Shifting Sands

Movie Beach has been a little more erratic than we intended this last week as we’ve been in and out at the AFM meeting some old friends and new, and catching up on changing trends in the business. We’re aiming to update every other day or so, so stick with us as we get into the groove.

Following on from our last post, a couple of friends this week echoed our sentiments about adjusting the focus back towards making movies and less on the slog of raising money. One friend, who recently placed highly in a prestigious national screenwriting competition, is craving the time to devote to his next work but he’s been distracted by his day job of consulting on projects for other producers. Helping to raise debt finance for other movies pays the bills to some degree but it doesn’t satisfy the creative urge. Another producer friend, tired of constantly adjusting the business plans on his projects, is currently seeking better structures for his equity investors who have been shifted further down the totem pole by debt financing. Better ways to get to the sharp end of making movies are on everyone’s mind this season.

There’s a lot of talk around the AFM this week about the changing film financing equation. In general producers are revising budgets down and not just because of the state of the economy, but because advances in technology and self-distribution are driving rapid changes in the formula. So, the concept of doing more for less really is a buzz out there and it doesn’t necessarily mean lowering quality standards. A director who spent most of the last five years trying to raise $3.5 million for one low-budget feature is now aiming to raise $1 million for a slate of four high-quality digital movies, including a little P&A spend on each feature. The economics of digital shooting mean he can put quality content on the screen at vastly lower cost than before, and he’s pretty sure he has an investor who will stump up the first $100k to kick things off. And, recent innovations in distribution strategies mean that niche audiences can be found to replace the dwindling pre-sales market and still make decent profits for producers and investors alike. It really is a whole new landscape.

Film financing changes but some things stay the same . . . While waiting on a friend today at the Lowes we overheard a conversation from another table, where a sharp-talking money man was pitching his financing package to two attentive, patient producers. They smiled and nodded as he explained how his bank would issue a Standby Letter of Credit (SBLC), then a guarantee on a loan to their production company backed by the SBLC, with which they would make their two movies. He explained to them that, after they pony up the fees to set the ball rolling, they would have the use of the SBLC for a whole year and could repeat the sweet deal themselves to generate another guarantee. The too-good-to-be-true moment came when he told them that, since the SBLC lapsed after a year and was covered by the guarantee anyway, they wouldn’t have to repay the loan. You can see how this tale unfolds from here: the mark pays up the money, the bank then unfortunately has some "difficulties" issuing the SBLC, the guarantee never arrives, the movies don't get made and the producers are left feeling like idiots and short of a few hundred k. And it all sounded so easy . . . It’s a great trick which we’ve all seen played out just so far, but we have a feeling the guy didn’t go home with a deal.

The Out Of Obscurity team