The Hero’s Guide to Film Finance – Book 1
You have a feature film that you want to get made. You have an awesome script and a director interested. You’re eager to move toward production, but you clearly need $$$cash$$$. Your priority this week? Get your film financed.
Seated in the lobby of the American Film Market in Santa Monica, you’re hoping this is where you’ll meet the people who can help you complete this task. On your cocktail napkin, you draw a pie chart that represents 100% of your film’s budget. You mull over the myriad options to finance your movie: it would be nice if someone would just cut you a check for the full amount, but assuming that doesn’t happen, you realize your other options are a combination of the following:
- Cash/Equity: This would be the wealthy individual that will invest the cash needed to cover your budget.
- Incentives: You could use production incentives from federal and state governments to lessen the amount of equity you need to raise.
- Pre-Sales: You could pre-sell (aka license) a portion of your international territories to foreign buyers; these sales contracts would be used as collateral for a bank loan, which in turn would supplement the amount of equity you’re trying to raise.
- Gap Loan: You could get a loan against the estimated value of your unsold international territories. Although an expensive loan because it’s high-risk, it could fill-in that inevitable gap between the money you raise need and the money you need.
Note: If you still have a shortfall, then you have to either raise additional cash, find a better incentive, pre-sell additional territories, or get a more aggressive/expensive gap loan…each of which are easier said than done.
You reflect upon your back-of-the-napkin finance plan and wonder how much you could expect to raise from each option. The film commissioner from the panel you just attended was touting a 30% tax credit for shooting in her state. That’s a third of your budget! If you could also get 30% in Pre-Sales, plus another 30% in Gap, then you’d only need to raise 10% in cash-equity! That seems doable.
As you fill out your pie chart with a hopeful heart, you discretely peruse people’s name-tags as they pass you by. In this town, you know anybody could be somebody; unfortunately, they’re usually nobody. But, with all types represented at the Market, you’re hopeful that this just might be the chance for you to meet the right person that could take you to the next step.
Damn!#$% There’s another name tag that’s flipped backwards. You can’t read it. The unidentified woman looks successful. As she passes into the crowd, you think she could have been the woman with the money. You look back to your mobile and check your email for the fortieth time in the past ten minutes. No unread emails. Whew! You’ve been sitting in the lobby a looooonnnggg time now. You yawn. While stretching your neck, you notice an elevator open. Indie mini-mogul Avi Lerner steps out.
Avi Lerner built his NuImage fiefdom over several decades, one low-budget-action-movie at a time. Like widgets, he makes them for $1 and sells them for $2. In addition, he owns all of the major vendors that service each film: His foreign sales company called NuImage, the studios in Bulgaria and Louisiana, the visual effects shop in Bulgaria, and the various financing entities. Even if a movie doesn’t perform at the box office, 75% of the budget stays in the family. Lerner’s focus has since shifted from low-budget widgets to large-budget theatrical films, but the model remains the same.
Avi exchanges warm pleasantries with an older gentleman wearing crisp jeans and a polo shirt. Avi points him toward the restaurant, then they head in opposite directions. Avi has no entourage. You stand eagerly when you realize this is the best opportunity to make your feature pitch. Avi could greenlight your project – or in the very least, get it read by an Executive…or even an Executive Assistant. (At this point, you aren’t greedy.)
You hesitate and look back in the direction of the restaurant, noticing the gentleman that had walked away from Avi — Avi appeared to show some deference, so that man could also be the key to financing your project.
THE CLOCK IS NOW TICKING: You must make a decision and quickly.
Will you: Follow Avi Lerner? Or target his friend?
If you run after Avi, turn to Page 1.
If you target the friend of Avi, turn to Page 2.