So where were we? We were last talking about Film Financing w/ a Deposit (an unsavory practice) and I was sharing a few experiences I’ve witnessed in the community with regards to that.
But something else has come on to my radar lately that I wanted to share with you…
I’ve had several conversations with filmmakers whereby they are in discussions with potential equity financiers, and the finances find out that they’ve prematurely made deals with cast and crew members for fees and back end that leave the project so encumbered that the equity financiers have no choice but to walk away.
I wish I could say I’ve only seen this happen once or twice but that would be grossly underestimating.. From the financiers perspective, think about it – they are being asked to put up all the money but most of the film’s ownership is already spoken for before it even gets to them, so there’s no upside left for them to participate in.
And the fees! Unknowingly and in desperate moments filmmakers will contract with writers and actors and crew for certain fees to be paid out of the budget once it’s raised. Only to find out later the budget has to be cut in half in order to get financed. And they are stuck with these existing contracts that they can no longer afford to honor. It’s a big problem.
Don’t be lured by sales projections….
I had a client say to me – yeah, but I looked at the projections from a sales agent and I’m thinking I can get a $1 million buyout because that’s the high end total. (I cringed). Their plan was to be paid that by a distributor and therefore honor all the agreements made and pay investors back.
First of al, never ever rely on the high end total of sales estimates, and that’s even assuming the sales agent that provided them are being honest and conservative.
Take the low end total, cut it in half (because you probably won’t sell every territory), deduct commissions and expenses and now you’re getting closer to real revenue recoupment.
One of the first things I do when I start working with a new client is to go through all the existing commitments and expectations and start from scratch building a strategy. Because chances are there’s some re-jigging that
has to be done in order to make the project even viable for investors and partners.
> What are your thoughts on this? Let’s continue the conversation in the comments section below…