Film Financing: The Whole Picture
While the film financing process may appear daunting, Sargent-Disc Ltd explain how independent producers can benefit from employing creative strategies when it comes to funding.
For independent producers, the process of film financing remains time-consuming and complex. As the financial landscape continues to be unpredictable, production partners are required to maintain a keen awareness of all opportunities available to producers in raising funds for their latest projects. More than ever, it is important to understand all components of production finance.
International competition to create incentives for film production is becoming increasingly evident. Earlier this year, France approved proposals to raise the ceiling of the Tax Rebate for International Production (TRIP), from €4m to €10m. Part of the intention is to attract inward investment to compete with neighbouring countries such as Belgium and Luxembourg, which have, in recent years, been used as cheaper alternatives. Additionally, the ‘soutien’ allows producers of qualifying French feature films to be rewarded with a share of the production’s distribution success to invest in future productions, loan repayment or development finance.
Indeed, countries across the globe are constantly reviewing their incentives to enhance their global presence. “Legislation continues to change in the US and around the world,” says Joseph Chianese, executive vice president of EP Financial Solutions, “with the US and international territories continuing to offer new incentives or modifying existing incentive programmes.”
Similarly, the UK’s Enterprise Investment Scheme (EIS) is available for producers intending to raise finance through equity, and provides tax relief to private investors who may otherwise be unwilling to invest in what is considered a high-risk business venture. Producer Pippa Cross has demonstrated the potential of this method after successfully raising finance for Summer in February through vanilla equity investment, which involved multiple investors. Additionally, the Seed EIS, which was introduced last year for small new companies, has been used as a viable option for producers seeking development capital.
For a production with a strong pitch that offers artistic merit or proven public interest, there is the possibility of accessing discretionary investment from public agencies. While highly competitive and of a subjective nature, this funding can contribute a proportion—and, in rare circumstances, the entirety—of a production’s finances. In the UK, the BFI Film Fund supports an average of 20 independent productions per year. Further afield, similar institutions such as Telefilm Canada, the Korean Film Council (KOFIC), the Netherlands Film Fund and the New Zealand Film Commission also provide funding for national productions. Eurimage, the Council of Europe fund for the co-production of European cinematographic works, has a funding programme for producers of films co-produced within its 36 member states; lobby groups have been campaigning for Britain to rejoin following its controversial withdrawal in 1996.
There is also the option to secure pre-sales, although this can be quite challenging for independent producers who, without a strong track record, cannot always entice investors with the promise of a strong cast list. “With the reduced availability of soft monies, more producers are having to look to international sales agents to put up an MG [minimum guarantee] or bring in pre-sales in order to get their films financed,” says Andrew Orr, managing director of Independent. “Commercial financiers also want to see that level of market support to give them confidence in the project.”
The Angel’s Share, winner of the 2012 Festival de Cannes, Prix du Jury is an example of the film finance patchwork common to independent films. It was structured as a co-production with Italy, Belgium, UK and France, with pre-sales to Spain and France and the UK, and equity support from the BFI, France 2 and Studio Canal. “A lot of the money for our films comes from France,” said producer Rebecca O’Brien. “But that is our best territory so it makes economic sense for it to come from the people who appreciate our films most. For The Angels’ Share the BFI came on board with a nice healthy investment.”
One of the most interesting recent developments in film finance methods has been the use of reward crowd-funding. With the proliferation of Internet users and the dormancy of traditional funding methods, producers have sought to target potential finance through social media platforms such as Kickstarter and Indiegogo, using a reward system that corresponds to the size of each donation. In March, writer and producer Rob Thomas launched a campaign to fund the movie adaptation of the television show Veronica Mars on Kickstarter. The goal of $2m was reached within just 11 hours, and by the end of the campaign one month later, it had garnered $5.7m. Perhaps an exceptional case, but there have been other, more modestly successful filmmaking campaigns.
Writer Charlie Kaufman, along with Starburn Industries, successfully launched the Anomalisa crowd-funding campaign in September last year, with the motivation that the animation be produced ‘outside of the typical Hollywood studio system’. It raised more than double its goal ($200k) and was, at the time, the second most highly funded Kickstarter project. These campaigns illustrate the power of social media, and suggest the possibilities open to producers through the democratisation of film investment.
The UK film tax relief and the new UK tax relief for high-end television and animation potentially offer producers additional choices on appropriate ways to structure their productions, subject to a range of factors such as the intended budget, running time and release platform strategy. High-end television productions with budgets exceeding £1m per hour of footage, and which pass the UK Culture Test, will be eligible for tax credit. Left Bank Productions’ Mad Dogs and Strike Back were filmed in South Africa last year due to attractive tax breaks; chief executive Andy Harries has said the company now has “many other large-scale projects in development and this incentive will allow us to make them in the UK whilst supporting the UK’s creative community”.
As the national reputation for providing excellent production facilities, infrastructure and services continues to excel, maintaining good financial management is crucial. Christine Corner, partner, Grant Thornton UK LLP’s TV and film team, stresses its importance to “ensure that all financiers provide their finance on time and that all liabilities incurred can be paid in a timely manner thus maintaining the reputation of the producers within the industry”. The Sargent-Disc team believes this to be core to the success of independent production, and gladly offers its services to support the UK’s international presence.
Taken from movieScope magazine, Issue 34 (May/June 2013)