When it comes to film funding, it is a lot harder to finance your film from jail!

Nov. 9, 2007, 7:17AM

Film producer arrested in Los Angeles in suspected movie-financing scam

From the Associated Press

LOS ANGELES — A film producer has been arrested on suspicion of using bogus contracts with foreign distributors to help secure more than $35 million in loans to finance movies, federal authorities said Thursday.

Gary Howsam, 56, was taken into custody Monday at Los Angeles International Airport on a criminal complaint accusing him of bank fraud, FBI spokeswoman Laura Eimiller said.

He was released on $500,000 bond and placed under house arrest with an electric monitoring at a friend’s residence in Los Angeles. If convicted, he could face as many as 30 years in federal prison.

There is more to this story on Film Funding at the Sacramento Bee

Looking for innovative ideas to fund your next project? Check out two interesting film funding ideas:

Buy a character

and

Movie ticket pre-sales

For more ideas, also take a look at Carole Dean’s new book The Art of Film Funding:

The terms Gap Financing and SuperGap financing have been getting a lot of play lately. As these concepts are sometimes hard to succinctly define, I was impressed by this pithy description from the Wikipedia:

Gap/SuperGap Financing

 

In motion pictures, Gap/Supergap financing is a form of mezzanine debt financing where the producer wishes to complete their film finance package by procuring a loan that is secured against the film’s unsold territories and rights. Most gap financiers will only lend against the value of unsold foreign (non North American) rights, as domestic (North American: USA & Canadian) rights are seen as a “performance” risk, as opposed to more quantifiable risk that is the foreign market. In short, this means that the foreign value of a film can be ascertained by a Foreign Sales Company/Agent by evaluating the blended value of the quality of the script, its genre, cast, director, producer, as well as whether it has theatrical distribution in the US from a major film studio; all of this is taken into consideration and applied against the historical and current market tastes, trends, and needs of each foreign territory of country. Surprisingly, this is fairly predictable to a certain degree of certainty. Domestic distribution, on the other hand, is very unpredictable and far from ever a sure thing (e.g. just because a film has a big budget and a commercial genre and cast, it could still be unwatchable and thus never receive a theatrical or television release in the US, thus being relegated to being a big budget, direct-to-video film.) So, in as much as there can ever be any certainty in the entertainment business, lending against foreign value estimates is almost always going to be a much better bet than banking on domestic success (comedies and urban films being two notable exceptions: they’re referred to a “domestic pieces” or “domestic plays”.)

 

True to its mezzanine nature, in the pecking order of recoupment of investment, generally, gap (or supergap) loans are subordinate to (recoup after) the senior/bank production loan, but in turn, the gap/supergap loan will be senior to (recoup before) equity financiers.

A gap loan becomes a supergap loan when it extends beyond 10-15% of 100% of the production loan required to shoot the film (or in other words, when the percentage of the gap required to complete the film’s financing package becomes greater than a bank is willing to bear, which is traditionally 10-15%, but can sometime be a flat dollar threshold like USD$1,000,000.)

Gap/Supergap lending is a very risky form of capital investment and accordingly the fees and interest charged reflect that level of risk. But at the same time it’s not unlike buying a house: nobody pays 100% of the purchase price with cash; they pay about 20% in cash and borrow the rest. Supergap financing works by the same principal: put down 20-30% cash/equity and borrow the rest.

Over the years, because of the high risk nature, many supergap companies have come and gone, but a few established players have survived the ups and downs of the markets: Screen Capital International is arguably the gold standard in the industry, with Grosvenor Park, Blue Rider, Newmarket Capital, and 120db also being significant “players” in the debt financing space.

[All text is available under the terms of the GNU Free Documentation License. (See Copyrights for details.) ]

You can also find some useful reference books at the Writer’s Store: film funding

Australian films are getting a boost of financial support. Already rising in prominence in the United States, Australian filmmakers are poised to take advantage of a new film funding plan that provides the Australian film industry with an additional $283 million dollars to pursue its cinematic ventures.

In addition, the government there will soon introduce a 40% tax rebate to encourage the production of Australian feature films, and a similar tax rebate of 20% for television productions. In addition, the location rebate for foreigners interested in filming in Australia will increase to 15%, thus boosting incentive for producers to fund large-budget overseas projects.

Essentially, the Australian film industry is getting a facelift. In addition to the previously mentioned financial support, the government package also includes the installation of the Australian Screen Authority to replace the previous film funding review groups: Australian Film Commission, Film Finance Corporation and Film Australia.

Through this arts package, the government hopes that this step forward will aid in not only improving the Australian film industry but also contribute to economic and cultural growth.

