Videoage International January 2020

26 “The best TV show of the past ten years… it is absolute feel-good joy” THE TIMES “The most charming and emotional show on TV” THE TELEGRAPH @all3media_int all3mediainternational.com J12868_VIDEO_AGE_NATPE_ISSUE_FP_270x360mm_THE_DOG_HOUSE_WITH_REVIEWS_AW.indd 1 07/01/2020 17:16 January 2020 V I D E O A G E tra forms of financing. The first is P&A funding. Capital is invested in marketing costs instead of production costs. This is attractive to investors because it is the last money in and the first money out of theatrical film rentals. The second is leveraging the “Ultimate.” This allows producers to borrow money against an estimate of a movie’s gross over its lifetime, a figure that analysts calculate about two months after a picture’s theatrical release. It looks at the lifespan of a film (roughly 10 years) and includes major income factors beyond theatrical box office. The third is receivables financing. This uses a hit movie as collateral to fund other movies. “Lenders,” explained Friscia, “are more generous with estimates from studios than indies.” However, he added: “Gone are the days of gap loans, in which banks would lend money based on what sales agents projected a film was worth According to Los Angeles-based indie producer John Laing, the best film commissions are from Canada, specifically provinces such as Ontario, British Columbia, and Quebec. In the U.S., there are commissions in Louisiana and New York. Plus, there are commissions in the U.K., Isle of Mann, and Ireland. “The key criteria to get the money,” said Laing, “is usually the story relevant to the location tax incentive, track record, director or star if related to region, and sometimes the budget. The general percentage of films rejected by various financing is probably greater than 95 percent because there is so much competition and only the best projects get the funds. [But] it is not so much a rejection rather than an acceptance of verified risk considering how much of the budget is left open, how much equity [there is], quality of presales, and if it has P&A.” Banks invest in film and TV financial companies (e.g., FilmNation and A24 with Bank of America, and Bron Stu- dios with Comerica Bank). Film- TV financial companies also know how to tap capital from Silicon Valley (e.g., Annapurna Pictures/ Oracle, First Look Media, and Par- ticipant Media/eBay, and K Period Media/World Wide Technology). China is also a good source of finances for movies (e.g., Ingenious Media/Hejing Culture, The H Collective/Huahua Media, and Studio 8/Fosun Group). Film financing can also be found in Abu Dhabi (e.g., AGC Studios/ Image Nation Abu Dhabi). These sources of money are less focused on packaging and more on fully financing projects. Steven Shapiro, SVPS Enter- tainment Division at City Natio- nal Bank in Los Angeles, sought to explain the challenges an indie producer faces in obtaining bank financing. “Generally, banks do not take any form of delivery risk, performance risk, or box office risk, so it is a very small group of independent producers who can expect to receive film financing from a bank. “Entertainment banks will lend against a pick-up agreement froma distributor acceptable to the bank. The agreement is normally for a specified amount (as opposed to a percentage of box office receipts) and payable at a specific date. Banks will also lend against a standby letter of credit issued by an acceptable bank. If a letter of credit is being used as collateral, it should be straightforward and not include any smokescreen language. “Entertainment banks also always require completion insu- rance to protect both the bank and the distributor or investor who puts up the collateral for the loan. A producer should talk with an entertainment banker when the producer has at least 80 percent of the budget cov- ered,” Shapiro concluded. before it opened theatrically. Only a handful of banks (half the number of 10 years ago) will do gap loans now.” According to Friscia, 50 percent of the movies produced will lose money, 20 percent will break even, and 30 percent will be profitable. To leverage the various tax credits there are specialized companies. Explained Rachel Swearingen of the Los Angeles-based The Forest Road Company: “FRC specializes in tax-credit lending. We are active in Canada and in all U.S. states with a film tax credit program. While we do not specialize in financing the entirety of a film, we focus on maximizing the available tax credit on behalf of the filmmakers. FRC provides a loan against the tax credit to filmmakers to help cash-flow any stage of production. In addition, we offer tax-credit servicing to help guide filmmakers through the process.” Meet ing of The Wal lets (Continued from Cover)