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FILM FINANCING -- Interview with Anne Marie Gillen
If you're on the path to getting a movie off the ground, no one has to convince you that raising money is challenging. Particularly if you want a "real" budget and not $10K or $20K for a micro-budget "no name" movie. I recently sat down with Anne Marie Gillen to discuss the financing conundrum most Producers face.
Anne Marie is the CEO of Gillen Group, and former COO of Morgan Freeman's production company (Revelations Entertainment), where she led the company in strategic financing and distribution of their projects. She's also co-author of the 3rd Edition of Variety's The Producer's Business Handbook, and has produced such movies as "Fried Green Tomatoes" (nominated for 2 Academy Awards).
Jerome Courshon: What are the sources today for financing an independent film?
Anne Marie Gillen: Certain sources of film financing have remained fairly constant over the years:
1) From the foreign territories that would include presales and estimates or gap financing;
2) Depending on what country or state you film in, there are the tax incentives and rebates;
3) Donation-based Crowdfunding; and
4) Equity investors.
Additionally, what is new in the last couple years is the equity financing coming from the retailers, advertisers, and then now the investor-based Crowdfunding through the new JOBS Act. An example of retailer financing is the recent development of original content by companies such as Netflix and YouTube. Another trend is equity from advertisers, who want to organically integrate their product(s) into a film in a way they can control the specific use of their product. Product placement is just not good enough anymore. And finally, the Jumpstart Our Business Startups Act (JOBS Act) is aimed at increasing American job creation and economic growth by improving access to the public capital markets -- i.e., the 99% like you and me.
Typically, equity investment has been secured by indie filmmakers by utilizing a private placement memorandum which can only be sold to "Accredited Investors" -- people who have net worth of at least $1 Million (excluding their house), or have made $200,000 for the past two years. (A further definition can be found on the SEC website.) But this new law will allow indie filmmakers to sell to Non-Accredited Investors. It's a new development your readers should be aware of and be tracking.
Jerome: Given we've been in a somewhat anemic economy for the past few years post-recession, is this affecting investment today in film?
Anne Marie: I think the private equity investors are coming back to the table. In every filmmaking corner of the planet you will find fresh pockets of disposable income. Credit Suisse Research Institute stated that over the next five years, global household wealth will climb by almost 50% to reach an unfathomable $330 trillion. By 2017, they expect the number of millionaires worldwide to increase by another 18 million, for a total of 46 million millionaires.
However, I believe potential film investors are much more savvy these days. You need to have a strong business plan and recoupment model that mitigates as much of their risk as possible. Films get financed because the producer has a good "package" that is desirable first to equity investors, then to distributors/sales agents, and finally to the very important paying audience. Package not only refers to the obvious -- the actor(s) or director -- but also a great script, a marketable genre, a fair distribution agreement, a finance plan, a viable entertainment attorney.
Jerome: What do I really need for going after equity investors?
Anne Marie: There are two main documents you will need: a Business Plan and a Private Placement Memorandum (PPM) or offering. The Business Plan must clearly address what the project is all about (genre, budget, talent, production team, management team, etc.), the marketing, the distribution, the investment opportunity, and financial projections. The PPM is a full disclosure document that is typically more factual, pessimistic, and realistic than the Business Plan. It contains all the risks and liability of the project. And it must list all possible scenarios regarding how the project could go wrong.
Other materials I highly recommend preparing are a movie poster or one-sheet, trailer or proof-of-concept video, and/or a Look-Book. Film is a visual medium; pitches to investors as well as potential talent, distributors and sales agents should be with visual materials whenever possible.
Jerome: What are the most important factors equity investors look at, when investing in a film?
Anne Marie: Three things mainly:
1) Money In - Money Out
2) Why YOU
3) Why this Project
To be more explanatory, investors want to know how much money you will need, how it will be spent, how it will be protected. They must know how & when they can expect to get their money back, your reasoning behind why you expect it back, and the timing of the potential return. And finally, investors invest in people and ideas -- so you must clearly answer for them why you and why this project. What makes you uniquely qualified to make this film? What's your competitive edge?
