05.26.08
Posted in Classes/Books, Film Financing at 7:17 pm by Amanda Rogers
Picking up from An Evening With Lew Horwitz, Part 3, let’s continue our discussion by talking about completion bonds and banks.
Completion Bonds
It’s easy to get bonds confused with insurance because sometimes there appears to be little difference between them, so here’s a quick explanation of what they do. They both provide coverage for financial risk or loss, however, bonds usually cover the performance of a specific project, service, or act. Whereas insurance usually covers financial risk to a tangible item such as a house, boat, or car. There are exceptions to this rule of course, such as errors and omissions (E&O) insurance, which is more like a bond because it provides financial protection for acts performed or not performed.
Film production completion bonds guarantee delivery of the completed film. They guarantee that the film will be in a technically perfect condition, on budget, and on time. Banks always require that independently financed films have a completion bond. This protects their interests because it guarantees that in the end there will be a product to distribute.
Lew gave us the names of three film completion bond companies:
- Film Finances
- International Film Guarantors
- CineFinance
Lew insists that you should never produce a film without a bond. He says that bonds not only protect the bank, but they also protect you. However, if you’re a first-time producer, you’ll need to convince the bonding company that you know what you’re doing.
Bonds usually run about 3% of the budget, but might be more for a first-time producer.
Banks
So where do you find banks that will loan you money against distribution contracts? Well, Lew recommended the International Film and Television Alliance. Their membership includes bankers as well as sales agents. You’ll want to ask for a membership booklet from them.
It’s a good idea to get to know bankers ahead of time. Here are some tips from Lew for getting aquainted with a banker:
- Be sure to approach the banker professionally.
- Talk about your project.
- Never predict what your film is going to make.
- Ask what he or she needs.
- Which sales agents do they like?
- What type of films do they like?
When you’re ready to ask for a loan from your banker, don’t approach them without a sales agent. Be sure you have all your details together such as start date, bond, and chain of title. Also, be sure to give them enough time. Deals can take anywhere from two to three months, even up to six months. So don’t go to the bank and tell them your shooting in two weeks and will need the money by then. You won’t get it.
Keep in mind that bankers will not take all contracts. Who you sell to is very important. Only reputable distributors will be accepted by the bank.
This is turning into quite a lengthy series of blogs, but I should have the series wrapped in one or two more blog posts. Next, I’ll talk about the three components of film financing and the real budget.
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04.30.08
Posted in Classes/Books, Film Financing at 10:26 pm by Amanda Rogers
Continuing the discussion from An Evening With Lew Horwitz, Part 2, let’s talk about sales agents.
Lew advises that you need to get a sales agent. Don’t sell your film yourself!
Wait just a minute. Isn’t that opposite of the advice that Sandra Schulberg gave a couple of months ago in a class that I took? Yes it is.
I have a rule when it comes to getting advice or learning something new and it’s this: Get several opinions. Don’t just accept the opinion of the first person to come along, because, as noted above, even the experts don’t always agree. This rule applies to more than just the film industry. It can be applied to just about everything in life. And when you come across a different opinion, dig deeper, get more information, and then make up your own mind. You’ll find that you’ll make better and more informed decisions.
So why does Lew think a sales agent is so vital?
- According to him, without an agent, nobody will talk to you. By nobody, I’m assuming he means banks and distributors.
- A sales agent will give you an estimate of every territory’s value for your film. That’s important to know because, according to him, you need to keep the budget of your film to the value of the estimates. Don’t bluff yourself, he warns. Be realistic with your budget.
As much as Lew recommends that you hire a sales agent, he also warns not to trust them. “Love them, but don’t trust them,” he says. So how can you protect yourself from your own sales agent?
- Don’t let your film get packaged with other films. You don’t want cross-collateralization because if the other films don’t make any money and your film does, you’ll be sharing your profits with the filmmakers whose films weren’t profitable. Not a good thing.
- Give your sales agent some leeway to make deals without having to get your approval every time, but be sure to state in the contract with your agent that they cannot license your film for less than X % of his estimate without your express permission.
- Make sure you see the quarterly reports.
- Make sure the bank knows about your deal with your sales agent. You can do this by sending the bank a letter detailing the agreement conditions and asking them to uphold those conditions. Your sales agent might not be scared of you, but he/she won’t mess with the bank.
- Hire the best attorneys. Make sure they have a lot of experience with independent films.
The jury is still out for me as to whether getting a sales agent is the best route to go. Lew insists that it is, but, obviously, Sandra Schulberg has been able to sell her films without one. I’m definitely going to have to look into this further before deciding which route is the best one for me to take.
Coming in part four I’ll talk about what Lew has to say about bonds and banks.
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04.21.08
Posted in Classes/Books, Film Festivals, I-Man Cast Film Update, Music at 10:54 pm by Amanda Rogers
This weekend I went to my first film festival. The California Independent Film Festival is a small festival held in nearby Livermore, and this year was its tenth year running. Time didn’t allow me to see everything, so I only attended a few events.
The first event I went to was a seminar on Saturday on Directing, Producing and Distributing Indie Films. It was only 45 minutes long. What could they possibly share in only 45 minutes that I didn’t already know? The answer was…nothing. I’ve heard it all before. They mostly talked about distribution of indies. Nothing much about directing or producing. There simply wasn’t any time. The prevailing attitude that shorts are nothing more than a calling card was expressed and so I shared a story that I know of a short that actually did make money. I’ll have to blog about it sometime. It’s a great example of out-of-the-box thinking.
