Who finances a film? Well, the answer is complicated and there are many different ways that films can be financed.
Many people don’t understand the process behind filmmaking and how much it costs to create a movie. The film industry is one of the most expensive industries in the world, with films costing anywhere from $2 million to over $200 million.
The financing for these movies comes from a variety of sources, often including major studios like Disney and Warner Bros., as well as private investors, independent financiers, and even filmmakers themselves.
FILM FINANCING 101
What Is Film Financing?
Film financing is a term that encompasses the many ways in which money is raised to fund an independent film project.
When people talk about film financing, they are discussing the money that is used to make a movie.
The producer will sell rights to distributors in order to raise these funds and then investors will contribute their own money as well.
It takes a lot of work and time for this process but it can be done successfully with enough preparation.
Who Finances a Film?
The financing of a film can be a big deal. There are many people that need to be considered when deciding who will finance a film.
Investors, producers, distributors, and government or public funding, all have their say in determining how much money is needed for production costs and what percentage each party takes as profit.
A film is a collaborative project between many different creative individuals, from the director to the actors, producers, and writers.
Unfortunately for filmmakers, it’s also one of the most expensive projects they can undertake.
In order to raise funds for their film, directors have had to turn to outside sources in order to fund their work.
What Are Film Financing Companies?
Film financing companies are often the most important part of a film’s production. They not only act as the funding source, but also help with distribution and marketing.
For example, they can take on all of these roles in order to get the film off the ground and into theatres.
Film financing companies are production-based financial institutions that provide funding for film and television productions.
These institutions may be private or public, with the latter being funded by tax revenues, like in France and Italy.
Film financing companies are known to offer various types of loans, such as:
- production loans, which help finance a project’s pre-production expenses;
- gap loans, which cover the difference between what is raised from equity investors and what is needed to complete a project;
- bridge loans, which fill in a funding gap when more than one round of investment has been required;
- foreign sales loans, which provide funds for films that need to be sold into other countries before they can generate revenue domestically;
- mezzanine debt instruments (MDEs).
Film financing companies provide funds for the production of a film by lending them money or buying shares in it. They are businesses which provide funding for film productions and they may be owned by individuals or groups of investors, often specialis in a certain type of production.
These could include documentaries, comedies, dramas, horror films or animation.
How Are Studio Films Financed?
The first thing to note is that the majority of studios’ financing comes from international investors and not domestic ones.
This is because studios have a better chance of making their product more appealing abroad than domestically, since Hollywood has been traditionally known for its lack of diversity in terms of race and ethnicity.
Studio films are financed by a company for the purpose of recouping their investment. This is done through movie theatre ticket sales, DVDs, streaming services and other forms of revenue.
The financing process starts with an executive producer, who has a budget in mind that they wish to spend on production costs.
They then go to the film’s financiers, who decide whether or not they will provide funding for the project. They base their decision on several factors, such as how much money it would make back, and the risk associated with making this type of film at this particular time.
If they agree to finance the film, then it goes out to producers, who create budgets that detail all aspects of production costs including talent salaries, marketing campaigns and post-production costs.
It can be difficult to understand how a studio film is financed. The process of financing a film starts way before the movie begins filming, with the development stage.
In this phase, studios recruit writers and directors for their projects; they also develop scripts by commissioning screenplays from established or up-and-coming authors.
Studio films are financed by a variety of sources, but the most common ones include:
- Movie studios (e.g. Disney).
- Independent financiers and production companies (e.g. Amblin Partners).
- Foreign film distributors and investors (e.g., Sony Pictures Entertainment).
How much does it cost to make a studio film? A typical budget for an animated studio film is $150 million, while live-action films can range from $100 million up to $300 million or more.
How Are Independent Films Financed?
Independent films are a creative alternative to mainstream Hollywood productions. They are made by filmmakers who want to explore new stories and ideas not found in the big studios.
However, these films don’t always have the required budget to be produced at their full potential. How do independent filmmakers get funding?
The film industry is a complicated machine that relies on the input of many individuals to function.
One important cog in this machine is independent filmmakers, who often have to finance their films using outside sources.
If you’re a filmmaker, how do you finance your film?
The answer is not as simple as it may seem. Everyone has different needs when it comes to financing their film and there are many ways to go about getting the funds needed for production.
One of the most popular methods of funding independent films is self-financing, where filmmakers use their own money or raise funds from family members or friends.
For example, “Napoleon Dynamite” was produced by three friends who pooled together $400,000 dollars to make the movie. An amount that would be considered very little in Hollywood terms but still made them millionaires because they owned all of the rights to the project.
Another way independent films are financed is via crowdfunding campaigns.
Independent films are often financed by investors who have a passion for the project. These individuals provide money to filmmakers in exchange for an equity stake in the film.
In this way, they share ownership of the film with other producers and financiers, as well as any profits from its distribution.
It is important to note that these types of investments can be risky because there may not be any returns on them at all if the distribution does not work out or if it doesn’t make enough profit to cover the initial investment.
Why Are Films Funded?
Films are funded for many reasons. There are those who see filmmaking as an art, others that use it to make money, and then there are those who combine both reasons.
