The Art of Film Financing

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We’ve heard plenty about mysterious accounting practices in the film industry so I was very curious to hear what the suits have to say about financing films at the American Film Market. For an avid moviegoer and cultural critic like myself, going to the AFM Finance Conference is like glimpsing Oz behind the curtain. Who, pray tell, decided Sahara was worth $130 million? What sort of metrics were responsible for green-lighting Gigli, I Know Who Killed Me, or, the gold-standard for box-office failure, The Adventures of Pluto Nash? And why do so many crappy movies clog the screens at my local theaters — even during ‘Oscar season”?
It became clear, quite quickly, that there is some method to the apparent madness — and some reasons why we got stuck with Saw IV. Here are lessons I learned about how suits determine the value of a film and how battle-hardened executives cut corners:
How much is a film worth? Maybe you thought it had something to do with the stars, the director, the genre, the budget. Think again.

All those things play a role, but when a financer places a monetary value on a movie, according to Roy Salter of the Salter Group, what matters most is who is handling the distribution. While it used to be that a movie on 1500 screens guaranteed success, that’s no longer the case now. Attaching a savvy distributor to your film is more important than signing an award-winning director.
How do you convince a financer that you’ve got a marketable film? Once again, financers could care less who’s directing. The real gatekeeper in this business is . . . get this: the sales agent. If you’re a new filmmaker and a credible sales agent has decided to hawk your film, the financing is yours.
Do financiers have slush funds to pay for movies that may not fit their metrics for success? After claiming that he couldn’t even comprehend the question, Screen Capital’s David Molner said, uh, no.
Isn’t it hard to get a film financed these days? Why, no! There’s so much “dumb money” out there (read: hedge funds) that the barriers to entry are lower than ever. This may come as a surprise to every indy filmmaking friend you have; their problem is that they probably haven’t made an expensive enough movie. Got a film under a million? Ask grandpa to fund it. Got a film over $10 million? Now you’re talking.
What genres of movies are the easiest to presell (i.e., to sell the rights before the film is made)? According to Nu Image CFO Trevor Short, generally action movies and thrillers are the best bets. Comedy and drama are tough because the quality of the film depends on (get this) the execution. This may help explain why so many action movies and thrillers suck – their financing was sewn up before they were even made! Oh, and just in case you were thinking of hawking a film this year, let’s hope it’s not horror. Apparently, there’s a glut of gore. And road movies? If you’re thinking about location shots in multiple states — even states that have generous tax incentives — don’t do it! Dealing with the bureaucracy in one state — even a state with an established track record dealing with movie financing — is harrowing enough.
Where can I go to produce a movie cheaply? If you’ve got a big enough budget, you can save money in Fiji, Bulgaria, South Africa and Australia. While Canada is still an option for U.S. filmmakers — because of the huge tax incentives and the hot bidding war among the provinces– the suits were chortling at the idea that Canadians may soon complain about runaway runaway production. Now that the dollar’s so cheap, filmmakers from across Europe — including the U.K., France, and Greece — are flocking to Shreveport, Louisiana, and other obscure locations along the Atlantic seaboard.
Will the big guys just get bigger? According to Comerica Bank’s Morgan Rector, no. His position is that the digital environment will create a more diversified industry, not a more consolidated one. The entire panel he was on agreed that diversified film finance is here to stay, and studios would be foolish to take back control of their product . . . and all the
risk. Echoing the long-tail argument, Salter predicted that the global marketplace will expand, and special interest content will rise most in value because it’s the hardest to get right now.
How do banks decide whether to fund films? Rector explained that he likes to give money to people who have borrowed large sums of money from him in the past . . . and paid him back. With interest. Hmmmm – maybe film finance isn’t so mysterious after all.

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