Get more information from MSN News:
http://news.ninemsn.com.au/article.aspx?id=265777&rss=yes

Contributed by Christina Chen,
UC Berkeley student

Moving Pictures Magazine published a useful step-by-step overview covering how to sell your project at the AFM. The article summarizes the kind of coaching Sharp Angle provides to its clients. Here is the quick overview:

• “Identify the elements that constitute your package and be able to pitch it in a brief period of time.”
• “Of the 400 companies at the AFM, it’s unlikely that any film would suit any more than 25 or 30. Put together your list.”
• Utilize the screenings, pitch sessions, locations expo, and other resources
• With your research complete, buy a half-market badge and start making the rounds

Take a look at the full article for additional details. Moving Pictures Magazine

Visit ifta-online for more information on the American Film Market.

The 2007 AFM takes place October 31 - November 7, 2007.

Sebastian Michael’s film, “the study of bunkers & mounds in a temperate climate (relatively speaking),” pioneered an inventive new way of film funding. Cleverly named, “fund a frame”, this new approach to film financing paved its way to success by basically selling single frames of the film. On its main website, people are invited to fund a single frame, thus making this film “the first ever frame-by-frame funded film”.

The idea is pure ingenuity as it mimics the cool factor of the business of selling land on the moon. The filmmakers send out an email that describes the donor’s funded frame as “handpicked for you” along with the actual image of the frame as a high-resolution (HD) jpeg file with your name and the time code printed on it.

In additional, to add a more Hollywood-like collector’s item flavor to the donation, the frame can also be printed on high quality photographic paper, autographed and framed in a black wooden frame. As an additional incentive to get the program running, when funding for the film began, it was even possible for donors to get their names on the credits.

Check out the film’s website for more information:
http://www.optimistcreations.com/bunkersandmounds/fundaframe/bnm-fundaframe.html

Contributed by Christina Chen,
UC Berkeley student

First in a series of posts that will discuss the extensive process of putting together a grant application.

Part I:
Essentially, the only way to fund a short film from an American independent filmmaker�s perspective is either through grant money or your money.

The key to funding a short film is planning. Poor planning can break the project before it has even begun, while decisive and smart planning can jumpstart it. Therefore when applying for a grant, the application has two key parts: the script and the budget.

Ensure that the script is compelling and that the budget is error-proof and airtight. If anything is questionable at all in the budget, make sure to disclose an appropriate note.

In addition to the script and budget, other items to support your grant application include synopsis, style breakdown, biography and casting information. These topics will be covered in a subsequent post on the Film Funding Blog.

Contributed by Christina Chen,
UC Berkeley student

Photo by Mahalie

The film Dark Floors is a horror film being produced by Lordi, Finnish rockers that won the 2006 Eurovision Song Contest. The film is not only being shot in Finland, but also contains a cast that is largely Finnish. The government there has contributed 300,000 euros (over $400,000) towards the overall production cost of 4.2 million euros (over $5.6 million).

This contribution is more than a symbolic gesture, it shows the government’s intent to support local film ventures in Finland. The recent buzz on the film at the Cannes Film Festival only adds to the potential success of the project and growth of the Finnish film industry. Now only if the U.S. government was willing to do the same here!

Get the full story from the BBC
http://news.bbc.co.uk/1/hi/entertainment/6718257.stm

Contributed by Christina Chen,
UC Berkeley student

As reported in The Independent:

City financiers have begun a European film-funding drive in an attempt to imitate Hollywood’s global blockbuster machine.

…

Early next month Stewart Till, the current chairman of the UK Film Council and former head of United International Pictures and PolyGram Filmed Entertainment, will hold talks with bankers from Dresdner Kleinwort. They will discuss the formation of a £100m investment fund, which he would lead, to back the distribution and marketing of UK and European films.

…

“This is not about transplanting the US model. There should be a balance between these culturally significant movies and those that can be globally appealing. We need to be able to match those ideas with the appropriate financing.”

As this press release from 99 Ways Entertainment demonstrates, you have to think creatively if you want to raise film financing.

To get its own stories distributed 99 Ways has brought together a dynamic mix of music and film stars together with creative financing by NBA players, doing an end run around the traditional channel of seeking pick up by a separate film distribution company. Its first feature-length docudrama, Gangstresses, starring singers Mary J. Blige and Lil’ Kim, was produced for $25,000. Released straight-to-video, it spent 12 weeks on Billboard’s Top 40 Video Sales, earning revenues in excess of $1 million and garnering the Independent Film Project (IFP) Best Directorial Debut award for Davis. Six years later the film, which was also featured in pop culture venues such as BET, The Source and Interview Magazine, is still selling in the U.S. and internationally.

http://biz.yahoo.com/prnews/070206/nytu064.html?.v=75