Regardless of the reasoning behind it though, a film can only be made with funding.
Films are funded by different entities for different reasons. Filmmakers themselves may fund their own projects, while others rely on funding from studios, producers, and investors.
Investors may be motivated to invest in films that are likely to generate a return, or at least break even with the amount invested.
The film industry is a booming business, with films like Black Panther and Jurassic World attracting huge audiences.
It’s important to understand what factors go into deciding which movies are funded so you can make informed decisions about what to see in theatres.
How Are Commercials Funded?
Commercials are everywhere on TV, and it’s difficult to avoid them. But do you ever wonder how they’re funded?
There are two types of commercials: paid and unpaid. Unpaid commercials can be produced by the company itself or by a third party who is interested in promoting that company.
Paid commercials require payment from the advertiser and they usually offer more benefits than unpaid promotions, like higher production quality, better soundtracks, and more time for marketing messages.
Commercials are usually funded by the businesses they advertise.This means that companies pay a fee to have their products advertised on TV, in newspapers, or online. The most common commercial funding is from advertisers who want to sell their product to consumers.
There are many ways that commercials are funded. The most common way is for the company to pay a media agency, which in turn pays the TV networks and other producers for content.
This means that if you’re watching an ad on TV or streaming it online, then there’s a good chance it was made by someone else but paid for by the company advertising their product.
Film Financing – Soft vs. Hard Money
The type of financing a film project needs is dependent on the genre, budget and other factors.
There are two major types of financing: “hard money” and “soft money”. Soft money comes from private sources, like individuals or companies with an interest in your project.
Hard money comes from banks or financial institutions, as well as investors who may not be interested in your project but are looking for a return on their investment.
Filmmakers often have to finance a film project with their own money, and then go out to find investment for the rest.
This is called “hard” financing, or leveraging your own resources. But what if you don’t have any money?
That’s where “soft” financing comes in. The difference between hard and soft loans is that while hard loans are given at an interest rate, soft loans are done on a non-profit basis.
Soft films can be funded by private investors who want to see their projects get made for personal reasons (emotion), public foundations who want to fund projects for the greater good of society (advocacy), or individuals interested in making some extra cash on the side (profiteering).
Example Film Financing
A movie is not just a fun way to spend an evening. It can be a very lucrative investment opportunity as well.
One such film that had a successful return on its investment was the 2013 Academy Award-winning “Dallas Buyers Club”, which grossed $250 million worldwide against its $5 million budget.
Dallas Buyers Club, a film about the life of Ron Woodroof who is diagnosed as HIV-positive and given 30 days to live, has always been a movie that I wanted to see. However, when it was released in theatres in 2013 there were no plans for a DVD release.
Fast forward two years later, and Dallas Buyers Club is now streaming on Netflix!
The story behind this movie’s financing is quite interesting. The director wanted to make the film after he read an article about AIDS patients who smuggled unapproved drugs into Texas from Mexico because they couldn’t afford them any other way.
He pitched his project to Hollywood executives but they turned him down so he went back home to raise funds through friends and family members with connections.
The movie was based on the true story of a Dallas businessman named Ron Woodroof (Matthew McConaughey) who was diagnosed with AIDS in the 1990s.
Not wanting to die from HIV/AIDS, he smuggled in unapproved drugs and began selling them at cut-rate prices to fellow patients who didn’t have insurance or couldn’t afford the medications sold by pharmaceutical companies.
The FDA tried repeatedly to shut him down but they were unsuccessful each time.
Eventually his story hit the press and Hollywood would come calling for rights to tell his tale on film.
Private Equity Film Financing
Private equity film financing is a process of raising money to fund a movie project. It is also referred to as “venture capital” or “PVB.”
This type of funding has been used for many years, but in the past decade it has become more popular because of the higher returns and lower risk associated with this investment.
Private equity funds are a form of investment that is not well-known to the public. Most people know what venture capital firms do, but few have heard of private equity. It is an investment fund that typically seeks to invest in a diverse range of industries and companies.
Private equity funds are not subject to the same regulatory oversight as large banks, insurers and public corporations.
Private equity investors often buy out other shareholders, take on more debt, or make management changes.
Private equity firms are a powerful force in the film industry, driving nearly 60% of all new films.
The next time you’re at the theatre, look down at your ticket. If it says “R” for Restricted Audience or “NC-17,” you might be surprised to know that these ratings aren’t set by Hollywood’s Motion Picture Association of America (MPAA).
Rather, they are set by individual private equity companies such as Fidelity Investments and BlackRock Investment Management LLC who finance independent films with restrictive content.
How Do I Get Funding for a Low Budget Film?
“Filmmakers often struggle with the question of how to get funding for a low budget film. There are many different approaches, but it is important to first identify your needs and then decide which approach will work best.”
There is a misconception that if you want to make a movie, all you need is access to a camera and some friends with nothing better to do. In reality, funding for low-budget films can be hard to find.
Many filmmakers find themselves in a situation where they need money to create their film. If you are struggling with finding funds for your low-budget films, then this guide has hopefully helped you.