Category Archives: Funding

Theatrical release becoming a loss-leader

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Today’s post is a mashup of two recent articles that got me thinking.

First, Poppy Reid reports in Australia’s The Industry Observer that Chance the Rapper earned $33M without selling a single record this year.

That places him fifth on Forbes‘ highest-paid hip hop artists list.

Not only is all his music free, but he has yet to sign a record label deal.

As quoted in Vanity Fair, Chance claims:

“My plan was to sign with a label and figure out my music from there. But after meeting with the three major labels, I realized my strength was being able to offer my best work to people without any limit on it…. I make money from touring and selling merchandise, and I honestly believe if you put effort into something and you execute properly, you don’t necessarily have to go through the traditional ways.”

Poppy concludes with:

“It should be noted that all the top earners used hip hop as a stepping stone toward their respective successful business ventures. In fact, Diddy [number one on the list with earnings of $130 million] hasn’t released any new music in the past year. He did however, sell a portion of his Sean Jean clothing company for US$70 million.”

Second, Tatiana Siegel reports in The Hollywood Reporter on Indie Film’s Financial Paradox: More Backers But Less Box Office.

She starts by singling out the weekend of September 22, 2017, when 15 mostly independent films competed against each other at the box office, resulting in no run-away winners.

She then contrasts that with, “Despite the box-office challenges, there is no shortage of funds being poured into indie films” and cites a $50 million epic.

She adds that $30 million in P&A is required to successfully break an indie film; $20 million is not enough.

She concludes:

“Many distributors continue to buy, not because it’s financially lucrative but because it feeds another side of their business or their parent company’s overall strategy. Releasing movies has become something of a side hustle. Many other distributors are really in the VOD or streaming business or have bigger interests that overshadow how their individual films fare at the box office.”

One moment please.

Releasing movies (let’s exclude blockbusters for the moment) is now a side show to the main event? Huh.

My take: I think this speaks to the fracturing of the mediascape. Long gone are the days of orderly rollouts across windows (when) and territories (where). Today there are so many more options available to distribute projects. It’s still the wild west but streaming (how) and mobile (where) are emerging as leaders. Add in Chance’s ‘give it away’ strategy. Combining the two begs the question, what could be the ‘real’ business of indie filmmakers? Hmm. Maybe it’s not the destination, but the journey? Can we monetize that? Ideas, folks?

Giant step backwards for Canadian media

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On May 15, 2017, the Canadian Radio-television and Telecommunications Commission (CRTC) renewed major television licenses for five years and also lowered the requirements for Canadian production.

In double-speak, it titled the media release “The CRTC supports the production of original content“.

Particularly troubling is the removal of the requirement for Bell Media to fund BravoFact and MuchFact (see clause 55):

“Deletion of various requirements

55. Bell Media requested the deletion of various conditions of licence and expectations for certain services. Given that the proposed changes are consistent with Commission policies, the Commission approves the following:

  • …for Bravo!, to delete the condition of licence requiring the licensee to contribute to BravoFACT;
  • for Much and Gusto (formerly M3), to delete the condition of licence requiring the licensee to contribute to MuchFACT;”

So upsetting is this that the Directors Guild of Canada (DGC) immediately launched a petition.

Bell replied that it hasn’t yet decided to kill the programs:

“Bell Media was granted flexibility by the CRTC in making contributions to MuchFACT and BravoFACT no longer conditions of license for its Much, Gusto, and Bravo specialty channels. We are currently reviewing both programs and no decisions have been made regarding their future at this time. Both programs continue to accept grant applications in anticipation of their next funding deadlines later this year.”

Tim Southam, DGC National President, said:

“For years, the CRTC has said it’s shifting focus from the number of hours of Canadian programming on air to the investment broadcasters make in original content. Now, they’re cutting the investment requirements, too. The Commission is betraying its own word and betraying Canadian creators. The CRTC got it right when they said that, in the digital world, broadcasters need to invest in innovative content that stands out in a global marketplace. So why let broadcasters slash their investments in distinctive, original content by $200 million over five years? The Commission called the right play, then absolutely blew the follow through.“

Tellingly, less than a month ago, Bell Media hinted it is about to launch a new streaming service. UPDATE: It’s television for cord cutters, called Alt TV.

