Pre Sales - How it works

Let's talk about pre-sales and why they are important for producers today and why some say pre-sales are less common today than before. If you are interested in other parts of film financing, please see my other posts about that below:

When a producer or a production company are in the later stages of a film financing round there are many times a lack of financing options and a way to acquire the last parts of the production budget can be to do a so called pre-sale deal or agreement. This is usually made far in advance but can be made in a later stage as well.

There are essentially two different deals that can be made with a pre-sale agreement. One is to take a bank loan using the pre-sales as collateral or the second and maybe the best option of these two, to receive a direct payment from one or several distributors. The important part to remember is that not everyone should use pre-sales and not everyone has that as an option. For pre-sales to work, there need to be value attached to your project. Value can be many things but for a pre-sale deal, it is entities that will help sell the film, for example attached talent, actors and actresses that has a high marketable value and a great track record.

Since these deals are pre-arranged contracts made before the film is produced. They are based on the strength of the project based on what each part counts as strength. A german distributor might not see the same value as an Indian distributor and so on. There are some universal factors that can be used in discussions with distributors and that can be the quality of the script, movie stars and a great marketing strategy.

Pre-sales can be a wonderful way to finance your film but with everything, if the film is a success, then you have nothing to worry about, however, if the film is below average on the "success-scale" then you could be in a bad spot. With other words; The downside to this type of financing strategy is that it requires the producers to repay the loan before profiting on the film. As with everything regarding financing, it is wise to consult with someone who has done it before or who has knowledge in your particular situation and experience before signing any agreements.

The sci-fi movie, Valerian is a great example of a movie almost completely financed with pre-sales agreements. The movie was made and everyone seems happy but the movie itself seems to be a financial flop according to Box Office Mojo - Valerian.

Valerian

Take a look at what was being said about the movie before it's release:

And after it's release:

It is important to note this had nothing to do with pre-sales, however, depending on the agreements, it could be a disaster for future projects.

As always, thanks for stopping by.

Update: I revisited Valerian to write about the budget and a potential second movie.