The different types of film funding

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When you raise capital for a film or are asked to invest (as a film investor), you should preferably have a general idea of the different types of options you have and which ones you can use in your particular situation in order to gain the most value (for everyone). Another thing to keep in mind is the film finance structure of the production, how the producers structure the financing of the film is key in film financing. Getting funding for a film is generally not easy unless you have made some movies before. Knowing different types of film financing options is a good way to start.

In the end it all comes down to being honest with your situation and to make a deal where all parts are happy. If everyone is happy the chances are the production will be a nice experience rather than a nightmare. Below are some of the most common types of investments you will come across as an investor or filmmaker. By the way, a place where a lot of people talk about film financing is, Sundance.

Equity

Are investments in a project made by a single investor, a group of investors and/or investments from colleagues/family. It's also called Private Equity or Private Equity Film Financing and it requires that the investor own a stake in the film or operating structure and must be paid back (typically on their principal investment + 20%) before profit is seen on the side of the filmmakers. This is oftentimes the easiest type of investment since it is so straight forward. However, this can be hard to handle depending on the size of the investment or numbers of investors.

What to remember; Equity investments require that the investor own a stake in the film or entity and must be paid back before a potential profit is seen. It is generally a good deal for the investor (depending on the project of course) and it can be a good deal for the project or entity. However, the risk of losing the full investment is as always, very high.

Tax Incentives, rebates & credits

This can be the worst and hardest piece of the investment puzzle. Tax incentives are today an important part of film productions and are most definitely the strongest reason why a production is filmed in an area or country other than California for example. Individual state and country legislation enables producers to subsidize spent costs for production. Tax incentives often require a producer to hire a certain number of local crew employees, use local vendors, hotels and services etc. The draw back is that tax credits are often based on application processes and is usually lengthy, months and years are common for a single production.

Pre-Sales

Pre-sales agreements are made with distributors before the film is produced. These agreements are often based on the strength of the project's marketability and sales potential in each territory, a rule is to always have marketable cast attached early on in order to be able to sell the movie if the opportunity presents itself. The project will usually be valued by a distribution company based on the script, attached talent and crew. The market might also be taken into account. If an agreement is made, this will enable the producer to take a bank loan using the pre-sales deal as collateral. Pre-sales can also be a direct payment (at a discounted rate) from a buyer, often a distribution company.

What to remember; As with almost every investment, pre-sales require the producer to pay back the capital before profiting. Pre-sales can be a great way to secure distribution and distribution is often extremely valuable for a producer and potential investors.

Gap, supergap & mezzanine gap

In motion pictures, gap and super gap financing is a form of mezzanine debt financing where the producer wishes to complete their film finance package by securing a loan that is secured against the film's unsold territories and rights. Some gap financiers who will only lend against the value of unsold foreign rights. The value is decided based of the quality of the script, cast, genre, director, producer, as well as whether it has theatrical distribution in the US from a major film studio.

The interesting thing here is the valuation is also based on the historical and current market and trends of each foreign territory. As I said before, it is a dangerous game to play because it is an unpredictable practice. Domestic distribution is also unpredictable and far from a sure thing today.

Generally, gap or super gap loans are recouped after the first production loan is recouped (you can say it´s in second place in the hierarchy). The gap or super gap loan will be recouped before an equity financiers investment. It’s not hard to understand why many gap investors are banks with high risk, high reward type of deal.

LOANS

It goes without saying that loans are common in film financing and we all know how they work. It is actually not that different from an equity investment. The real difference between a loan and an equity investment has to do with risk. A loan comes with lower risk, as long as the loan is secured and have collateral backing it. The borrower is obligated to repay the loan and interest to the creditor. The creditor on the other hand does not see any revenue except for the interest paid.

Bridge financing

Bridge finance has become more common in film making in recent years. Bridge financing is an answer to the problem of "needing funding to get the actors" but not getting the funding without the actors. Bridge financing can be used in scenarios where a filmmaker has a letter of intent from an investor to finance a film provided the filmmaker can attach an approved actor. The problem then becomes an issue of acquiring financing for the actor's payment. In this instance, a short-term lender can provide a bridge loan to secure the actor with the note as collateral; once the actor's payment is in an escrow account, the equity investment can be triggered, and the bridge loan would be paid back with interest.

A note; Bridge financing can be a great way for an investor to invest a smaller sum in a movie for a short duration and knowing where the money will go. Knowing where your investment actually goes is usually an important step in doing an investment and for producers this can be the investment that kick-starts the production.

Thanks for reading. I hope this was easy enough to understand. If you have any questions regarding film financing, please get in touch or click here if you want to know more about the basics around film funding.

