Oscar-winning producer Dino De Laurentiis summed up filmmaking in a nutshell: “If no producer, no movie.” He was right, but he could equally have said, “If no finance, no movie.”Films cost money to make, sometimes a lot of money. And without it, even the best script backed up by the best actors and the best production team is worthless.
So how does a would-be film producer raise the finance to get a film off the drawing board and onto the screen? A starting point is to understand filmmaking from the point of view of the moneymen, the investors.
Investing in film is a risky business.For every money-spinning Star Wars, there are hundreds of 47 Ronin’s, flops that leave investors with empty pockets. The starting point is to understand that investors are weighing risk and reward. A producer’s job is to convince investors that the risks are small and the rewards are large. They can go a long way to doing this by overcoming these hurdles:
1. Production risks
You are selling a product so it needs to be tangible, not a vague dream. That means having a script, a director, a cast and a crew. And it requires knowing who your target audience is and why they will come to see your movie.
Plus you need to have a budget and a business plan. It is easy to be vague about the figures and over-optimistic about costs. Investors will scrutinise these so make sure you are on top of them. What investors are asking is whether you are capable of delivering the film you say you are going to make, and on budget.
Working with an inexperienced production team or one that is not suitable for a project, for example, can lead to schedule and cost overruns, and an inferior end product. If you can’t satisfy them on all these issues, they won’t be opening their cheque books.
2. Business risks
You need to be aware of what your competition is doing. What titles are you up against with similar creative elements such as premise, storyline and genre? It is remarkable how often films go head-to-head with near identical rivals. Think Olympus has Fallen versus White House Down or Deep Impact and Armageddon.
Investors need to feel comfortable that your film is not about to disappear down the sinkhole due to a parallel film in production on an advanced timeline and/or with a larger budget, bigger talent and better sales agents.
3. Sales risks
You need to come to investors armed with realistic sales estimates. Without them, the potential value of the project is little more than guesswork. Investors rely on accurate forecasts so that they can project the return on investment. Of course, no one can be 100% accurate in predicting sales on day one and these will change as the project moves forward.
What investors look for are sales agents with a strong track record in revenue handling, sales estimates and negotiation. This will give investors comfort that the estimates are founded on reality and not simply plucked from the air. The level of investment will be dependent on how well you can convince investors of the solidity of your projections, so getting these right is crucial.
4. Compliance risks
One of the attractions for investors is the fact that they can often claim tax credits on their investment. These vary from country to country and it is important that you know what credits are available in each region.
Experienced advisors like Iron Box Capital will work with producers to ensure compliance with the regulations and will engage tax experts to help with this.
5. Research your investors
Finally, producers should do their own homework on potential investors. The film industry is littered with stories of deals that have gone sour as a result of people’s desire to succeed blinding them to harsh realities. For example, in 2010, US producer Steven Kaplan signed two deals for $300m to finance 10 films for his company Rainstorm.
It turns out he was a victim of fraud; the company he agreed terms with didn’t exist. After four years of going through the courts he received an award for damages of $27m. His own verdict was simple: “I wouldn’t have done the deal if I’d known.”