ore than almost any other artistic medium, filmmaking depends on money. And the more expansive a filmmaker’s vision for a movie is, the more money they’ll need. Very few filmmakers get into the movie business because they’re interested in dealing with money, but often an effective filmmaker is good at film financing. So what is film financing, and how can you get money behind your next movie?
Watch: Development and Financing in Film Explained
Subscribe for more filmmaking videos like this.
The history of film finance
Money for movies has fluctuated and adapted as the entertainment industry has evolved. But from the beginning, many filmmakers have been thinking about financing.
Early Cinema Financing
In fact, some of the first filmmakers were entrepreneurs. Keen businessman Thomas Edison invented one of the first motion picture cameras, and quickly translated it into a lucrative company called Edison Studios.
The Lumière Brothers, meanwhile, quickly commercialized their short films by traveling around the world and showing them to paying customers.
In this system, the actual filmmaker didn’t concern themselves as much with the financing of their films – the studios had that covered largely through their relationships with East Coast banks. The catch, however, was that creatives had very little control over their films.
This all changed with the Paramount Decree, which slammed the major studios with antitrust laws. In the studios’ ruins rose a new financing process which continues to this day: the package-unit system.
Now, power shifted from execs (though, as we see today, they still have a lot of power) to producers. Producers would put together packages of material and creatives. This may begin with a spec script (the writer wrote it without any guarantees of getting paid), a piece of intellectual property, or something as simple as an idea. The quality of a package is vital to a movie’s financing.
So let’s look at it a little closer.
FINANCING A FILM
Building a package
How does one quantify the quality of a package? The short answer: it depends. Beauty is in the eye of the beholder, and this adage applies to the success of a package. But one thing remains consistent – somehow, some way, a package needs to signal to a potential financiers that they will make their money back.
Here's a full-length interview we did with producer Alex Saks. She lays out a lot of information about the packaging process, what financiers are looking for, as well as the various types of financing.
Let’s look at all the elements that can go into a package.
A script is a great place to start with a package. This will give an investor the best sense of what their money will be going toward. The only catch for a producer is that a script requires time and, typically, money.
To save cash, a producer may option a script rather than buying it. This means that they pay a lower fee to maintain the exclusive rights to buy the script within a given period of time.This is all well and good, but where might a producer find a script? Again, it depends. A writer’s reps may send their script along to the producer. Or a producer may scout out projects that have won awards or garnered attention via some of the top fellowships or appearing on the Black List.
In recent years, intellectual property has become arguably the hottest commodity in a package. It’s not hard to see why.
For investors, what’s better proof that a film will do well than seeing that its subject matter is already beloved?
IP is everywhere. It can be a book, a magazine article, a comic strip, another movie, a toy, a news blurb… the options are endless.
Obtaining the rights to a piece of IP is complicated, and often involves lawyers. A producer will choose to obtain exclusive or non-exclusive rights, establishing whether or not others can own the rights as well. They will also decide how long they want to have the rights, whether in perpetuity or for just a few years. Optioning a property is another cheaper alternative as well.
A lot of this decision-making process simply depends on the depth of a producer’s pocketbook.
What’s another great way to convince an investor they’ll get their money back? Get a recognizable actor involved.A big star can quickly increase the budget of a project exponentially. A great spy movie might make money. A great spy movie starring Tom Cruise will make money.
Of course, a movie with a big actor may not always be a financial success, but a big actor draws big money in the financing stages. That’s why they make the big bucks.
It should be noted that for a while, stars dominated the packaging process, so much so that for a period of time it was referred to as a star system. But that era has waned. Stars are crucial to funding, but some of their importance has been eclipsed by IP.
A DirectorGetting a big director on a project will also help the financing process. Steven Spielberg, for example, is not usually having to beg for a couple million for his next project.
Of course, not all directors have the name recognition that Speilberg does (come to think of it, none of them do). In that case, a director’s track record can become a selling point.
For example, Jon Favreau may not be a household name, but his consistent filmography and status as one of the highest-grossing directors ever will give investors faith that his next project will make money.
With all these elements in place, it’s finally time to actually get the film financing you need. This process looks very different depending on the nature of the project. Let’s start with big studio pictures.
One might assume that blockbusters from large studios are easier to finance, since it stands to reason that these movies will make more money in the box office. But studio financing is often as complex as indie financing, comprising multiple sources and strategies. Let’s go through a few.
As their name indicates, pre-sales refers to a studio selling the rights to distributors before a film is completed. For a studio to get a significant amount of money out of pre-sales, their product needs to be very bankable.
In other words, a distributor is less likely to buy rights to an indie dramedy sight-unseen than they are to buy rights to an action movie starring Chris Helmsworth and Zendaya. In the latter case, the distributor is all but guaranteed to make their money back. An indie movie? Not so much.
Pre-sales don’t just refer to theatrical releases. A studio can also sell rights to streaming platforms, giving a company like Hulu the right to stream their film in a given territory.
Gap financing is similar to pre-sales, but with a key difference. Here, a studio takes out a loan based on the anticipated sales to distributors. In this case, the studio doesn’t have to rely on a distributor’s perception of their film’s worth.
But gap financing can be risky. Overestimate a film’s value, and a studio can end up in the red. It’s hard to predict just how hot a commodity your film will be, especially when it’s yet to be finished.
A negative pickup is funding that happens before a studio gets its hands on a film. Here, an independent producer will sign a deal with a movie studio that guarantees the studio will pay a fixed amount for a movie upon its completion.
This means that the independent producer is in charge of financing the movie to get it made, but this process will be much easier, since investors now know they will get their money back.
Often, a producer will simply get the amount outlined by the studio from a bank. The bank is likely to agree to the loan because it’s so low-risk.