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Developing and investing in Intangible assets

Nowadays we see many examples of how IPs (intangible assets; simplified, assets that can not be "touched") increase in value and how you, as the owner, can manage, buy and sell different types of IPs. A clear example that we all encounter next to every day is movies and books that often change owners and develop into other products. We have also seen how mobile games like Angry Birds can evolve into movies, books, etc. Many who are not familiar with the industry of movies, books and games, or who have not been particularly involved in intellectual property, might not know that the rights of every movie and ideas, like books and games, are owned by someone. As in the case of many films today, companies or individuals often own the rights to these and the value of the brand or idea can be sold or in other ways earn money. This can be valuable, especially if you have an idea or intangible asset that is unique, popular or may have sold well in the past or as another product.

I will talk more about this on my Youtube channel so feel free to subscribe on the link below for future videos.

Daniel Bramme on YouTube

why focus on IP?

One of the most common reasons why you choose to make movies of a game or book is almost exclusively for economic gain. Many times you see a greater value in expanding an IP's market than writing a new book or developing the next game. A new product under the same IP will often reach a new audience or otherwise exploit it's already established customer base to boost its revenue from an already existing product. One example is the books you make a movie of, the book sells the movie but the movie also sells the book to those who did not read it. Another strong advantage of intangible assets is that you can collaborate with companies in other industries to take their IP into a new market without having to invest resources in development and production costs of a new product. A clear example is Angry Birds whose owner made stuffed animals to further capitalize on Angry Birds and the movie they released during the same period.

A brand can therefore be incredibly valuable. Look at Star Wars who Disney owns or why not Swedish examples such as, "The man called Ove" or "Men who hate women. A perfect example on an IP is Valerian, a movie I wrote about some time ago. The horizon has become much broader and today you can see opportunities where you would not otherwise think that a brand or IP could fit, much thanks to great successes like the ones above. This has in turn increased the understanding and importance of protecting intangible assets. You should never underestimate the value of your intangible assets and take a day or two to figure out how to protect and use them to your advantage. I am convinced that we will see a greater willingness in expanding and protecting IPs in the future and that can only be good.

For more information in Sweden, please visit: Patent- och registreringsverket

For more information in the U.S, please visit: USPTO

And as always, thanks for visiting.

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how to finance your film or project

I'm writing this post as a quick resource to those who wonder about easier ways to fund smaller projects. It's much easier for me to write a post about the common ways you can acquire investments than to answer questions via e-mail which tend to become long answers. If you want to get to know me better and get more personal, please consider subscribing to my YouTube channel, I will start posting during 2020.

The financing model for VR projects can be somewhat similar to financing for film projects. The simple answer to most questions I get is, do your homework and do it well, learn and read about your situation and think about how to reach your goal. So this quick post will be about the different ways you can finance your project. A note though, every project is different, this is a simple rundown of some things you might not think about for your perticular project.

Government funding

Let's start with the common misconception that a government can and might finance your project. Well. in some cases you might have the time and the right project to approach a government fund or grant. In that situation it can be a great way of getting funds for your project. This will almost always attract media attention and PR opportunities so don't skip that route if you have a viable project. However, it will probably be time consuming and in most cases, your project is to small or not very interesting for a whole country to bet on.

If you do go this route, check the tax and investment incentives for each country, region or state (The U.S.). BFI in The UK is a great example of a organization helping with funding. SFI in Sweden is another example, however, Sweden does not have tax incentives for film productions at this moment.

Quick information: Apply for funding from each country and contact agents to see what territory works for your production. Lobby, until you get approved, denied or give up. Many filmmakers with larger projects can create job opportunities in countries, cities and/or regions. They usually include potential tax incentives and governmental funds in their budget. Always make sure you have a good reason to why you need investors, in this case how you bring value to the region. Soft money or public funds most of the times have many applicants and are often hard to get. In addition, these funds will probably restrict and compromise your creative integrity.

The Studio Model & Slates

The studios have a great strategy that helps investors lessen the risk of failure and that is called "slates". I'm not going to get into details around this strategy, as always, with several projects in your pocket, this can be something for you.

Quick information: Get 3 to 5 films or "VR episodes" together of a similar genre or idea and approach investors with this list of projects (slate). What you want to do is to show that you have more than one idea (actual productions that will happen) and what you need is for one of these to succeed on the market. The idea is that the successful project will recoup the investment made in the less successful projects. As with everything else, if you go with a slate, make sure all of them are great projects with different people behind them. Getting a couple of projects together that have clear value, energy and talent behind them is not easy. Being engaged and creatively invested in all of them is even harder.

Pre sales & Co-productions

Now we are talking. This is probably the best chance you'll get if you need funding. Also, this is a good way to see if a project is worth jumping on, if you are an investor. As an investor it's always a good sign if someone has already invested in a production. If a distributor made a pre-sale deal before you come in, that is also a good sign.

Co-productions can be a great way of knowing if a project is doable. For example a smaller production company might get a bigger production company to help in certain areas and that is making the whole project much more interesting for potential investors or team members.

