Friday, November 20, 2009
Creative Movie Money
It’s been an interesting week in the movie financing business. Mega-financier Ryan Kavanaugh has been all over the news this week with a profile in Esquire and blanket coverage in Variety following his Producer Of The Year award at the Hollywood Film Festival. For a guy with a chequered past and an unclear reputation still, he’s been incredibly successful and we are in awe of his ability to get deals done. He has blown Hollywood convention away by almost single-handedly creating the wave of investment into movies by hedge funds and banks via his Legendary Pictures and he has opened wide the discussion on film finance. He’s also helping to change the structure of movie funding deals by ensuring that key talent and directors share in the project’s revenues rather than take excessive up-front salaries. This is classic indie moviemaking and frankly it’s good business sense in a business not known for sensible financial structures. There’s obviously a mix of skill and delivery and Kavanaugh has got it.
We had a call today with a director and his partner who are putting together a business plan for a low-budget slate, aiming to have a stream of content ready within a year. It’s a noble venture and something that can be readily done now with digital technology and the new economics of movie-making, and the readiness of cast and crew to work more flexibly than ever before. And, with advance marketing – even designing Internet slots before the movies are shot – to build up audience awareness from ground level, they believe they can create a viable and lucrative business. Forecasts say there will be a shortage of movie content within the next year, a direct effect of the drastic cutback in production during the past couple of years, and so they’re hoping to be ready with a pipeline of projects to work with by then. It’s a neat plan and our next challenge will be to find the $20 million required, so we’re now putting on our thinking caps.
Another director friend we’re working with to finance a small slate passed on an amusing comment he’d received from a funding source he’d been talking to. After several months of discussion the broker finally came to the table to say that his investor was now ready to look seriously at financing the movie slate. Great news – except that the first investor would require a $25k fee for him to visit our guy and carry out due diligence on his projects. “Don’t worry”, said the broker, “the guy has already financed a couple of property deals we’re doing and it’s a good sign that he’s interested in your project”. It’s pretty certain that you’ve heard this one before, haven’t we all, but the number one rule in raising money is never to pay anyone in advance for doing it. In any field of business if fundraisers can perform they will, but they rarely do once they’ve been paid and of course most fees of this sort are scams. It’s tough to find them but it’s important to work with trustworthy partners and if they can raise money for your ventures then they’ll share in the rewards. Of course we all consider every possible option on the way to getting movies made but some are just not worth the headache.
The Out Of Obscurity team