Jerome: Why is distribution important before I make my film?
Anne Marie: Securing some form of distribution can be an extremely advantageous position for a number of reasons. First and foremost, knowing you have distribution means you have the possibility of getting your investors' money back to them. It is a huge risk-mitigating factor to be able to pitch to investors to get them to invest.
Second, if you have distribution, it means it's been vetted and deemed viable for the marketplace by an end buyer that's on the front lines selling to consumers. It's no longer just you -- the passionate filmmaker -- telling everyone that the audience will be there.
And finally, working with a distributor and/or sales agent in the packaging stage and before production commences, allows you their expertise and advice on such things as: a) who to cast that will bring in an audience; b) what to add or change to be sure you get the right rating (PG 13, R, etc.); c) what marketing materials to be sure you capture during production; and d) what film festivals to submit to plus assistance with the submission. They can be an extremely valuable team management member if utilized correctly.
Jerome: Where do I find equity investors?
Anne Marie: This of course is the Million Dollar Question. If it were easy, everyone would be successful. Let me just start with stating, no matter what stage in your career you are -- beginner or veteran -- we're all in the same boat with the same challenges. Even Steven Spielberg had trouble getting his film Lincoln financed and it almost ended up on HBO instead of in theaters. That said, let me give you some ideas.
First, start in your own backyard. By that I mean, most of us living in LA are not from LA. Go back to your original home state and city and look for the diamonds in your own backyard.
Second, call everyone you know and make a request; let them know what you are doing and ask if they know anyone who might be interested.
Third, include in every conversation that you are looking for money to make your film. Have a great succinct 2 lines ready about why your project. Be sure to ask everyone on your team -- advisors, consultants, attorney, CPA, and so forth.
Fourth, get a partner who has done it successfully already.
Fifth, if your project has a social issue such as bullying or the environment, or is faith-based or family-friendly, research which wealthy individuals support these causes or have invested in projects like this before. Then you need to get a direct connection to them.
Jerome: What about foreign pre-sales? How is this arena for raising money these days?
Anne Marie: Currently this is an extremely challenging financing source for the smaller indie filmmakers. You need the following to accomplish it: Great screenplay, and typically in a genre that sells easily like thrillers; marketable actors and director attached; viable foreign sales agent with strong relationships with the top foreign distributors; a bank to cash flow the value of the presale contract; a completion bond; and a collection account. Typically a bond is not available for film budgets of $2 Million or under, so micro and very low-budget films will not work with this financing model.
Jerome: How do you go about estimating the cost of talent when putting together a budget for your package? (Of course, we're talking about indie films and not budgeting for A-List salaries.)
Anne Marie: You can get talent costs by calling the agent and asking them for the actor's quote for indie films. You can also work with a casting director who will know this information, or can call producers who have worked with the actor in a recent project.
But I would not dismiss A-List talent if you're working with a low-budget film. If you think outside the box a little regarding casting, you often can get higher level talent than you thought possible. For example, I was executive producing a film with a strong Catholic theme. We researched actors that were Christian or Catholic and made submissions based on that connection. Another example is to cast outside of type. Many actors get typecast and would love the opportunity to play against type to expand their range and image in the marketplace.
Jerome: Anything else you'd like to add?
Anne Marie: I know in this interview I brought up concepts and terminology that may not be fully understood by all your readers... presales, gap, bond, collection account, etc. Being a successful producer requires you to be knowledgeable and equally balanced in three main areas: Fiduciary; Marketer; Visionary. I call this the "Balanced Producer" approach. The shortest window in the life of any film is the actual making of that film. It takes years to develop, years to finance and years to market and distribute. Equal attention and expertise must be paid to each stage of that film.
Anne Marie's contact info:
Gillen Group LLC
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