Highlights From The 3rd Annual Film Finance Forum: Part 1
Winston-Baker & Variety’s 3rd Annual Film Finance Forum concluded this week, at the Universal City Hilton. With a standing room audience of mainstream financiers, producers, executives, attorneys, and more, this annual event has become the preeminent financial gathering of its kind. In addition to attending several panels, I also moderated the panel on crowd-funding.
One thing that sets this forum apart from most others are the prep courses offered the day before. Two 3-hour courses are presented concurrently: one is a primer for new entrants/financiers, and the other is a primer for independent producers. The former was taught by attorney Steven Fayne of Akin Gump, and the latter by Philip Fier of Focus Advisory. These courses are essential for attendees that are hoping to digest all the information and jargon they are going to be inundated with over the following day-and-a-half.
The forum kicked-off with a State of the Industry overview presented by Roy Salter, of the Salter Group. There were lots of statistics but the overall assessment was rather inconclusive. This intro was followed by the first panel: Five Reasons to Get Into the Film Business Now, moderated by the Brothers Kisker (of Lionsgate fame and my alma mater Screen Capital International.) The panelists were Hyde Park’s Ashok Amritaj, Sierra/Affinity’s Nick Meyer, JPMorgan’s David Shaheen, and DreamWorks COO Jeff Small, and Roy Salter. The overall consensus of the this group was (1) that the financial crisis that pulled the plug on financing for the past two years has passed, and (2) the distribution bottleneck of indie films that was created by the proliferation of film funds that saturated our industry with capital and content has also passed. The take-away being that the film industry is recession resistant, but not saturation resistant. The irony is that most if not all of those myriad film funds that sprang-up between 2004-2008 were armed with a Salter Group business plan, replete with Monte Carlo Simulation. Salter Group is certainly best in class for what they do, but did any of those plans contain a caveat that there might be 25 other plans running loose on the streets of New York and London? Pick-axes to prospectors.
All the panelists agreed that the new dominate criteria for whether a foreign buyer picks up an indie film is the actual screening the completed film. This trumps script, director and cast. This means that execution is everything — it’s not enough to have a script, director and cast. Nick Meyer underscored this by poignantly asking, “Can the producer who develops the script also manufacture a good film?” While not mutually exclusive, they are nonetheless two very different skillsets. Development is an editorial pursuit, while physical production is manufacturing and processes. Sophisticated producers need to be comfortable with what they know and what they don’t know and should surround themselves with those who know more.
The panelists also concurred that financiers are returning to the indie marketplace, but they are exponentially smarter than before. They’re not interested in cutting a check for a film that might perform. They are demanding quantifiable risk mitigation: tax credits should be used to reduce the loan, not enhance the budget; films need to be commercial with an identifiable market; producers need provide solutions for territories that don’t pre-sell and need to come to terms with the fact that territories that don’t pre-sell generally don’t sell at all. Salter admonished the audience that before the film is greenlit “producers must have contractual access points to powerful distributors”. Which in turn puts a lot of demand onto the shoulders of a small group of bankable sales agents. It also raises the bar on what types of project those sales agents will consider. Ashok cautioned that due to the bottleneck of projects trying to find sales agents, “Sales agents can’t spend time on projects that haven’t been thought through.” In other words, you need more than just a script. Much, much more. The panel provided some insight into navigating the current film finance climate, but not a lot of thought about what lies ahead. I think it’s important to note that most of these panelists built their success in the traditional finance models and therefore could have an interest in preserving the status quo. This isn’t a demerit; it’s just human nature.
The next panel was Business Models for Digital Content and Electronic Delivery, moderated by the effervescent Kara Swisher, of All Things Digital. Panelists included Logan Mulvey of GoDigital Media Group, Michael Murphy of Gravitas Ventures, Cliff Plummer of Digital Domain, and media executive Adam Rymer. Kara started the panel by announcing that the previous panel will be obsolete in ten years. The theme of this panel is that consumers want to watch what they want, when they want. Digital has replace physical ownership, and rental is replacing digital ownership. It’s interesting to note that 70% of people use VOD, but few pay, because they watch the free stuff like TV series. It’s even more interesting to note that there are more people in India that read English, than in the United States. I guess you can scratch the Hindi track off your foreign delivery schedule. During the Q&A somebody asked the panel if they saw a future in crowd-funding; Rymer dismissed it as something that wouldn’t evolve beyond being a marketing gimmick that allows people to pick a script or cast a film. He couldn’t be further from the truth. Stay tuned for my recap of the panel: How to Make Crowd-Funding Work for Filmmakers, where Kara’s panel is declared obsolete.