and they can flourish in adverse economical environments.

This is something I learned from the depths of the industry within the European market. However, few actually understand the above quote and even fewer know how to effectively utilize it. Provided a financier is adept enough, he or she can turn into a gigantic profit in the medium and long run. That is where you (and I) come in. We have to convince them. So, in order to make that happen, you need a killer presentation that includes (I know you will hate this) a glorified spreadsheet! This means you have to find yourself the films that are equivalent to yours, within your budget range and develop a mathematical formula that can effectively estimate the costs and returns of investment, also known as ROI.

Financing_Signature
A lot of papers will be signed way before you even settle on a financing agreement. Starting from NDAs, going on to executive agreements, term-sheets and the list goes on.

The downside of the financiers that don’t know much about the film industry is that they tend to handle it the way they are used to. This means that you might hear things like: “We need to recoup in less than a year.” If you are going for a theatrical release, the lifespan of your film in the theaters will be anything between 90 to 100 days. Take that into a full three months. For simpler movies, pre-production is approximately two months (if you’re serious enough), plus 1-2 months for principal photography and 4 months for post-production. Now, provided you already have distribution in place, that’s a good 11 months worth to get revenue from the theatrical release alone, barely catching up on any DVD/BluRay releases and completely missing out on the VoD (Video on Demand) that comes through service providers such as Netflix, Amazon, Hulu etc. That’s a lot of pressure, no? I’ve encountered stories like that, but I’ll leave those for later.

In any case, back to the financier I had the opportunity to talk to personally, after “breaking” through his barriers, the guy was ready – as an account trustee – to provide whatever documentation I needed, in order to proceed. At exactly that point, there was a fallout between him and an executive and kaboom… the negotiations died that instant. Live and learn. Besides, the project I am pushing for is not for the faint of heart. It’s designed for a lifespan of at least 30-50 years worth of revenues so not many people can fathom looking that far, despite the great returns.

The ones who know about film

In this case, you rarely – if ever – deal with the financiers themselves. Those tend to form relationships with intermediaries that function as executive producers. However, be mindful. It’s executive producers, not brokers. Big difference. As much as good a broker can do, you don’t want to over-market your project, as it will make you look desperate and your film appears as – please excuse my language – the hooker of the industry. You don’t want that.

Financing_Group_Shooting
One aspect that can help your promotion of the film to executives and financiers is an actual teaser. You need to evoke interest and emotion.

However, the upside part of dealing with executives is that you can be more yourself. This means that more enthusiasm is allowed and actually encouraged. Being adept at what they do, dedication and consistency are traits they admire. So, shoot your very best pitch and presentation, if you want their attention. The downside with them is that since they know what they are looking for, the time allotted to you will be more limited. The reason is that many filmmakers go after them, so it’s highly likely they are looking at other projects to direct the money of the film funds they have access to. So, make it count!

I’ve actually found myself talking to executives significantly less than I do with financiers. The reason, besides the one I mentioned above, is that they may also have access to distribution markets (the good ones do), which can add up to the financing bank for your project. However, following that tactic could limit your revenue prospects, but we’ll talk about this in another post.

Unlike talking to financiers, the executive part may require taking leaps of faith with your story. This means that they may have recommendations regarding the content so that they can make the “sale” easier. This could mean more violence, nudity or anything that could satisfy an audience that they are hoping to target. On that point, it’s up to you how far you are willing to go and if you made any previous agreements with a crew and/or acting talent.

 

Financing_Deal
That magical moment when you close the financing deal.

Speaking of crew and talent, that’s a major catch-22 phrase, which I’ll dive into deeper in part 2 of this article. Recommendation: subscribe/follow this blog so that you get an email when the second part of the financing is up and running!

Until then, I hope you learned something new today!

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