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General Filmmaking

How to Finance a Film

Not the same old answers to the question: How to finance a film? The sobering reality.

Sometimes we go to film schools, show one of our films, and answer some of the questions the students might have. But they tend to be very specific questions, which rarely have to do with the craft itself. Most of the time, really, film students are looking for advice on how to raise money

Joel Coen, in the Moviemakers’ Master Class, by Laurent Tirard.

Important Disclaimer

This is not legal, investment, financial or career advice. I am not an expert on film financing, so please don’t assume it.

Nothing in this article should be construed as a solicitation or offer, or recommendation to acquire or dispose of any investment or to engage in any other transaction.  The information should not be construed as personal investment advice or financial planning advice. Please consult your accountant, and/or local and country laws before taking any action.

The information contained herein is for informational purposes only as a service to the public, and is not legal advice or a substitute for legal counsel. Please consult with your attorney before taking any action.

You are liable for your own actions and dealings. We are not responsible if something bad happens. If you’re not sure, or don’t agree, stop reading and don’t act on the information.

How to finance a film

Film (digital video, really) isn’t cheap, even if you’re shooting on an iPhone. Only those who have actually shot a few movies appreciate that the camera and gear budget is a small fraction of the overall budget.

You might be able to get away and earn money on one movie on a shoe-string (read: zero) budget, but try that over the course of ten movies or a career. Here’s the reality:

NOBODY HAS DONE THAT, EVER.

If not today, then tomorrow, you will have to face the reality of finding funding. This article is my best attempt to explain just that: How to finance a film?

It is divided into three parts:

  • Reality
  • Leverage
  • Examples

First, why write about how to finance a film?

Yeah, why? I’m like you. I don’t have the finances to produce a movie, don’t know any rich people who love my work, and know squat about global financing and distribution models.

But when was the last time any of the people who knew the answers and had walked the talk actually gave you advice on how to raise money?

There are a lot of articles and books on how to finance a film, but how many stories exist of people who have raised money following exactly what is outlined in those articles or books? It’s easy to say: It’s not what you do, but whom you know – but how many people would the average person know?

Actually, how many people could you know? I’ll look into this in detail later.

I am writing this because this is what I know, right or wrong, helpful or otherwise. Have the time? Read, and form your own opinions. It’s only worth the pixels it is displayed on.

Whatever you do, don’t let the negatives get you down.

Who is your audience?

Your work of art, your film, your movie – who is it for? Everyone? When was the last time you saw ‘everyone’ together? Or, when was the last time you heard any company successfully sell one product to the entire population of a –

  • Country, or
  • State, or
  • City, or
  • Block, or
  • School, or
  • Household?

Nobody gets the whole pie. That’s how it works.

I’ll make it easy. Want your movie seen by the widest audience possible? Let’s look at some numbers:

There are about 130,000 cinema screens worldwide.

There are about 40,000 cinema screens in the US. However, many of these are multiplexes, and the total number of cinema sites in the US is about 6,000.

The number of MacDonald’s outlets in the US is about 19,000. Just saying.

The audience count (admissions) in the US is about 1.3 billion per year (3.5 million per day). The number of people per screen is about 32,500 for the entire year. That’s 625 per week. If the average size of a cinema auditorium is 350 seats, then the numbers indicate only two shows are filled in a week. If there are four shows a day per screen, that’s only 7% occupancy! Obviously, the screens that do well are a small percentage of the 40,000.

Earlier, there used to be a count on the number of film prints shipped. For a major Hollywood release, the number of prints in the US alone can be about 4,000 (World War Z opened in 3,607 screens). Today, a vast majority of this number is digital prints, or copies. Let’s assume the number is 5,000 copies – that go out to 5,000 digital screens. That’s only 12.5% of the total percentage of screens, or about 8 blockbusters playing every day. Why, then, is there no place for the indie movie? Even if four blockbusters released at the same time in 5,000 screens, we still have 20,000 screens left.

Okay, let’s say the average movie with a proper release gets (or should get) 500 screens. That’s 80 movies playing per day. If the average movie gets to play for 14 days, 160 movies play per month, or 1,920 per year. That means, about 2,000 movies can rotate across cinema screens and each movie will get 500 screens and play for 14 days. So, how many movies are being produced in the US?

