Indie Filmmakers typically find financing a confusing and overwhelming world of terms, agreements, language and unknown third parties such as bonds and collection accounts. For this reason, I strive to offer a concise overview and simplified analysis everyone can understand. The focus needs to be on the Financing Plan, or the Capital Stack. There are numerous sources for financing one’s film and they add up to the Capital Stack – i.e. each source has a recoupment corridor or ‘stacking’. The stack can include one or all of the following sources:
o Presales, typically from international territories
o Estimates of the unsold territories or gap
o City, state or government tax Incentives, subsidies or rebates
o Advertisers are now offering financing to organically integrate their product(s) into a film in a way they can control the specific use of their product. Product placement is just not good enough anymore.
o Retailers – An example of retailer financing is the recent development of original content by companies such as Netflix, WalMart, Amazon Studios and YouTube
o Vendor Equity/Profit. Vendors such as GCI / Post / Producer Service Companies. Examples of recent deals include:
§ Digital Domain – Ender’s Game
§ Prime Focus- Sin City 2
§ Tunnel Post – Santa Monica post house
o Talent and/or Vendor Deferments
o Completion Bond
o Collection Account
Producers need to understand the costs associated with cash flowing presale agreements, estimates and tax incentives: the bank or fund Fees, Interest and Discounting. These are the hidden costs of using these sources of financing.
Another popular model of securing money for your film is Donation Crowdfunding through IndieGogo or Kickstarter. These funds are reward-based donations adn do not need to be recouped, so they are not part of the capital stack.
And finally, The Jumpstart Our Business Startups Act (JOBS Act) is aimed at increasing American job creation and economic growth by improving access to the public capital markets, especially for small businesses or start-up companies – and a film is always a single picture LLC entity and therefore a start-up company with no history or past financials.
In summary I off the “Final Words of Wisdom”:
- Strive to be a Balanced Producer: that is give equal weight to being a Fiduciary; Marketer: Visionary
- Film is a risk business and with risk comes failure. Filmmakers cannot let that risk or failure stop them. In the words of Samuel Beckett: “Ever tried. Ever failed. No matter. Try again. Fail again. Fail better.”