My take: Is the CRTC trying to kill CanCon? I have won two BravoFACT grants, for my film ‘i luv spam’ and for Scott Amos’s ‘Scratch’. We were honoured and grateful we could finally pay our cast and crew on those productions. Thumbs down on both Bell Media and the CRTC. Also, I find the timing of the CRTC’s decisions suspect, as the government is about to release its new vision for Canadian culture in the digital age. Is the CRTC making an end run on behalf of its major stakeholders, or is this just a preview of more cuts to come?

Top Streamers Become Mini-Majors

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Netflix/Amazon/Ringer illustration

Sean Fennessey, Editor-in-Chief of The Ringer, has just posted The End of Independent Film As We Know It.

It’s a fascinating, if long, read that concludes Amazon and Netflix have become mini-major studios.

The ramifications are that independent film may be dead on two fronts:

  • these new exhibitors are wealthy enough to green-light and finance indie films, so how independent are those films actually, and,
  • because they’re streaming services, premieres in actual cinemas, long agreed as the christening of all ‘real’ films, may be a thing of the past — no more theatrical window!

“Technocratic distribution companies like Netflix and Amazon have upended the state of independently produced movies. Film festivals that screen these movies were once the bastion for work created beyond the perception of Hollywood’s studio structures — films that were either unable or unwilling to penetrate the cast iron gates that lead to the moviemaking seats of power. The festivals were a home for insurgents, temples that hoisted Tarantino, Michael Moore, Sofia Coppola, Kevin Smith, Allison Anders, Robert Rodriguez, Todd Solondz, Todd Haynes, Ava DuVernay, Paul Thomas Anderson, Wes Anderson, Richard Linklater, and dozens more into the frame. Today, a movie that has been bought, paid for, and strategized against a global calendar by a massive public company is dissonant with the spirit of independent movies.”

Sean includes a quote from Joe Swanberg that is very telling:

“Drinking Buddies honestly found its biggest audience on Netflix. It’s become pretty clear to me over the last few years that the work that I’m making is finding its audience there. Do we go where the audience is or do we make the audience come to us? If there’s a big audience over there that wants to watch it, and we already made the movie we want, that makes the most sense to both of us.”

Ted Sarandos has a goal of 50% original content on Netflix and envisions more ‘day and date’ or simultaneous releases:

“There’s a romantic notion about the film being on a big screen. There’s definitely something about a premiere at [main Sundance venue] Eccles that you can’t replicate — that I can’t replicate — but the fact is, that happens for a couple hundred people once a year. We’re doing it every day for the world. People who are discovering a movie that might change their life; that’s who they’re talking to. We have to get rid of the romantic part. I don’t really think that they’re mutually exclusive. I think over time that these films will get booked into theaters at the same time they’re on Netflix.”

My take: with $6 billion in its production pockets, there doesn’t seem to be any stopping Netflix. Even Jerry Seinfeld has jumped from the Crackle ship, for a reported $100 million.

Equity Crowd-funding in Canada

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When we think of crowd-funding, Kickstarter and Indiegogo come to mind.

For instance, over 20,000 film and video projects have been successfully funded on Kickstarter, with an average goal of approximately $5,000-$10,000 and pledges of about $25-$30.

But what if you want to raise much more money, and instead of giving away ‘rewards’ (otherwise known as perks or swag) you want to give away shares in your project company? Enter Equity Crowd-funding or Crowd-investing.

There are two options when crowd-investing in Canada: the Start-up Crowdfunding Exemption and the Regulation Respecting Crowdfunding.

The maximum value that can be raised is $250K twice a year with the first, and $1.5 million with the second.

Four provinces allow both, four don’t allow either and the rest allow one of each.

FundingNomad is the new kid on the block in Ontario:

“FundingNomad is a crowdfunding platform that presents exclusive deals to investors that have been fully vetted and selected by our professional team of experts. Many angels and institutional investors choose to invest through FundingNomad because of the increased efficiency and access to deal flow.”