The total official number of movies produced in the US every year is about 500. Judging by the submissions to Sundance though, the number is probably around 2,000.

Why then, aren’t indie films getting their ‘due’?

The answer is simple, and thoroughly depressing: the market doesn’t really want to see your movie.

If a Hollywood blockbuster costs 200 million, and spends half that for marketing, the audience is going to prefer it to your movie, no matter what your movie is about. In fact, your movie could be an exact replica (the same movie even) of the blockbuster, with just the title changed, and it would still bomb.

Okay, how many screens can a indie film aspire to? Let’s look at some ‘big indie’ films (opening week, compare it to World War Z):

The reality is that you will be lucky to get more than 1 screen. That first screen can be four-walled, and it doesn’t count.

Sundance gets about 2,000 or more submissions per year. Out of this, less than 0.3% find distribution. That’s about 5-10 movies. Out of these, about 3% turn a profit. That’s one movie or less.

The number of television sets in the US is about 96% of the number of US households (about 120 million), which results in a figure greater than 100 million. The average viewership of 174 series finales is about 13.5 million.

The number of broadband internet subscriptions is about 70 million, of which the average speed is 7.4 Mbps. The global average is about 3 Mbps. In most households, people share broadband connections. Youtube gets about 100 million visitors every day from the US.

For a full HD stream (1080p), the data rate is about 8 Mbps, and the total number of internet connections that are above 10 Mbps in the US is about 15 Million.

Compare:

  • You can reach 3.5 million cinema-goers per day, if you could control distribution in the US.
  • You can reach 13.5 million television viewers per day, if you could control television distribution in the US.
  • You can reach 70 million Internet viewers per day, if you could control Internet distribution in the US.
Man Umbrella Money Coin

If the average cost of watching your movie is $9.99, which market would you want to target? Which gives you the best odds to recover your money?

So, who is your audience? Here’s a hint: It’s not human beings. It’s either an air-conditioned seat in a dark cinema hall, a spot on a couch, a computer, or a smartphone. How many of these can you reach? How many of these can you occupy?

Who funds movies?

The answer is simple, but totally not helpful. People with money funds movies. Financing your film is the process of getting funds out of these people’s accounts into yours (or an escrow account).

Banks won’t fund an indie filmmaker with no collateral to lose in return. Smart investors only put money down on a deal that already guarantees profits. You could ‘package’ your movie to reduce the risks, but unless you have a massively bankable actor, no sane investor will fund you. They know that money is lost forever.

What about friends or relatives? They know that money is lost forever too, and they also know that your making a movie isn’t going to help you learn the value of that money, either. They know you too well. If they don’t know these things, and want to help you out of the kindness of their heart, it is your (the filmmaker’s) responsibility to tell them that the chances of recovering their money are so close to zero that it is invisible.

Hollywood studios? Nope.

But people are making movies every day, right? 3,650 movies a year means about 10 movies delivered (to somebody) per day. That’s about 6 movies per State per month. That’s nothing.

Even if you triple the number of movies per year it’s about 20 movies per State per month. Rhode Island has about 40 cities, so the number of movies per city for Rhode Island is 0.5, or one movie per two cities if 10,000 movies are made every year. That’s about 5 per city a year – going by 10,000 movies. In reality, it’s about 1 per city a year. One lucky individual gets to make a movie.

Before you say: more movies are made in major cities, the average filmmaker who aspires to making movies will never live in a major city. Still, that movie must be made.

The same statistical analysis bears for any country or area. I’ve used figures for the US because they are widely available. Try finding the same numbers for other major movie industries like China or India.

Faced with such depressing and dismal odds, it’s no wonder that investors are wary of putting money into film. It’s a losing proposition for most people.

The question, then, is not how much money your movie should cost, but how much it can make.

See where this is going? You have two things you can find out right now:

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

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.
Stacked Gold Coins

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.

Leverage

Ever 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.
Man In The Rain

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 man

Let’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 it’s 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.

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 film

Analogous 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.

Your Audience

Now let’s look at real-world examples of how people have financed their films.

