How to Finance a Film (Part Two): Leverage

In Part One we looked at the reality and numbers of the film industry. We left off with two questions:

• How much money should your movie make?
• How many people can you influence?

In this part, we’ll try to answer both these questions, on the road to learning how to finance a film.How much money should your movie make?The math is simple:What you make = Number of viewers who pay x Cost per view.The cost per view is not entirely flexible:

• About $9.99 for a cinema screen or DVD.
• About $90 a month ($3 per day) for ‘regular’ forms of television.
• About $9 a month for IPTV (that’s $0.3 per day).
• About $1.99 to $2.99 per rental on Amazon.

Mind you, you are competing against past, present and future Hollywood movies, television series, celebrities, intellectual property, comics, news, advertising, etc., in addition to every other indie filmmaker. In all seriousness, if I had to put a figure on an internet stream, even if it is 4K, I’d say the value per view would amount to no more than $2.99.If DVDs and Blu-ray is going the way of floppy disks, then your bonus features are probably going to end up on Youtube for free. In any case, it could be that less than one-third of those who buy DVDs or Blu-rays watch the bonus features. That means, they’re not spending $9.99 on the bonus material, but just the privilege of owning your movie to watch at their leisure.You could peg your movie (download, unlimited views) at $9.99, and you might end up being right. However, the person who is willing to pay $9.99 is not the same person who is only willing to shell out $2.99. You can’t have the whole pie.No matter what amount you’ve chosen, the point is that market forces and economics decide what your cost per view should be. Therefore, your only real influence is maximizing the number of viewers who will pay your price.LeverageEver heard the phrase: ‘The early bird gets the worm’, and its counter: ‘The second mouse gets the cheese’?In the first case, the bird ate because it was early. In the second, the mouse ate because it was late. You see, advantage isn’t an absolute. Some people equate the word leverage with ‘advantage’ or ‘power’. That’s all fine and good, but it doesn’t help you get any.I have a simpler way of looking at leverage. Money. This is how it works:

• If I had a $100 bill, and you had a $100 bill, I can leverage (use its market value) my note in exchange for yours.
• If I had a $100 bill, and I wanted change, I could leverage (use its market value) my note in exchange for your notes that add up to $100. However, if you’ve won your change after a fair bit of struggle, you might be reluctant to part with them. In a city where change is hard to come by, coins and lower denomination currency have a ‘greater value’ than their market price. Strange, but true. How do you eliminate that?
• If I had a $500 bill, and I wanted change for only a $100, I will most likely get you to relinquish your $100 in change for my $500, and I will have leveraged my note for yours.

Of course, this last example is an extreme one, but the idea is: People only part with things when they feel they are getting equal or better value. The only way to guarantee (well, almost) a sale is by always offering obviously greater value.Make no mistake, it is a sale. The legalities in your country may forbid you from soliciting for money, but few countries forbid selling. I’m not talking about conning someone, mind you, but offering them real and honest value so they will open their wallets and pay you three bucks.But there is a catch. Unlike a buy-goods-in-a-store transaction, where the deal is sealed instantly, this one doesn’t work that way. First, let’s see why not.If you’re a celebrity, let’s say a famous singer, you have probably delivered value many times over – at least to your fans. So, if you call upon them to give you $2.99 to crowd-fund your movie, even if it’s for practically nothing in return, chances are you’ll get it.If a beggar asks someone for $2.99, the odds lie in the opposite side of the spectrum, close to nil.If you’re a nobody filmmaker with just a dream, and a very small circle of influence, your chances are closer to what the beggar’s is. Just like a beggar, you probably have nothing to offer – even if it’s for $2.99.But – maybe you can offer something to the tune of $1.99, or $0.99, or $0.01. Every human being is valuable, in whatever capacity it may be. Even if you just smile and tell everybody things will be all right, that might be worth one cent.Let’s say you meet a grumpy person on your way to work every day. On the first day, you smile, and the grumpy person barely notices you. You keep at it, for many days, maybe a couple of months – and one day, the grumpy person will smile back. From that day on, that grumpy person will look forward to your smile – you have suddenly become valuable.What if you wanted to ask your coworkers for money, but had nothing to offer in return? Smile and greet them with enthusiasm, and do that for a year. What do you think your chances will be like then? You think they’ll shell out $2.99 to a person who cared about them at every contact, for a whole year?This is leverage, the art of gaining value by offering value. The cool thing about leverage is that it works. The insanely tough thing about leverage is that it is tough, slow, and you must make the first move, with no expectations of reward or success.Eliminate the middle manLet’s put our thoughts in order.Your goal, regardless of how handicapped or talented life has made you, is to use what you have, and sell it for what its worth. If it’s just a smile, it’ll take time but you’ll get there. If you’re a doctor, you might be able to earn your money quicker.The question is: what in your arsenal of skills will get you there the quickest? To understand how to solve this problem, you must first study the barriers of entry.If a salesman has to go to every house on a street, the ones that have big gates, security cameras, pit bulls in the shape of humans or dogs, and a big ugly sign that screams salesmen are not welcome, are said to have a large barrier to entry. The homes that have doors and a bell that don’t have any barriers are easier to approach.In Part One we looked at the different distribution markets. Let’s take the case of cinema.The studios control cinema screens. Do cinema screen owners get to choose the movies? Not really. If a cinema owner refused a ‘request’, he or she would be blacklisted – not officially of course, but with consequences just as disastrous. Not only do most cinema owners want to earn money by betting on the safest bet, they also want to be showing the movies that are marketed the most.The barrier to entry is tougher than accessing a secure military zone. They simply won’t let you in. You cannot occupy their space. You cannot even get them to acknowledge your existence.But let’s say, hypothetically, that you decided, to hell with them. I’ll make a movie on a decent budget, and spend a million on marketing. Surely, money talks? Good for you. Now, try to contact a magazine editor and get that person to splash your movie on their magazine’s front cover. Or, call a PR agency with the clout to get it done. Want to know the answer? You can’t. Why? Having money is not leverage enough. There’s also the value of the ‘change’ to consider.You just don’t have that value. You might be able to afford the price of admission, but you’ll never find the entrance.Many independent filmmakers, and even famous names with enormous clout, have tried to influence this system, but they haven’t succeeded. If you’re a small-time filmmaker, you might be able to achieve what thousands haven’t – but don’t kid yourself into believing that’s the first thing you’ll do when you step out the door.What about television? Fighting or trying to win over television networks is like bringing a knife to a gunfight. They have invested countless millions to:

