Learn the Art of Filmmaking – Basics of Film Financing
Funding tips every Filmmaker needs to know
A film’s budget directly corresponds to the choices made throughout its lifecycle and impacts the script and the idea in many ways. Film Financing plays a dominant role in the filmmaking process and occurs during the development stage prior to pre-production, to determine the potential value of a proposed film. It involves an amalgamation of various factors such as investors, banks, tax credits, and loans.
Let’s get into the details to help you understand the film financing process and the different ways Moviemakers seek investments for their projects:
What is Budget?
A film’s budget is the estimated cost of every element that goes into making the film, right from the cost of the creative talent and direct production costs, to post-production and other miscellaneous costs such as legal and insurance. Film Budgeting refers to the process by which a Line Producer allocates a sum of money towards the various stages of moviemaking process, excluding any marketing and promotional costs. Estimating the amount of funds required in each element of the film is not only important, but is also an art.
Types of Films based on the budget:
No Budget films are films that require no or a small amount of money. Short films that are often created by filmmakers at the beginning of their career to showcase their talent and build a portfolio fall under this category. Besides submitting the project to film festivals to gain acclaim and attention, many filmmakers are making use of online video sharing platforms such as YouTube and Vimeo to market their home productions to a world-wide audience.
Low Budget Feature films are usually produced by filmmakers seeking a learning experience to gain credits and step into the Entertainment Industry. Low Budget films only feature below the line budget, that is the direct production costs that goes into the making of the movie. The crew collaborates as a gesture of goodwill, and the filmmaker usually takes on multiple roles. These are often screened at film festivals but OTT platforms such as Netflix and Hotstar have changed the game for independent filmmakers and low budget cinema.
Medium Budget films attract commercial distribution, but are made at low production costs and exclude A-listed talents. These movies are funded, but their budgets are not as high as Studio Productions, and content is at their core. Prakash Jha produced Lipstick Under My Burkha, a ‘lady oriented’ bold film at a small budget of INR 8 crore, yet its strong content helped it gain fame and win multiple nominations and awards.
High Budget movies are the big players of the industry. These are usually funded by Studios to support the high production and post-production costs, location and travel expenses, elaborate sets, costumes, breathtaking visuals, latest technology and high-end equipment, high marketing and promotion costs, and the A-Listed talents associated with the project.
What came first…
Chicken, or the egg?
The budget, or the story?
Filmmakers that produce the story written by themselves should keep in mind the budget while writing the script. Besides giving you a better understanding of what can be produced within the estimated budget, the budget coupled along with the script provides a clearer picture to the Investors on where their money will go.
However, the quality of content is independent of the budget for any film. For example, Tumbbad, a movie made on a mere budget of INR 60 to 80 million portrayed stunning visuals and garnered appreciation from a global audience.
Filmmakers must allow budget constraints to fuel their imagination. Many high budget films have failed, and many of the biggest hits were made on a low or medium, if not a shoestring budget.
Importance of a Marketing Strategy
Every successful film is backed by an efficient marketing strategy. A marketing strategy is part of a Filmmaker’s business plan, which acts as a blueprint for investors to help them evaluate returns on investment in the film.
Different ways to secure Financing for a Film’s Business Plan
The Studio Model involves pitching three to five films of a similar genre together. These films are pitched along with research on previous successful films from a similar genre. When one of these films turns out to be successful, the investor feels confident about the other film projects on the similar slate. The best approach is to pitch a series of films as it is always more lucrative for an investor in terms of return on investment. Golmaal series is a successful example of the Studio Model. The franchise is due for its fifth installment and is now the sixth-highest-grossing film series in Bollywood.
Attractive tax and investment incentives offered by Individual State and Country Legislation enable Producers to subsidize spent cost for their production. Other production incentives offered range from tax credits, cash rebates, and refunds to free location scouting and other assistance. Many countries around the world provide subsidy in form of cash or in kind in order to promote its own culture by showcasing location or facilities. European countries have 90% films being produced from Government or public funds whereas countries like USA and India have 90% of the films produced from private funding. Government funding depends majorly on the nature of the film, where documentary films get preference over others. Gandhi, a documentary by Richard Attenborough, was one such documentary that was funded by National Film Development Corporation of India.
Films that are funded by a single investor, a group of investors, or through personal investment, fall under the equity investment category and entitle the investor to own stakes in the project. In addition to the principle amount, they also get paid a fixed percentage on profits. Majority of Indian Film Industry follows this model.
The contracts made in the funding stage with the distributor are known as Pre-Sales agreements. The Distributors predict the value of the film on the basis on the script content, talent associated, crew, marketing strategy, etc. The Filmmaker’s contract with the distributor can also act as a collateral to draw out loans from the bank. The risk involved with the project is reduced as the film is sold to the distributors and helps raise funds from financiers in advance.
The strategy here is to collaborate with producers in other countries to secure soft public money in other territories. The soft money advantage in co-production is otherwise not accessible to a film’s production. However, co-production comes with its own drawback; that is involvement of financial partners all across the globe and in various territories with access to the creative process as well as a share in the revenues generated by the film. Lunchbox, a joint production between seven Production Houses from all over the world, is one of the most renowned Indian films and a perfect example of an International Co-production.
Teaming up with brands to benefit the film, either in cash or kind, is a popular method towards reducing the total cost of the film. Brands collaborate with Filmmakers to get exposure and reach out to the audiences of the film. When the product placement helps the narrative of the movie, it is usually a success with the audience. Product Placement is a win-win situation for the Brand as well as the Filmmaker. Here, the Brand Managers evaluate the marketing strategy of the film before investing in the film so it is pivotal towards ensuring you have a strong one. For instance, BMW’s collaboration with Yash Raj Films for product placements in Dhoom 3, an action movie, where the antagonist was spotted pulling off heists on BMW superbikes.
Filmmakers can raise funds for their film project from people without promising to pay them any share of the profits through Crowd Funding. The strategy here is to entice the backers into contributing by gratifying them with a reward, ranging from offering official merchandise, to sharing dinner with the film’s lead cast, and in some cases, even a Co-Producer credit. Crowd sourcing helps build a community that resonates with your story. A successful approach to crowd funding is backing it up with an excellent business plan. One example of a successful crowd funded movie is Bhasmasur, a concept-based film on plight of farmers. This movie, which was produced and directed by Whistling Woods International Alumni, raised INR 5 lakhs on a crowd funding portal to cover post-production costs.
In the Deferrals model, the crew, cast, vendors, locations, and services are all rendered up front at no cost until the ﬁlm generates money upon release, and payments are made out of profits only. In return, a share of the profit is offered to everyone, where the fee depends on the success of the film. It is possible for a Producer to avoid all costs on a project, depending on his capabilities to negotiate a deferred deal. However, this is not the most sought-after method of financing, as it is difficult to get experienced cast and crew to work under a structure as such.
Filmmakers who adopt the self-financing model do not have to deal with investors. Self-financing refers to producing a movie using the Filmmaker’s own resources and finances. With low costs of production and unconventional distribution methods available in the new digital landscape, self-financing is feasible but comes with high risks. Tangerine, a feature film self-financed by Sean Baker was shot entirely on 2 iPhones was reviewed by critics as one the best films of 2015.
Many first time and experienced filmmakers use a combination of the above financing options to bring a film to completion.
Expand your knowledge of the filmmaking world by delving deeper into the various strategies moviemakers adopt for funding films and making it big through our online filmmaking course – Advanced Certificate Program in Filmmaking.