Before I get to it, though, I will make two distinctions and clarifications.

Difference between reach and influenceJust because you can reach a certain number of people doesn’t mean you can influence them. E.g., if Apple wanted each of their customers to pay $2.99 for nothing, they would get a less-than-%100 result. Even if they only targeted customers who have bought three or more Apple products in the last year, the result would still be less than a %100 response rate.

Nobody gets the whole pie. On the flip side, you can’t influence those whom you cannot reach.

The most popular way to solve this problem is to ignore it. A manufacturer will indeed send out messages to those it can reach, sometimes bifurcating the market (by demographics and profiling) to get better odds. It takes many years even for major corporations to better its odds. Even so, many factors ensure this knowledge doesn’t last forever.

A disruptive technology, competitor, economic policy, global financial situation, etc., will wipe out years of research and experience.

Thankfully, for film, the window of opportunity, and the sales cycle, is pretty small. Only highly successful movies that have enriched the lives of its viewers remain in public memory years after its release. Filmmakers use this as an excuse to not look too far ahead – getting the damn movie in front an audience is pain enough.

As a budding filmmaker looking to finance a film, try to understand the difference between whom you can reach and whom you can influence.

Difference between making the movie and distributing it

One way to finance a film is by getting close friends or family to contribute to your movie. It is definitely the easiest way to get started, simply because these are the people in your immediate reach.

However, these are not the people you should reach, because they are not your audience (unless you and your friends or family put together $5,000 for a short that only you will enjoy in your living rooms). When I talk about reach, I am talking about reaching your audience. As I mentioned earlier, those who control the direct link to the audience controls distribution.

Therefore, even if there’s nothing wrong with friends or family paying to fulfill your desire to make a movie, you should understand that it is intrinsically a flawed business model. Even Spielberg commented on how tough it is to get movies financed these days. Now, everyone knows that Spielberg has enough money to make whatever movies he wants, and he also has years of goodwill and friendships he can draw upon. What he cannot do, is control distribution.

Here’s my honest advice: Do not make a film until you can control its distribution, and ensure it returns its investment (whoever’s it might be). It is the height of stupidity to think in terms of ‘raising finance’ and ‘getting money’ for your movie, without knowing who will be seeing it and how. Do not let the middlemen control your destiny, or you’ll end up like Spielberg or Welles or Kurosawa – so much respect, but no direct link to their audience.

The traditional models of financing

Let’s start with the examples. First, we’ll breeze through the traditional models of financing a film (source: Wikipedia), which are still valid. If you have access to these avenues of funding, there is nothing wrong with taking advantage of them.

Government grants

These should definitely be utilized. It’s not easy to get your foot in the door and deal with bureaucracy, but you will be supporting the development of film in that region. Sometimes, governments grant financing or resources so you can show-off tourist destinations. You can see the catch, can’t you? There’s always a catch.

Tax incentives and shelters

These should also definitely be utilized. Why shouldn’t you take legitimate advantage of tax laws in your country or region? The catch is that you need good lawyers and accountants to do all the work, and there might be middlemen involved. You might lose a large chunk of your advantage to their bills.

Private equity and hedge funds

People put money into your movie, so they can get a tax-advantage. Or, people put money into your movie, because they believe in your movie. This second kind is nice to have, but as I’ve mentioned above, shouldn’t be utilized unless you have your distribution in place. They might fund you once, but rarely a second time. If you don’t want to build new relationships, that’s fine – just don’t go about destroying the ones that already exist.

Pre-sales or pickup deals

This is where you hop from one film market to another, selling your film territory by territory. In a pickup deal, you find financing for your film, make it, and then go begging to a studio or distribution god to buy your film outright. In the end, they’ll be known as the producers, and will own your movie.

Most ‘big budget’ low-budget indies ($1 to $40 million) aim for this pot of gold.

Product placements

Get a major brand to show their stuff in your movie, at a price. The catch is, unless you have stars or a distribution in place that will target their market, there is slim chance they will even return your calls.

