Indie Film Financing

Independent filmmakers normally have interesting stories about how they made it to the big screen.  Blood, sweat, and tears literally make the movie, and the stories inspire new filmmakers to follow suit.  The many forms of financing for independent films are slate financing, equity financing, hedge funding, bank financing, crowd funding, product placement, and many more that are even more convoluted.  The Raindance Film Festival explains the various forms of film financing here.

The above article points out that any filmmaker should always have a business plan before seeking any funding.  Some unique financing strategies listed in the article include putting together unique music for the film and deferrals.

1. Music – With this strategy, film producers would land a well-known musician to compose the film score.  The musician’s name would be used to promote the film.  Such examples of this are Pharrell Williams/Despicable Me and Jay Z/Great Gasby.
2. Deferment – This strategy involves paying key people and firms on the back end, after the film brings in revenue.

A website called www.SecondMarket.com provides more loan related insight on film financing.  The following widely used forms of financing are also unique:

1. 
   Pre-sales – Pre-sales is a minimum guarantee usually provided by a distribution company that has access to various markets.  The payment is usually delivered in the form of a check to the producer of the film.  The disadvantage of this channel is the packager and sales agents make commission off the sale.
2. Gap-financing – This form of financing is used to bridge the last “gap” of funds that are needed to finish the project.  These funds are usually provided by a bank and they range from 10%-20% of the film’s budget.  Larger, riskier gap funds can be up to 35% of the film’s budget.

With all of the different types of funding, filmmakers find interesting ways to find money to produce their film.  A great example of hard work put behind a film’s production is the film The Butler. With an all-star cast from Oprah  Winfrey, Forest Whitaker, Lenny Kravitz, Jane Fonda, Mariah Carey, David Banner, Terrance Howard, Cuba Gooding Jr., Robin Williams, Live Schreiber, and many more, the movie attracts interest in many markets.  However, the all-star cast is not the unique aspect of this independent feature film.  The film raised money through forty-one producers, including a Ukrainian billionaire, a retired professional athlete, and numerous African American celebrities.  Each producer raised their own funds to put towards the film, and the world is awaiting its success. The Butler debuted August 16, 2013. So far, it grossed $8.3 million on its opening day. View the trailer below!

Sources:

Trailer
Image
http://www.dailymail.co.uk/news/article-2394397/Lee-Daniels-The-Butler--The-film-FORTY-ONE-producers-How-host-stars-entrepreneurs-raised-30m-fund-The-Butler.html
https://www.secondmarket.com/education/wp-content/uploads/2012/11/Key-Considerations-in-Film-Finance.pdf
http://www.raindance.org/10-routes-to-finance-your-film/

Read More

Profitability of Music, Games, and Film

Many speculate that the mainstream music industry is witnessing an all time low point due to the change in business processes of music creation and distribution.  If one had to compare the three largest entertainment industry sectors (film, video games, and music), how would they rank the three by profitability (by amount of revenue generated)?

             In mid 2011, an article discussed the actual worth of each industry.  CBS reported the video games industry to be a $23 billion industry, while the film and music industries both lagged behind at $10.6 billion and $6.9 billion respectively.   However, this year, retail sales of video games have dropped about 20% in the U.S. according to the New York Times), so we must put this widespread decline in revenue into perspective. Reuters.com claims that record labels are maintaining their spending on new music despite the decline in their industry.  Major labels have consolidated, merged and even disappeared in some cases during this decline. Artists are even protesting services like Pandora that have lowered music royalty rates (read more at SFGate.com) . So why are the video games industry and the film industry doing better than the music industry if every industry is experiencing some decline in revenue?

            Video games and films have much more to build on with each project created.  Video games are more interactive with their participants (as they should be).  Games are purchased, content is constantly updated, expansions and additions to the games are sold, websites and online communities are solely dedicated to the games, and festivals are attended (like the one to the right).  In the film industry, sequels and trilogies create loyal viewers (and sometimes critics) and communities are also built around the characters of the movies (with merchandise, video games, etc.). 

            In the music industry, however, the interaction must happen with the band or the artist for the fans to really connect.  The avenues for this type of interaction are fairly limited with mainstream music artists.  Interaction takes place in concerts, television appearances, and in the music itself.  Very rarely will mainstream artists take time to chat or tweet their fans, which creates a disconnect between the “product’s community” and the product itself.  Some artists will release free music or create countdowns for their fans to participate in, but that still does not come close to the interaction created in the film and video games industries. Sources of revenue are physical sales, digital sales, ticket sales, and sales related to artist merchandise (t-shirts, wristbands, etc). A movie and a video game usually cost a bit more than a music album as well.  Music may not ever be as interactive as the video games and film industries, but maybe if the music industry could tap into possibilities of their fan base communities more, major labels could achieve the same success as its fellow entertainment industry cohorts. 

Read More