Thursday 7 May 2009

Raising Film Finance - Rule Number One

Raising Film Finance Rule No. 1 - There are no rules! (Well one or two..)

The second module in my 'How to Produce a Feature Film' class was all about Film Finance. As an aspiring producer this subject is close to my heart and one that has really interested me from the very beginning. As any Producer will no doubt testify, this subject is vast and complex (or is that just me?) I could quite easily devote an entirely separate volume of blog entries on the ins and outs of film finance, in fact I might well do that .

So after numerous aborted attempts to write a succinct and coherent post on this subject I decided to break it down into easily digestible chunks if not for your benefit then definitely for mine;

Starters

  • Types of Film Finance
  • Sources of Film Finance

Main

  • Recoupment
  • Financing Models
  • Cash Flow Projections

Side Orders

  • UK Film Tax Credit
  • Garlic Mushrooms

Desert

  • Sales Agents
  • Sources of Revenue
  • Maximising Producer's Profit

I appreciate that for most seasoned Producers all this stuff is second nature. So if you happen to fit into this category of Producer and stumble upon this and are able to add your comments, or maybe you view things differently - then I'd appreciate your counsel. I'm most curious to discover how the reality of avidly searching for film finance will compare to what I learn in the classroom and through books. I'm guessing that it's going to be somewhere in between.

So onto the basics of Film Finance.

Broadly speaking in the UK there are two different types of film finance; Soft Money and Hard Money. Soft Money relates to finance that either doesn't need to be recouped from sales revenue or at the very least has relaxed and highly flexible terms of recoupment. Soft funding can come in the form of grants and subsidies, crowd sourced finance and film tax breaks. I'll say a bit more about these later. Hard Money relates to finance that will need to be recouped from sales revenue and often accompanied with an uplift of some sort. So examples of Hard Money include, equity, bank or gap finance.

And I guess this was the first thing to throw me - 'What, free money- you've got to be joking, there must be a catch!' How can you move into net profit when your revenues are less than your capex? I've read about the peculiarities of film finance and now I understand how this one works. It's official, in UK Film Finance there are certain avenues of finance a Producer can exploit to enhance the profitability of a project.

Lesson Number 2# THE MORE SOFT MONEY YOU CAN RAISE THE SOONER YOU MOVE INTO NET PROFIT

I'll be revealing more about film finance and the vast array of UK Film Finance sources in the next post.

50 comments:

  1. Hi DD. I wish I'd known about the course you've started - I would have been on it too. I have been reading up a lot on the financial aspects of producing films to evaluate if its worth doing. The statistics I've pieced together are not good: About 30% of British films made are never released or distributed (not in cinema, not on tv, not even DVD). 10% get less than £10,000 pounds box office (suggesting just one art cinema showing), which means £0 to the producer. 10% get more than £2million in box office, but after the cinemas and distributors cuts that may also be £Nil to the producer. 50% get between £10k and £2m at the box office. The top ten percent may include Hollywood-financed films made in Britain.

    I could raise a lot of money for some films - if you can show how the producers would make any money then I'd be willing to do so.

    Do you want me to email you?

    ReplyDelete
  2. Richard, thanks for your post. Apologies for not reponding sooner - for some reason I didn't get notified of your comment. Anyway on to your comment;

    I agree, I think making money from any independent feature film is tough - like anything I guess if it was easy more people would be doing it. I've just realised what I've said and in fact there are lots of independent film producers out there trying to make a financially sucesful feature. Having said that I think it's totally possible to pull it off, others have done so they've established a proof of concept.
    I think there are some key ingredients required to pull it off, namely; unique idea/story, great script, a commercially savvy producer who's willing to rigourously pursue all avenues of soft funding and has good strategy and crucially securing some big hitting attatchments. I'm confident we tick all these boxes and I'm up for the challenge anyway!

    I'd be interested to find out more about your interests and happy for you to drop me an email.

    diamonddivermovie@gmail.com

    Thank you again for your interest and taking time to post your comments and I look forward to hearing from you.

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