Last Saturday, I ventured across the Bay Bridge again to attend a film financing workshop featuring IFP (Independent Feature Project) founder Sandra Schulberg. Sandra has a very impressive resume that her IMDb profile barely touches upon and that includes expertise in international financing and co-production. Getting to spend an entire day listening to her was an incredible learning experience. Some of what she covered I’ve heard before, but I always count a class or workshop worthwhile if I come out of it having learned something new. By those standards, this workshop was an unmitigated success. I almost never put my pen down the entire day. It was eight hours jammed packed with information…too much to try to summarize in one post, so I’ll just hit on some highlights.
Do you think that grant money is only available for documentaries? Think again. If your feature film contains subject matter that is relevant to a cause or issue (e.g., the environment, social issues, etc.) that a grantor is interested in supporting, your project may be able to get funding from grants.
Depending on your budget, grants may not cover all the costs of producing your film, but here’s a little known fact: You can mix PPM (Private Placement Memorandum) money and grant money. Sandra called projects that mix funding from these two sources hybrids. Of course, the paperwork gets more complicated when you go this route, but it is quite doable.
Some grants are more like a loan. They are called Program Related Investments (PRI). This is a grant that the grantor wants back. Some may charge interest.
Private Placement Memorandums (PPM)
PPMs, also known as offering memorandums, are legal documents that state the objectives, risks, and terms of an investment. Here’s what must be included in an offering memorandum:
- Story synopsis.
- Chain of title–The script rights must be assigned to the LLC.
- Bios of key people.
- Talent agreements.
- Who controls final cut? This can be a touchy and difficult subject, but one that must not be avoided.
- Budget summary. This should include development budget.
- Production schedule.
- Bond (if required).
- Describe overall financing plan.
- Deal structure. Usually, profits are split 50-50 with investors, but this is negotiable.
- Minimum threshold to break escrow. Examples: When there are enough funds to shoot the film or enough funds to shoot and do a rough cut. Advantages to shooting sooner is that the film gets into the market sooner.
- Distribution/marketing plan.
- Risk factors–Never ever try to hide the risks from an investor. Disclose all risks. Be transparent.
- Tax treatment. This section must be written by an attorney.
- Wind-up provision–You want to put a cap on your relationship with investors. In the past, the usual cap was seven years. Nowadays it can vary greatly.
- Define accredited investor–Currently a qualified investor for a private offering must earn a minimum of $200,000 per year or have a minimum of $1 million in assets.
- Financial projections–Do three sets of projections for realistic scenarios.
Whew! Got all that? As you can imagine, a lot of work goes into creating a PPM; and the SEC (Securities and Exchange Commission) has very strict rules about how PPMs are distributed.
Looking for money for your film project? Consider going international. There is money out there, especially in Europe where many governments subsidize film productions. Interestingly, the U.S. is one of the few governments that doesn’t subsidize films. Go figure. Though you can find tax incentives in various parts of the U.S.
But if you’re willing to give up some parts of your copyright to get your film made, partnering up with a foreign production company may be a way to go. Rules may vary, but, most likely, you will be required to do at least some part of the work in that country, such as shooting or post production. You might even consider teaming up with production companies from several of the countries under the European Co-Production Treaty and taking advantage of the subsidies from each country.
Pre-Selling Foreign Rights
Pre-selling foreign rights is one of the most common ways to raise funds for a feature. Foreign sales account for more than 50% of a film’s revenue, so by pre-selling your film to foreign distributors, a large portion of your budget can be raised from this market and you’ve also set up distribution in the foreign market.
Hiring a foreign sales agent is great if you can afford it. At 12% to 40% commission plus costs, they can be quite pricey. But Sandra recommends selling the foreign rights yourself. It’s a great experience that she encourages filmmakers to try for themselves.
So how is this done? By attending international film markets and selling your film to the foreign distributors who attend and are looking for films to buy. Here’s the list of the film markets she recommends attending in the following order:
- IFP Market–This takes place in the fall.
- Toronto–This takes place right after IFP.
- Rotterdam–Focuses on indie films.
- Berlin–A little more complex, but compares to Cannes. IFP has a booth there.
- Cannes–Much more difficult to navigate, so you’ll want to take advantage of the resources of the IFP booth.
When selling your rights to the world (excluding the U.S.), you’ll want to be sure to use the services of a collection agency. A collection agency, in this sense, is not the type that you would normally think of that hounds you if you’ve fallen behind on your credit payments. No, these collection agencies function as funnels for all the various countries in which you may have sales agreements. They collect and distribute the various funds and can provide you with peace of mind in that you don’t have to worry about keeping track of funds from each country. They charge between 1% and 2% and are well worth the cost. The two collection agencies are:
- National Film Trustees–A British Company
- Fintage–A Dutch Company