My take: keep in mind, most investors are in the game to make money. When you invite investors into your company, you’re competing with all the other investment opportunities out there. So, your promise needs to be unique and the return attractive, or you need to appeal to other motivators. For docs, that might be the cause, for narrative projects, that might be the stars, for instance.

Smart contracts come to film financing

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I’ve written about the blockchain and smart contracts before. Now we have a breakthrough: the first film using both!

The film is called The Pitts Circus and promises to be a “feature length-horror-comedy movie incorporating the skills, comic talent and uniqueness of a real Australia circus family”.

Investors who buy some of the 666 shares with cash or Ethereum are guaranteed to share in 50% of the profits until 2036. Single shares are $150 USD or 10 Ether.

Caveat emptor:

‘As always with indie movies, there is only a small chance for a huge success — but in case it does take off, it is a journey to the moon.”

Use a wallet you know you’ll control until then because the smart contract will distribute the proceeds, if any, to that account.

My take: I know this sounds a bit weird, but it represents a radically different way to raise financing and settle contracts by using crypto-currency and smart contracts, both made possible by the blockchain. This illustrates the power of the blockchain — it does away with the friction of intermediaries, in this case bankers, advisers, lawyers and accountants. (For kicks, work out how much the 2007 million dollar coin is worth today!)

Zapruder Films seeks Canadian female feature writer for dev deal

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Because they don’t feel the Canadian feature film industry is doing enough to bridge the gender gap, Matthew Miller and Matt Johnson of Toronto’s Zapruder Films have launched a program to help support the development of one emerging female screenwriter.

They will be giving all of their $12,000 Telefilm development funds to one woman to develop a treatment into a first draft narrative feature script.

The rules:

“The contest opens September 8, 2016 and closes September 18, 2016.
The winner will be announced on Friday, September 30.
Applicants must not have written a produced feature length screenplay.
Scripts must be the original work of a female writer and must be written originally in English. Adaptations and translated scripts are not eligible.
The writer must be a Canadian citizen or permanent resident.
The writer must agree to option the material to Zapruder Films for a 24 month period.
The writer must not be a member of any screenwriting unions or guilds.”

Your single PDF application must be at least seven pages:

“One page synopsis of the film
A short treatment of the film (5-10 pages)
A short brief addressing what your film means to you (300 word maximum)”

I asked Matthew and Matt what sort of response their program has received:

“The response has been really encouraging. There have already been several submissions and dozens of inquiries as to the specifics of the rules and regulations. For the most part, it is very hard for young writers without an agent to get their foot in the door. Most companies don’t accept unsolicited works so we think that alone has provided a breath of fresh air. And it is trying to help address the issue of gender disparity in our industry and that has helped to spawn a healthy and spirited debate on social media. We couldn’t be happier with where things are at this early in the program.”

My take: I applaud Zapruder Films for this program. It’s smart on two counts: firstly, they’re addressing the gender imbalance in the Canadian feature film industry. Hey, it’s 2016 already. Secondly, these guys want to encourage new, as-yet-unheard voices, with new, interesting stories to tell. As we all know, story is king, or in this case, queen.

CRTC rewrites the rules for indie funds!

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In a surprise move that comes into effect this Thursday, the Canadian Radio-television and Telecommunications Commission is rewriting the rules when it comes to indie producers accessing Certified Independent Production Funds.

Among the changes, the CRTC is:

  • Eliminating the requirement that producers obtain a broadcast licence or development agreement to receive CIPF funding.
  • Allowing and encouraging CIPFs to allocate funding for script and concept development.
  • Allowing and encouraging CIPFs to allocate funding for promotion and discoverability.
  • Allowing CIPFs to fund productions achieving at least six Canadian certification points (down from eight), and include the pilot projects recognized by the Commission.
  • Including co-ventures in productions eligible to receive CIPF funding.

