Financing Basics
What is the difference between debt financing and equity financing?
Debt = Loan; Equity = Ownership Share
Name one major challenge indie producers face compared to studios.
Lack of access to capital
How do major studios typically finance films?
Through parent company funding, corporate borrowing, and presales.
What is it called when Companies pay to feature their products in a movie.
Product Placement
What does OTT stand for?
Over-the-Top, meaning streaming services like Netflix.
What is the interest paid on a loan called?
Interest
What does “soft money” refer to?
Money that does not need to be repaid, like tax incentives or grants. Also credited as FREE MONEY
Name one entertainment bank that finances films.
Comerica, First Republic Bank, Union Bank of California, etc.
A post-production company works for free in exchange for future payment or profit share. What is this called?
A Service Deal
What is replacing DVD and cable licensing as a primary source of film revenue?
Digital distribution via streaming services
What type of financing is riskier—financing a single film or a slate?
Single film, because there’s only one chance to profit.
Name a popular crowdfunding platform for films?
Kickstarter, Indiegogo, or Seed&Spark
What is a “co-production” financing strategy?
Two or more companies share production costs to reduce risk.
How do musicians or record labels contribute to film financing?
Record companies may pay for music rights in advance.
How does Reg CF crowdfunding differ from regular crowdfunding?
Investors get equity in the film instead of perks.
What is a PFD (Production/Financing/Distribution) deal?
A distributor funds the film, and the producer gets a salary.
What is a negative pickup?
A distributor agrees to buy a film once completed.
Why do studios prefer sequels over original films?
Lower risk because of built-in audience and proven success.
What is the risk of loan financing for an indie producer?
If the film flops, they still have to repay the loan.
How is the Internet changing film financing?
Direct-to-consumer sales reduce reliance on studios/distributors bypassing traditional gatekeepers; studios, distributors, TV broadcasters, and DVD distributors.
What does the SEC require for an individual to be an “accredited investor”?
$1M net worth or $200K annual income for the past 3 years.
What is gap financing?
Borrowing up to 40% of a film’s budget against unsold distribution rights.
What is the term for an agreement where a studio funds development costs for a production company led by a well-known producer, actor, or director, with the studio retaining ownership of any projects created?
Development deals/Housekeeping deals
What happens when a film doesn’t meet presale requirements for financing?
The producer may not be able to secure a loan.
Name one challenge filmmakers face in the digital distribution era.
Harder to secure pre-sales from traditional distributors.