Indie Movie Finance:
“What do you mean by ‘indie’ film?'” … the literal meaning is a movie which does not have finance from a major studio (Disney, Sony, Warner Bros, Universal) or a mini-major (LionsGate) or an SVOD (Amazon, Netflix).
How does an indie film get finance in today’s marketplace if a studio isn’t writing the cheque?
- Indie movies in today’s marketplace get their finance from a ‘puzzle’ of investment pieces
- e.g. soft money / tax credits; rebates; pre-sales; private equity; specialist film financiers.
- Around 70% of films made are financed this way.
Movie finance breakdown
Equity: from individual investors
Pre-sales: international buyers understand the value at script stage and buy in early.
Gap: a financier will take a risk on backing unsold territories – i.e. sales of a finished film.
Tax credits / rebates: there are global locations to shoot a movie in order to qualify for local credits and rebates.
- The most difficult money to raise is equity.
- Usually this comes from an individual (or group of individuals) who want to invest in and therefore take a risk on film.
- The ‘cash’ investment is in return for part ownership in the movie and a share of the profits.
- Sophisticated investors understand that film is a high risk business but when it goes well, the rewards can be high.
- Why has equity become so important?
- The indie movie finance structure in today’s marketplace constantly evolves.
- Twenty years’ ago, international sales accounted for most of the financing of a movie’s budget.
- Territorial buyers would own ‘all rights’ – theatrical, TV, cable, DVD etc.
- Netflix / Amazon – these platforms have roared into the marketplace and DVD / TV numbers have dropped.
- This has had a dramatic effect on the numbers that distributors are willing to pay.
- Less income for distributors means fewer pre-sales and this means filmmakers need to find other sources of financing.
- Once a finance plan is put together, it usually has a ‘hole’.
- Some pre-sales are made.
- A tax rebate is sourced.
- Finance will be placed against the unsold territories;
- and then there’s a need for approximately 25% (and this is usually the equity piece).
- Agreements are made based on the package and project’s potential between a sales agent and local distributor (an MG).
- The agreement is ‘cashflowed’ either by a financier / bank or the distributor themselves.
- The sum has to be paid back as part of the waterfall once the money recoups after the movie’s delivery and subsequent release.
Loans / Bridge / Gap Financing
- There are many companies which regularly make loans against the deals in place (i.e. pre-sales).
- They cashflow on deals expected to be made (i.e. sales of the finished film) ..
- .. and against the soft money rebate available e.g. Ingenious.
- These loans help ‘gap’ and ‘bridge’ the finance coming in.
- A location will offer the opportunity for a filmmaker to raise a considerable sum of their budget by giving a rebate against production spend in the area.
- As these rebates are only given once the film has completed, for production to go ahead it is necessary for filmmakers to cashflow this sum.
- There are many financiers who will back these types of credits
- Most rebates are state or government backed and therefore seen as a less risky type of loan (i.e. than an equity position).
- Will you defer your fee in order to bring down the costs of the film.
- The filmmaking team is often asked by financiers to take a smaller portion of their fee in order to bring down the overall cost.
- Although this is commonplace, it really means filmmakers are working very hard, for free and will have to wait until all other parties make a return before they receive their payment.
- Not ideal if you need to eat!
- Depending on the type of movie you are making and the size of the budget, there are ways to crowdfund part of your budget if you have a route to an audience e.g. Seed & Spark; Kickstarter.
- Remember, each of these has to be honoured and there may be many individuals involved.
- Post production deals can be done whereby a post house will advance you that portion of the budget (on the basis that you will post the movie with them).
- There are music deals to be done although this is usually a tiny piece of your budget.
- Companies will finance your music budget in return for the rights to the score / soundtrack.
Each Movie is Different
- The joy of the movie business is that each movie is different and no two stories are exactly the same (even if they’re set within the confines of a genre).
- No finance plan is the same and the pieces that come together will be different.
- Every deal needs to have legal counsel – you, the filmmaker, need to realise how liable you may be personally in all situations.