I’m heading to the Toronto International Film Festival, which kicks-off this week and marks the one-year anniversary of the credit crunch and market collapse that left the streets of last year’s festival strewn with the bodies of dead deals. It’s worth noting that TIFF is not technically a film market in the same sense that AFM and Cannes are, but it is a major North American festival that, due to its proximity between Hollywood and Europe, attracts enough buyers and financiers to function as a mini-market similar to Sundance.
An inside look at the landscape of the industry as of this Toronto Mini-Mart reveals that institutional equity is still scarce, but a resurgence in individual private equity seems to be filling in some of those cracks. Lenders, however, continue to be extra conservative in their lending practices and this is creating an additional (often unanticipated) 20% shortfall in film finance plans (that does not reveal itself until late in the game) and is derailing many closings and causing these films to collapse. This is creating a demand for even more international pre-sales to plug that extra gap. In the past, pre-sales of international territories needed to total about 25% of a film’s budget; that number has since climbed to 40% or more of a film’s budget. To add insult to injury, finance and production companies know all too well that buyers are becoming more and more reluctant to engage in pre-sales for films that they are not confident will go into production. Even though it’s a buyers’ market, cash and credit are still in short supply and buyers don’t want to commit to cash deposits unless it’s for a “sure thing”.
In the past, most producers and financiers were content to let their sales agents go off to markets and festivals to make the necessary internati0nal sales and pre-sales on their behalf. These days, however, with many film closings hanging in the balance, companies are not satisfied to just stay at home and wait for news, but nor do they want to ship out employees and pay to put them up. Case in point, I have recently been asked by financiers and producers to convey to potential buyers the validity of a given film’s financing structure as well as their realistic time lines to closing and production (about which most filmmakers tend to be overly optimistic). While clearly a sign of the times, it’s also a form of vetting that benefits all sides, as I have no stake in the film, nor do I speak to the creative or commercial elements of the film, so I can therefore remain relatively objective. This in turn helps buyers more clearly prioritize which films they want to commit to and in what order. Buyers and distributors have pipelines and schedules that need to be filled, way in advance; if they commit their cash reserves to a big budget film with big stars, but that film takes a year or more to finally go into production because of a flimsy financing plan, that’s a lot of missed opportunities that could have gone to films that would have been well into post-production by then. The way I see it, anything that gets more financially sound films made, is good for everybody. Transparency and consistency are the foundations of a dependable market — and that’s the only kind of market that will clear away the stench of last year’s corpses.