The next seminar immediately followed and it was on Indie Music for Television and Film. Okay, I actually learned a few things at this seminar. Most notably, I learned about the importance and role of a music supervisor in a film. Besides finding the music for a film, a big and very important part of a music supervisor’s job is to get clearance on music rights. Without the proper clearance, lots of legal problems can crop up and that can cause all kinds of headaches that could have been avoided simply by doing due diligence.
One of the panelists was a music supervisor with a long list of TV and film credits. He has the kind of experience I would be looking for to build a strong team for my film, so after the seminar I talked to him and got his contact info.
I got an invitation to the filmmakers party that night, but the darn thing didn’t start till 10:00 p.m. I’m an early riser and I need my sleep, so I passed on the party.
The next morning I was back at the theater to watch the Tri-Valley Shorts Showcase…a slate of nine short films from filmmakers here in the Valley. The reason I wanted to see this series was because I knew a couple of the filmmakers whose shorts were being featured. One of them was John Meredith. You long-time readers may remember that I blogged about his On The Lot entry last year. Well, John has come a long ways. This was the first time he got one of his shorts on the big screen and his filmmaking skills keep getting better with each film.
Overall, this was a nice introduction to film festivals. One of these days I really need to attend one of the big ones like Sundance, Toronto, or Cannes. Oooh, visiting France sounds like fun.
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04.19.08
Posted in Classes/Books, Film Financing at 9:08 pm by Amanda Rogers
Okay, picking up from last Saturday’s post, An Evening With Lew Horwitz, Part 1, let’s continue the discussion about financing films using debt financing.
Lew had an interesting comment about banks: They don’t care if your film makes money. That struck me as a rather odd statement, but it makes sense when you think about it. Banks just care about getting their loan paid back with interest. And getting their money back really has nothing to do with whether you make money or not on your film. What they require is a guarantee that they will get their money back and that guarantee is in the form of collateral. No, they don’t want your house or car. Collateral in the film world is distribution contracts, also known as presales. The term presale is a bit misleading because Lew emphasized that you must never, ever sell your film to a distributor. You always want to retain ownership of your film in order to keep the profits. Instead, you’ll want to license your film to distributors for a specified period.
The world is divided up into many territories, a domestic territory and many foreign ones. Preselling your film to as many of these distributors as possible can give you the collateral you need to get a bank loan. These distributors promise you a minimum guaranteed amount in the distribution contract and it is against those amounts that you can take out a loan with a bank.
Before 1995, it used to be that presales could cover the entire cost of a film. Not anymore. After getting burned a few times, distributors became more cautious. Now, you can expect, on average, around 30% to 40% of your film’s financing to come from presales…sometimes it’s more, sometimes it’s less.
If you approach distributors after your film is finished, instead of before, you can usually negotiate a better deal. But that means that you’ll need to get your funding from other sources and, if you’re like most, you’re cobbling together the financing for your film wherever you can get it.
You really should try to get a U.S. theatrical release because it will help with getting foreign sales. Also (and I’m going to interject something here that I learned from a Dov S-S Simens’ class I took a couple of years back), if you want to license your film to HBO, Showtime, and other pay cable networks, you need to get it out in theaters, even if it is only a limited release because, according to Dov, the pay cable networks only air films that have had a theatrical release. That said, Lew did mention that straight-to-video films can do very well.
Well, that’s all for tonight. Part three of this series deals with getting a sales agent.
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04.12.08
Posted in Classes/Books, Film Financing at 10:00 pm by Amanda Rogers
Lew Horwitz has been described as one of the true greats in independent film financing. He has over 35 years of experience in the entertainment financing business and has funded hundreds of films during that time, including the very successful My Big Fat Greek Wedding. So when I found out that IIFF was sponsoring a film financing workshop featuring Mr. Horwitz as the speaker, I knew I had to attend.
Wednesday night’s workshop was located at the Academy of Art University’s auditorium on New Montgomery street in San Francisco. It’s not the usual location where IIFF workshops and meetings are held, so I made sure to leave early so that I would have plenty of time to find parking, which can often be a challenge in the City. Fortunately, I got there in plenty of time and was able to chat with other attendees while we were waiting. I, also, caught a glimpse of actress Diane Baker, who attended the workshop, and is currently a Co-Director at the University.
Lew was very charming and entertaining. Occasionally, he would take a break from speaking and entertain us with magic tricks, which were a lot of fun to watch. He’s quite good.
Some of the material he covered I already knew, some of it clarified things for me, and some of it was new. Starting with the basics, there are three ways to finance a film:
- Studios
- Investors
- Borrowed Money
Studio financing is great if you can get it, and that’s the trick…if you can get it. It’s rare for independent films to get studio financing, which is why independents usually fund their film by means of borrowed money (debt financing) and/or investors (equity financing). This is a good time to define what debt and equity financing is for those of you who may be unfamiliar with those terms.
- Debt financing is money that is borrowed from a bank and must be repaid with interest. One of the advantages to debt financing is that the lender does not gain ownership interest in the film. Once the debt is paid, your obligations to the bank are over and all profits from your film are yours to keep.
- Equity financing is money received from investors in exchange for interest in the film. The advantages to this type of financing is that you don’t go into debt to obtain funds and the risks are distributed among the investors. A disadvantage is that you don’t keep all of your film’s profit.
Most films are financed using a combination of debt and equity financing. That’s putting it very simply. It actually gets far more complicated as you will see later on. I already had an idea how complicated financing can get and I find the whole process very fascinating. During the break, however, I overheard conversations from some in the audience who were hearing the information for the first time. They were freaking out a bit when they found out what was involved to get their film funded.
Lew taught us about funding our films using the third option: borrowed money (debt financing). I’m going to stop here for the evening and pick it up again in part two. There’s a lot of information to cover and I think it would be better to split it up into several posts.
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