Film Financing – tools & resources for producers: What is changing and what stays the same?

Film finance is the perennial issue for film festival industry events. The attraction of commercial finance to Scottish connected product was a key point raised by Claire Mundell as she spoke about the launch of the Creative Scotland backed Mackendrick fund launching in association with Aegis and Prescience at an EIFF panel on the 18th June.

What became clear at this panel and at the New Distribution Models  discussion on June 20th was the enduring primacy of sales estimates in gap and market finance and thus the strength of the sales agent in the value chain. Despite the proposed disintermediation in the producer to consumer relationship as facilitated by Internet dissemination), little evidence of the success of this model at levels above the micro-budget was provided.

From both sides: the proponents of new models and the upholders of the traditional value chain, the message was the same. There is no compromise model to close the gap between producers retaining more rights and getting closer to their audience, and their reliance selling such rights in order to finance the film in the first place.

HanWay films were very clear that whilst a large social media following and extra digital assets to accompany the film may be a bonus, they are not the materials at which they look when deciding to purchase a film and certainly would not call for an increase in price or more preferential deal terms for the producer.

Jon Reiss, a proponent of new digital marketing and distribution techniques that contrast with the ‘all rights’ deal, recognised the problem in trying to finance a commercial project and also split rights to benefit the producer. Whilst unable to cite an example of an independent film able to include digital assets and a producer of marketing and distribution in the budget, he stuck to the argument that investors of any kind should recognise that this activity is necessary for a film to fulfil its potential and therefore should be happy to pay for it.

This argument: a bigger pie for everyone – not just a bigger slice for the producer, is yet to gain credence across the value chain as investors would prefer to either reduce the budget by cutting out distribution and marketing materials, or see it converted into value on screen. Distributors have a vested interest in retaining control of the relationship with the consumer, and also of the P&A spend in order that they can maximise their returns over their portfolio, not necessarily the performance of any individual film.

In order to develop this area evidence is needed of marketing and distribution activity conducted by the producer, which increases the ultimate revenues of the film and thereby benefits traditional financiers. Sigma Films and the Scottish Documentary Institute are companies benefiting from Creative Scotland investment to test these models.

The sharing of common technologies that enable direct ROI measurement may be key to future adoption of investment in early stage marketing and distribution concerns. For example if a production company were to use Distrify to seed its digital assets during production to build an early stage awareness, and a distributor, familiar with the User Interface (UI), was then able to track sales directly stemming from such engagement (by, say email sign ups) then perhaps some bridges could be built.

Whatever the new models, some fundamental practices are still absolutely necessary not least the ability to sketch a recoupment chart from putative deal terms. It was encouraging to see a number of students and academic representatives at the Jon Reiss workshop. Any aspiring new entrant to the business should be familiar with the contents of 3 key books to understand the underlying nature of the industry.

  1. Finney: The International Film Business
  2. De Vany: Hollywood Economics, How Extreme Uncertainty Shapes the Film Industry especially the epilogue
  3. Vogel: Entertainment Industry Economics ch3.

Michael Franklin
Research Associate, Creative Scotland

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