For more on negative pickups, check out this video:
This type of deal can create stress on set however, because if the film goes over budget, it might come out of the producer’s pocket. Then no one’s having fun.
Bridge financing is a means to an end. This is where a lender gives a producer a short-term loan in order to secure an expensive attachment, like a big-name actor or director.
The assumption here is that this money will act as a bridge to more money. Once a big actor is involved, for example, more investors will be attracted.
Having trouble getting funding for one movie? Why not try to fund multiple movies at once? This is called slate financing.
It might sound counterintuitive, but slate financing can actually be a safer bet for investors. More movies = more potential blockbusters. The idea here is that even if a few projects in a slate are duds, they will be offset by much larger successes on the same slate.
Or you can take the opposite approach. A studio may work with another studio (or studios) to fund a single project, divvying up the rights.
We’ve all heard of this one. A movie can make a lot of money off of product placement. Like millions-and-millions-of-dollars a lot.
But there’s a catch with most product placement deals. Usually, the brand won’t pay for the placement until after the project is shot.
Of course, the other catch is that obvious product placement can take an audience out of a movie.
A subset of product placement is the military-entertainment complex. Ever notice how a lot of Hollywood movies feature positive portrayals of the American military?
That’s not just good old-fashioned love of country (well, sometimes it is): some studios will work closely with the US military, portraying it in a flattering light while getting props, locations, or even financial benefits in return.
A lot of these financing strategies are employed on a smaller scale for indie productions. But there are also even scrappier strategies that can be used for a relatively low-budget movie.
HOW TO GET FUNDING FOR A MOVIE
Where does one get money for an independent film? Ask most indie producers, and the answer is remarkably uniform: anywhere that will give you money.
Getting together a budget for an indie project isn’t always pretty, Frankenstein-ing a bunch of different sources together to eventually reach a sum that can get the cameras rolling.
In other words, indie financing means thinking outside the box, getting creative, and begging rich distant relatives. Famed indie filmmaker Spike Lee discusses the process:
Let’s look at a few of the more common funding options in the indie space. Before we start, it’s worth noting that a lot of these strategies are also used by studios. Hey, money’s money.
Most producers will tell you that the ideal situation for indie financing is finding one big financial backer who will bankroll the movie. Ideal, yes. Hard to find, also yes. So some filmmakers take the opposite approach – getting small donations from a ton of people.
This is referred to as crowdfunding, and there are a bunch of websites that make the process easier, like Kickstarter or Indiegogo. This approach became especially popular in the early 2010s with the advent of these sites, and it still is used by many creators today.
For more, read some Kickstarter success stories.
The one issue: it’s hard to get a ton of money from solely crowdfunding. As such, it’s great for a short film, but exceedingly difficult for a feature, unless you’re content with a true microbudget.
Grants are no-strings-attached packages of cash gifted by governments or nonprofits. A filmmaker with a unique point-of-view and distinct message can find a lot of success with grants.
Of course, no-strings-attached money is appealing to a lot of people, so typically big grants have huge applicant pools. For some tips on how to get a leg up, check out this video:
Attention from top film festivals is great for any and all films. If a movie is decorated in awards, potential investors will be more likely to hop on board, since respected sources have affirmed it is a project of artistic merit.
Festivals are also a great place for networking with potential financiers. No matter your approach to financing, you’ll likely be screening your project at film festivals.
In a similar vein, the American Film Market can be another great place for filmmakers to get connected with investors. At the yearly event, producers can give presentations for their films, which may be in various stages of completion. Often, films are completed and simply seeking distribution.
Private Equity Firms
No, private equity firms don’t just buy your favorite publications and gut them. They can also fund movies! A private equity firm is a company which manages pooled investments. As such, they have a lot of money, and they just might use a bit of it to finance your next film.
The upside for them is that the return on an indie film which hits it big can be huge. The downside is that this isn’t always the case, so it’s a bit of a risky investment.
Think of a bond company as a sort of guarantor for investors – an insurance company that helps other financiers feel more at ease putting their money into your project.
Typically, these companies will create a completion bond, outlining the film’s completion date and budget. If the film isn’t finished in time, the bond company will be given the rights of the project.
All of the options we’ve mentioned so far bear some sort of risk. Self-financing is the most risky for the filmmaker. Mumblecore icon Mark Duplass explains how it became a last resort in order to achieve full creative freedom:
It is what it sounds like: a filmmaker will back their project with their own money. Usually, this is a terrible idea. As we’ve mentioned, indie movies are not good investments (in a strictly financial sense). In this case, if your film doesn’t make back its money, you’re on the hook for it.There are a few famous success stories for this method, of course. M. Night Shyamalan has bankrolled his past few films, and has made money every time. But it should be noted: Shyamalan is a big name director who has time-tested ties with production companies and distributors. He’s going out on a limb, yes, but not to the extent a first-time filmmaker would be.
If you’re self financing, you’re probably also utilizing our next option…
If a filmmaker needs to shrink their budget, they may opt for a deferred compensation deal. This means forgoing some, or all, of their salary in return for backend points.
This isn’t limited to just directors – a star who is passionate about a less-commercial project may take this route as well.
Take a look at the tax breaks in Georgia.
Getting funding for a movie is hard – there’s no two ways about it. But it’s not impossible. With a smart and hungry producing team and little creativity, a promising movie idea can amass the pile of cash it needs to become more than just a twinkle in a filmmaker’s eye.
How to become a producer
Does sniffing out talent and money sound like your life calling? Then producing may just be for you. Becoming a producer doesn’t happen overnight, however; check out our article that outlines the steps you can take to get to the position.