Responding to the new policy framework, Andra Sheffer, CEO of the Independent Production Fund, states:

“The Independent Production Fund has long been an advocate for the support of Canadian content for platforms other than television and because of its endowment, has been able to fund scripted series designed for the web. Therefore, the IPF is encouraged by the CRTC decision to allow other certified Funds which receive their funding from BDUs, to potentially finance projects with no broadcast licence. This will provide the flexibility that our system needs to keep up with evolving production and business opportunities and the demands of modern audiences. Web content allows for innovation and experimentation in story-telling – we have seen it in the web series we have funded over the past 6 years. With few gatekeepers and risk-adverse broadcasters, it encourages new talents to explore and create new forms of story-telling and content that do not typically work on the traditional television platform.”

There are over a dozen Certified Independent Production Funds in Canada.

My take: I think this is a clear signal that the CRTC and Heritage Canada (see ‘by ministerial portfolio’) want to diversify media production and divorce it from television. We shall have to wait and see how the CIPFs respond and how they change their programs.

 

BitTorrent launches the Discovery Fund

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BitTorrent Inc. wants to promote emerging content producers on the net this year — to the tune of $2,500 to $100K per project.

The Discovery Fund aims to “incubate the world’s next wave of awesome, straight-up brave storytellers and outside voices.”

“Over the next year, BitTorrent aims to partner with 25 creators by providing cash grants and promotional support to build impactful releases and discover new fans. We are looking for artists, musicians, filmmakers, designers and other creators working on uncompromised projects representing a diverse, original perspective seeking global distribution.”

There is no deadline or application fee.

My take: Kudos to BitTorrent for launching this initiative. To their credit, they surveyed artists and learned that “getting their work discovered is the biggest challenge they face.” Amen!

How to finance your independent movie

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Ben Yennie‘s post on Medium, The 9 Ways to Finance an Independent Film, is one of the clearest summaries of film funding I’ve seen.

He breaks your funding sources into nine categories:

  1. Skin in the Game
  2. Soft Money/Deferments
  3. Crowdfunding
  4. Tax Incentives
  5. Private Equity
  6. Gap Debt
  7. Product Placement/Sponsorship
  8. Pre-Sales
  9. Grants

“A lot of Filmmakers are only concerned with finding investors for their projects. While films require money to be made well, there are better ways to find that money than convincing a rich person to part with a few hundred thousand dollars. Even if you are able to get an angel investor (or a few) on board, it’s often not in your best interest to raise your budget solely from private equity, as the more you raise the less likely it is you’ll ever see money from the back end of your project.”

Ben also provides a graphic in which he displays a typical breakdown for three projects: first narrative feature, documentary feature, and second or third narrative feature.

It’s somewhat difficult to read, but here’s my best guess:

A. Narrative Feature

  • 1 – 10%
  • 2 – 10%
  • 3 – 20%
  • 4 – 20%
  • 5 – 20%
  • 6 – 20%

B. Documentary Feature

  • 1 – 10%
  • 3 – 20%
  • 4 – 20%
  • 7 – 10%
  • 8 – 20%
  • 9 – 20%

C. Second or Third Narrative Feature

  • 3 – 10%
  • 4 – 20%
  • 5 – 20%
  • 6 – 20%
  • 7 – 10%
  • 8 – 20%

Ben also has an excellent post called The 12 Slides you Need in your IndieFilm Investment Deck which you can use as an outline for your next pitch video.

My take: I love the visual which I think of as depicting your full budget as a pie of six flavours! Some are tastier than others and some come with strings attached. But the unsaid truth is that it’s difficult to bake this pie in only one flavour.

Europe moves to protect VoD

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As reported on Screen Daily, the European Commission is proposing that one of out five titles on Video on Demand platforms be European.

“The updated Audiovisual Directive will enforce VoD platforms such as Netflix to ensure at least a 20% share of European content in their catalogues. The new proposals will also give the possibility for the EU member states to impose financial contributions upon on-demand services to the production and rights acquisition of European works.”

The new rules are outlined in the Audiovisual Media Services Directive (AVMSD), under clause three: Promotion of European Works.

My take: it’s about time. Quotas work to establish a domestic industry. Just see how successful CanCom has been for Canadian music and television. With this measure, the Europeans are ending the free ride for VoD services. Too bad we don’t have the guts to enact this and movie screen quotas in Canada.