What's In A Commitment?

So, you’ve put your heart and soul into getting your movie made. You’ve called in favours and run out of friends and family members to rope into your venture. Finally you’ve cracked it: after hundreds of mostly dead-end calls, meetings and follow-ups you’ve got the money. It’s not yet time to relax but closing on important investment capital is a great achievement.

You’ve got a commitment of the financing you need to make your movie, that’s great. However you’d better tie that commitment down and convert it to cash as fast as you can because things have an unfortunate habit of unravelling in the movie business. Nowhere is this more painful than when the money falls out.

We’ve all seen it: we’ve had promises, commitments, sure things, cheques in the mail and proof of funds that somehow didn’t quite make it to cash in the bank as promised. Investors have a habit of getting cold feet in any walk of life, but maybe more so in the movie business where the lure is so seductive but the financial reality can be stark. If there’s any part of the process where we all need to do our jobs like superstars it’s in absolutely securing the money we need to make our movies.

There are many ways of getting investors comfortable with the prospect of investing in your movies. It’s not always profitable but we all know that’s not why most investors come to the movie business in the first place. We actually heard a speaker at a conference last week say that you should let your potential investors know that indeed movies don’t make money but they’re a great way to write off tax liabilities! A bold suggestion and maybe a touch risky. Otherwise, there are lots of ways to get people comfortable enough to make the pledge and stick with it including the U.S. government’s Section 181 tax incentive, and structuring preferred repayment out of revenue, not “profit”. Finally, aligning your investor’s interests clearly with your project’s will ensure that he achieves his goal along with yours. This could be for him to become a recognized media investor, get close to celebrities, gain visibility for his other business interests or any number of things. You need to be very aware of what’s going to float the boat of every investor you’re approaching and try to help them get there. Once they can see they’re investing in something that benefits them in some way, regardless of pure financial performance of your movie, they’re likely to stick with you.

Here’s a few real-world few examples from our own experience of how things sometimes don’t quite hit the deck as planned:
- A $250,000 investment into our movie fund from a Middle Eastern investor was confirmed not only by his broker but his bank confirmed it had been “sent”. Sadly, and suspiciously, something went wrong and the funds never arrived.
- After multiple term sheets a European investor confirmed his offer of a significant investment into our company. Despite signed contracts the investor then hid behind the “I pushed as hard as I could but my committee wouldn’t approve my suggestion” ruse, maybe you’ve heard that one before.
- We had two separate letters confirming a $5 million investment for a movie production. Solid, written commitments helped us to put together significant project elements and were looking forward to getting the production rolling. However in both cases the investors melted away, one through business reasons and the other, we think, because he was a lying fraudster in the first place . . . All the more galling because the starlet we had lined up for her breakthrough role as our lead loved the script and is now a superstar.
- And, we’ve come across a whole bunch of big-talkers promising everything from movie investment money to business partnerships which didn’t happen. Sometimes there’s a hint of innocence about the over-promisers and bigger-uppers, but they generally fall into the category of people who put more effort into talking themselves up than they spend getting things done.

Undoubtedly, episodes like these will be no surprise to those of you going about financing your movies and perhaps the business does attract more than its fair share of people making big claims. So it’s even more important to try to qualify your potential investors, just as you would with anyone you’re getting into business with.

Simple values always hold true: is this a good deal; is this person an honest partner we can trust; and do we want to be in business with these people if things get tough? Of course it can be hard to tell and raising money is tough, and we all kiss a lot of frogs along the way.

So what’s in a commitment? – you’ll know as soon as the money hits the bank.

The Out Of Obscurity team.