Film Finance: Show me the Money!

Sometimes a quote from a public figure or a line from a film becomes part of everyday culture.

Bill Clinton’s quote during the 1992 Presidential Election campaign succinctly summing up what Americans cared about most `It’s the economy, stupid!` comes to mind as indeed does the line in Jerry Maguire spoken by Cuba Gooding Jr. when he clarifies what he wants to his agent, played by Tom Cruise `Show me the money!`.

Film production does not happen without finance. It is not easy to ever get any production off the ground, big or small, ask any Producer. The main finance streams for films are:

Soft Money

This comes from government agencies, foundations and film institutes. The money is non-repayable. The British Film Institute awards around £26 million annually to Producers. Other sources in the UK include Screen Scotland, Ffilm Cymru in Wales and Northern Ireland Screen. Generally, to be eligible for these funds various criteria needs to be met such as regional presence, cultural significance and the promotion of new talent.

Pre Sales and Distribution

Distribution rights for films are sold before the film is produced. The film will be funded in exchange for exclusive rights to a territory and/or a period of time. It is often suggested that this market has dried up, but some producers seem able to access these deals. A strong cast, experienced director and solid track record will help drive sales. There are some 50 or so territories around the world to sell rights to: the main two regions being North America and Europe.

Equity

Typically, a producer will need to raise around 20% to 40% of the Budget through equity financing. Investors will firstly look to get their money back and will typically be looking for a return of 15% plus. If the producer manages to meet this criteria, the investor may then have an appetite to finance his next movie. So, it is imperative to meet this criteria, not only for the Producer but for the reputation of the industry as a whole.

Film Tax Credits

Regions worldwide offer tax incentives in order to attract production. The UK’s tax credit regime attracts an ever-increasing number of productions to shoot here and has facilitated producers to get their projects over the line. The UK tax credit covers practically all pre, shoot and postproduction expenditure and is paid out around 2 to 3 months from application to HMRC.

Debt

The UK Tax Credit is only paid out after the costs have been incurred. Therefore, producers often arrange finance to fund the anticipated tax credit. Similarly, when finance from pre-sales is only delivered when the film is completed, this can be financed by various banks and funds.

Gap/Bridging Finance

This takes the form of an unsecured loan. It is difficult, if not impossible, to procure and when offered it comes at a very high cost as it has no collateral

Product Placement

This is where the producer gets a brand to pay for the placing of their product in a film. This is usually not easy to obtain for new and early-stage productions.

Airlines

Whilst this will not raise a huge amount of money, it can prove to be useful, ancillary revenue.

Whilst the producer will want to explore all and every avenue of finance to meet the films budget, they should ensure that their creative and financial interests are protected. All too often we see cases where the rights of producers are sidelined in the interests of getting the movie made. This is where a good lawyer is essential.

One of the places to look for finance is at the many film festivals where financiers and buyers will attend. Festivals where engagement is relatively easy are Berlin, Cannes, Toronto and the American Film Market

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