• get a license for the airwaves,
• buy some space on a satellite,
• buy real estate,
• buy millions worth of equipment to form a broadcast station,
• recruit trained professionals and engineers,
• trouble-shoot infinite problems getting everything to work,
• spend millions producing content,
• go begging for advertising.

They are sitting on technology that they control, backed by the government, the law and solid real estate. You can’t get them to budge – you won’t even get them to sneeze. In television, you may be given a ‘position’, but you’ll never own the position. The market is never directly connected to you. Your audience will not mourn your passing – actually they most likely will mourn – but then they’ll continue watching whatever the network replaces you with.You have no leverage. You can get shut out of television just like in the cinema system or in the media. It might be expedient in some cases to do as they say, but they are just middlemen between you and your audience. They are the gatekeepers, the barriers to entry that you can choose to overcome or ignore.Today, you can ignore them because you have the Internet.How to finance a filmAnalogous to setting up a television network, what if you wanted to create your own internet television station? Here’s the analogy:

• Your internet connection is your license.
• Your domain name is your space on the Internet.
• Your hosting service is your real estate.
• Your laptop or computer is your equipment.
• You and your friends are your manpower.
• Software does the work. When in trouble, ask someone for solutions for free.
• Spend thousands producing content.
• Go begging for advertising.

Let’s address the last part first. Advertisers go to those who control the market. In traditional forms of media, television and cinema, the filmmakers don’t control the market. In their laziness to avoid the mundane, financial and political side of moviemaking, they handed over the reigns to those who had (and have) no business being in the movie business. Today, they are slaves to the middlemen.But look at entrepreneurs and start-ups. They have to deal with every aspect of their business, and simply cannot afford to ignore issues irrelevant to their passions. Filmmakers must be the same way. You have to learn about lighting, camera, editing, visual effects, audio, politics, and many other things. Why not learn about money and taxes as well? Why not learn about your audience and marketing as well?It’s not a crazy notion, let me assure you. If I have a scene in my head that I think is brilliant, the camera, lights, boom mic and that irritating actor are all standing in my way. I only tolerate them (just as they tolerate me) because I can’t get what I want without their help. The same goes for marketing and money. If you have no money, and no fans, then you must think of these as you think of your camera and gear.Use the tools at your disposal to connect directly with your audience. All you need is a computer.Your computer is a full broadcast station. It can transmit your thoughts, ideas, emotions, stories, and messages. It can even smile for you, and earn you that $0.01. Slowly and steadily, you will build your audience, and their combined size and goodwill will tell you what you are worth, and more importantly, what your movie is worth to them.That is your budget.In Part Three we’ll look at real-world examples of people who have succeeded in raising money using the methodology I have so very laboriously explained.