Quick information: Sell your movie or project upfront (pre-sales) and/or join producers in other companies (or countries) for a joint project. By co-producing you can take advantage of soft money not normally accessible to your production, either by being a stronger entity or by expanding your network. This is usually the best or at least the easiest way of getting started. If you ask me as an investor, I would feel safer to know that there are a team behind a project, rather than one company or one entity. If you own the project and are honest with your capabilities and knows where you need support, then that is a sign that this individual is serious. I always tell people to not get too attached to their projects because the drawback with having co-producers is that they might want to exercise creative control. This might not be the easiest thing to accept for some.

Product placement

I get asked about this one a lot and I include this just for that reason. Product placement or brand integration should not be included in a budget. If you are looking for companies to include their products in your project, you should first of all have the project fully financed. However, for the right project, product placement can be a great addition but many projects are simply to small to even be considered for brand integration. Talk to local companies if you really want to use brands in your project.

Quick information: Unless you have a great project and exceptional talent, just skip branding and sponsoring. If you do try to approach companies to include their products in your project, please do us all a favor and be fully financed before you reach out, trust me on this one.

 

If you want more information about different types of film funding, click on the link. That's all for today. Have a good night and thank you for stopping by.

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The Swedish Film Industry

Swedish Film abroad

The impact of Swedish films abroad are often overestimated. If you are Swedish and don’t agree, hear me out. Locally, Sweden see an upside, however, outside of our borders, you clearly see the limitations of Swedish film. Unless there is a unique story, english (great) speaking cast and international people or experienced film workers in key positions throughout the production, the movie won’t come far.

The problems are first of all the Swedish language and second, the small market opportunity outside of Sweden. The Swedish film industry is not at all close to Hollywood and Bollywood in terms of marketsize. The way people make film in Sweden is very different from how we work internationally. One could argue that we should be closer by now and the industry be more mainstream, sadly this is not the case.

Different reasons

The main reason to why Swedish film makers leave Sweden to work elsewhere is simply because of the market size and the fundamental differences in how we think. I take the opportunity to promote an interview about Hollywood/Swedish adaptations. The reason to why I work with foreign markets is because of the incredible value, cultural and financial. Swedish film as an industry should think seriously about it’s next step.

The Swedish film industry makes us think Swedish film is a success abroad and rightfully so but that is not completely true. We are far from bad at what we do. However, we have never seen a financial success abroad, or at least that's not what we see or hear about. Great foreign box office numbers could be a reality, if film makers changed focus to a more financial strategy and market strategy. That includes script and production value.

The problem is, no one is watching Swedish movies, or not as much as people may believe. Most of the viewers are hard core and are watching movies from European countries, in the same way we watch french movies in Sweden. The largest markets are based in both the U.S. and China and of course India but both the Indian and Chinese market are not a viable option for Swedish films for a few reasons.

The movie, Let the right one in had a very limited window in the U.S. It had some distribution in smaller "European cinemas". The film was not a financial success, It could've been though. The idea was bought buy an American production company and had an English adaptation, the reason is simply the increased audience and market size. Don’t get me wrong, the movie was a nice addition to Swedish Film.

Above is a picture from A man called Ove, a movie that will have a future american adaptation.

Swedish Film in Sweden

The movie, A man called Ove was partially funded by The Swedish Film Institute. SFI was founded in 1963 to support and develop the Swedish film industry. It supports Swedish film making and allocates grants and funds for production, distribution and public showing of Swedish films in Sweden. It also promotes Swedish cinema internationally. The Institute also organizes the annual Guldbagge Awards.

Through the Swedish Film Agreement, between the Sweden and the film and media industry, the Government of Sweden, the TV companies which are party to the agreement, and Sweden's cinema owners jointly fund the Film Institute and thus, indirectly, Swedish film making.

At a rate of, currently, 20 films a year the Swedish film industry is on par with other comparable North European countries.

In Trollhättan Municipality there is a film production facility known as Trollywood; movies shot there include Show Me Love, Dancer in the Dark and Dogville. The movie studio Film i Väst centered here produces about half of Sweden's full-length films.

I will write an update the Swedish film industry later on but for now, this is what we have to work with.

As usual, thank you for reading and be sure to visit me on youtube or Instagram if you want to continue the conversation.

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Stockholm international Film Festival awards

Here is a quick picture from the Stockholm International Film Festival during the award ceremony. Don't forget to get in contact if you are interested in collaborations in the film industry. We might be able to work together. Let me know if I can help in any way.

Feel free to subscribe to my YouTube channel, I will start posting videos there during 2020.

Daniel Bramme at the Stockholm International Film Festival in November with H.E. Mr. Santiago Wins and Jose Luis Tejera.

You can find the original post on Instagram here.

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