I often receive inquiries from around the world on how best to go about obtaining film financing. Projects come in all shapes and sizes – a wide array of genres, varying budgets and an assortment of experience levels. In every case, the biggest questions are:
How do I put together financing for a movie? What elements need to be attached? Where does the money come from?
To get an accurate picture of what is going on in the industry today, I reached out to good friends who work on all sides of the equation as producers, financiers and distributors, both on the foreign and domestic front. The first interviews in the series are with Cindy Cowan and Jonathan Dana who have been in the trenches for many years as producers, financiers and distributors, and have a vast amount of experience to pull from.
Let’s pull back the veil a bit and take a look at what is happening on the streets of independent filmmaking.
KA: Cindy you have been a producer, financier and distributor, what is your background….
CC: In 1995 I co-founded Initial Entertainment Group (IEG) with Graham King. During my time as president, we had a good run that included: an Emmy nomination for Rent-A-Kid starring Leslie Neilson; Emmy, Golden Globe and People’s Choice nominations for If These Walls Could Talk; a United Nations Award for Savior starring Dennis Quaid; and we produced the Oscar winning Traffic starring Michael Douglas. We also did Very Bad Things and Robert Altman’s Dr. T & the Women.
In 1999, I sold my two-thirds stake in IEG to Splendid Films and started Cindy Cowan Entertainment where I produced Scorched, and Fifty Dead Men Walking. (For a full bio please go to Cindy Cowan)
KA: Jonathan you have an MBA in marketing and a Ph.D in Organizational Behavior, and are considered one of the pioneers in the industry. How did you get involved in the film industry?
JD: I entered the movie business right out of school in 1971 and my first feature film, the documentary “Sandstone” was released successfully in theaters in 1975 and was recently profiled on The History channel. I served as Director of Acquisitions and Development at The Samuel Goldwyn Company, President of Motion Pictures and Television at the Atlantic Entertainment Group, and President and CEO of specialized distribution company Triton Pictures. I’ve had some luck with some prize-winning films at both Sundance and Cannes, and have been involved with such dramatic films as “The Spitfire Grill,” ” Patty Hearst,” “Palmetto,” “Wish You Were Here, and “Noel”; comedies including “Valley Girl”,”Teen Wolf,” “Drowning Mona,” and “Scorched;” foreign language films “Toto the Hero”, “The Hairdresser’s Husband,” and “Soldier of Orange”; and feature documentaries including “A Brief History of Time,” “Hearts of Darkness: A Filmmaker’s Apocalypse,”
Currently I serve as Executive Producer on movies, or Consulting Producer, and also occasionally I will serve as Producer’s Representative on movies which other people produce and I then organize the distribution and supervise the marketing, usually world-wide. (For more information please go to Jonathon Dana)
KA: How are getting films financed now? Is there a model that most producers/companies follow?
CC: For me…it is still easiest to stick with a foreign model…meaning, I take screenplays with some kind of foreign appeal thrillers, (RED LIGHTS, FIFTY DEAD MEN WALKING) action, horror, comedy…anything that is not just tons of dialogue in a room) and begin to put them together. First I attach a well known director and cast, (ROBERT DeNIRO, CILLIAN MURPHY, SIGOURNEY WEAVER) that I feel I know I can do numbers on. I then bring on a sales company to run projections and possibly do some pre-sales. I look for a state or country where I can utilize tax credits and soft monies…and after having completed this…I do a waterfall which shows me how much in equity is still needed and where this money can recoup from.
KA: For you Jonathan, you have some equity to pull from with your company?
JD: Yes, I work with a group that finances and produces films, CODE Entertainment. CODE has an equity fund that has been in place for many years. We use the common model of identifying the ‘foreign pre-sales value’ of a picture, and then back into a budget after taking into account all international value, available soft-money, and making a decision about how much ‘domestic risk’ we are prepared to take on any given film. (Meaning, Code can cover any gap that exists from pre-sales with respect to the budget, if they believe there is a reasonable chance the film will perform and cover the investment costs.)
It is basically a ‘risk management’ model. Most companies follow this model, except those companies that can guarantee domestic distribution, i.e. are domestic distributors, or companies run by ‘high net worth’ individuals who are often prepared to take risk on a ‘portfolio’ basis, i.e. managing risk across a series of pictures, rather than one at a time.
KA: Is a Domestic sale important to your overall financing plan?
CC: It depends on the project….sometimes, if it (the project) is very foreign driven and I can finance the majority of my film without a domestic, I like to hold back this territory as my up-side.
JD: Ultimately it is important, and is often the ‘upside’ for a movie, as pre-sales for domestic are often only available at ‘salvage value’. If the domestic rights can be held until the picture is finished, it can potentially be sold for a much higher value after it can be seen by the domestic buyers in completed or near-completed form, rather than if it is sold earlier, with more execution risk built in.
CC: But…having a Domestic pre-sale in advance, with real meaning, …a commitment in theatres and P&A, will definitely make all of the (sales) numbers go up and sometimes allow for easier deals to be made with the above the line players.
KA: How are investors’ interests best protected?
CC: It will certainly make the financiers feel better about their investment if the Domestic deal is in place and structured in their favor…particularly when a strong marketing plan is in place. A well thought out strategy with money behind it can often be more valuable than a small sum of upfront guarantee money.
KA: The landscape of financing films has not changed dramatically over the last 10 years, but has certainly become more challenging. Where do you see the biggest shifts?
CC: It used to be much easier to do pre-sales…sometimes you could get as much as 80% of your budget out of foreign alone. Now the market has changed…the buyers are more sophisticated. They want to know who the director is, how much of the script the lead cast is in…and, if it will have a domestic release before they will commit to big numbers.
JD: Over the past five years the emphasis has been placed even more on the foreign value of US films, as the ‘domestic salvage value’ has diminished, given the increased difficulty of finding large scale North American distribution.
The influence of the indie market…
JD: Over the past two years, the domestic US market has ticked up as the number of buyers interested in wide-release of independent pictures has increased. This has made the US market slightly more competitive. Increased attention is now placed on the more commercial genres, rather than the more ‘artistic’ movies which tend to be financed now more by the ‘high net worth individual’ model, rather than the ‘foreign pre-sale’ model.
KA: Is there a safe zone in terms of budget or genre that will give a higher probability for success?
CC: Again, it is project dependent…..if it is somewhat of an art house type of film, it should remain under a certain budget. If it is a huge action film with talent that supports the genre, then the budget can be up there. There are many variables needed to answer this question correctly
JD: It’s a moving target, with differing opinions. Currently one consensus is that the indie film in the $15-25 range is the sweet spot where a big enough star can be attached to a big enough movie (a commercial, universally themed film,) to make the formulas work, and yet small enough to fit into the budgets of the buyers around the world, including the diminished US pricing structure. Also, the huge indies, i.e. $60 million plus, if there is a truly major star and the subject is universal, and especially if there is a studio or indie-major distribution plan in place.
On the smaller side, best to keep the movie under $1.5 million….the more under, the better. Tough to make action pictures at this price, but horror movies can be done at this level, and maybe certain other genres, all taking advantage of high concepts, and digital production efficiencies.
We’ll learn more about what’s happening at the film markets, distribution and new technologies in the following parts to the series…stayed tuned…
By Kathryn Arnold
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