What is more likely, though, is the barter system. E.g., you showcase XYZ Game Parlor, and they let you shoot there for free; or you need a sculpture-prop for a movie, and the artist allows you to use his/her’s artwork in exchange for some publicity. Barters happen at all levels, so you should definitely look for such opportunities, except for one caveat – never over-represent your movie or fill someone’s head with false promises. In fact, you might be better off by promising low (which is hardly anything) and delivering high (if you’re so lucky).

Here’s my take on these traditional methods:

I’ve tried most of them personally, and though I know of many instances where people use them everyday to fund and get their movies made, I will never recommend them. To become good at finding finance through these methods, you’ll need years of experience and lots of influence behind you. Do you really have that right now? If not, you’ll need to invest time and money into acquiring these ‘connections’.

Hey, why not spend that time and money in building relationships with your audience? Why waste your breath on the middlemen?Crowd-fundingI’m not going into details here, because there are endless articles on this. Crowd-funding isn’t the same game in every country. There are too many variables in law and land that make this an exercise in complexity.

Let me give you two examples of successful crowd-funded movies that I have personally seen happen from start to finish (one is completed and the sequel has been ‘funded’, the other is yet to begin).

Iron Sky

In the annals of crowd-funding history, Iron Sky will be known as the movie that did the impossible. Not only did they start from scratch, but they also managed to go way beyond the crowd-funding model, find distribution, release their movie worldwide, and find funding for pre-production of the sequel.

They have probably used every method of financing known to man. They have elevated crowd-funding to an art form.

Here’s their original teaser that shocked everyone (me too) in 2008:

And here’s the official theatrical trailer released in 2012:

Manchild

I do want to point out that it was 18 months of hard work that enabled my successful 38-day campaign. “Ten years to an overnight success,” as the saying goes.

Ryan Koo, nofilmschool.commanchildfilm.com

Ryan Koo has documented his success (raising $115,000) in these extremely inspiring and helpful articles:

He achieved his goals two years ago, but the movie hasn’t been made yet. Here’s an article on why he is taking it slow but steadily, and here’s a video Q&A with the man himself:

What’s common between these two methods? If you look at how much time it took them to build an audience prior to launching their campaigns, you’ll see that both of them took about 2 years.

So, it’s your call. Can you spend two or more years building your audience from scratch, with the ability to directly connect with them? No middlemen, just you and your fans – they influence you, and you influence them.

Building your own audience

The next way to build an audience is via Youtube, Vimeo, etc. Some are not as lucky or talented as Fede Alvarez, who went from this:

https://www.youtube.com/watch?v=dadPWhEhVk

To this:

These avenues might seem like great opportunities, and they are. They should be exploited for every last view. But –

These are middlemen too. It is relatively easy for Google or Vimeo to pull the plug on your video or channel without warning. Furthermore, you must commit to these channels and their ways of working. The worst part is, let me repeat one last time – you don’t have direct links to your audience. You think you do (because there’s a comment section at the end), but if your video gets pulled, it’s all over.

Look, I’m not putting any of these avenues down. What I’m saying is: try to control distribution as much as possible. You must play it safe and not depend entirely on one platform. Always assume the worst, and you will never be caught with your pants down.

The only people who really matter are your audience. Everything else is just an expedient necessity. Don’t give these middlemen anything more than what they are prepared to give you. Leave your best for your audience. Only they will appreciate your efforts.

The toughest way to finance a film

Ha! There’s one more way to finance a film, and that’s through earning your money by selling your skills to an employer or business (even your own). I worked hard for two years to earn the budget for The Impossible Murder, and when it failed, it was roughly around the time that Iron Sky became a success.

This taught me the one invaluable lesson I’ve been harping about in these three parts – build an audience, and the money will come – continually.

Don’t take this continual money for granted, though. I won’t go into that here, but I’ll leave you with this sobering quote:

Indeed, I am one of those born clever enough at gaining a fortune, but incapable of keeping one; for the qualities and energy which lead a man to accept the first, are often the very causes of his ruin in the latter case.

– from Barry Lyndon.

3 replies on “How to Finance a Film”

Hey Sareesh
I want to know if you still make movies and can you tell anything about future of indians as directors in Holywood .

Hi Sareesh,
Could you please add search in your website? 
And also would be great to have list of all articles, because now I can see only all most recent of it

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