Financing a dream
So, I am a filmmaker. An 'Indie' ! This is somehow short for “independent filmmaker”. I am not as rich as f.e. Howard Hughes, who used his inheritance to build his own film production company, but I too love to make films (any, from drama, documentary, TV series to f.e. commercials) and I want to make a living out of it. So what are my options? Of course I have a truckload of very nice ideas for new films but most of them are vague, very global and didn't even reach the status of 'synopsis'. Time and money have to be spend to go through the whole process from idea via synopsis, treatment / storyline, budgeting, pitching, scenario, storyboard, casting, shooting, post-production, promotion, distribution and much more, towards the actual moment that the audience can experience the film. Here, although there are many aspects to film-making I like to limit myself to the financial aspects of film-production. I will investigate current financing possibilities and, later on, developing future possibilities.
There are two major complications in this film production process. I mean money-wise.
First, it is often difficult to estimate the economical value of the film to be made. Economical value can mean the actual final turnover of a film but it can also mean a financial translated 'cultural value' or the resulting commercial value in case, for instance, of making commercials.
The second issue is related to the first one. The financing has to be done up front. At least most of the financing. The product is just an idea. It exists in an increasing kind of detail but time and money have to be spent or has to be promised to be able to make the next steps.
Although these two complications are true for most product developments in every area somehow for film-making it is difficult to get the ropes together. Formal investors are reluctant to invest in films and for a good reason. Only very few films are made with a full return on investment and a reasonable profit. On the other hand a lot of people like to watch movies. Some of them are even willing to pay for that. So what could be the problem? Why is it that almost every film needs 'charity funding' to be created? Well an answer could be found in the basic principles of economics; supply and demand. So let us look at some interesting statistics* of the Dutch film market for cinema-released films. In 2008 there were 23.5 million visitors of formal NVF (Nederlandse Vereniging van Filmdistributeurs) theatres. In that year they watched 296 new films were 30 of them were produced in the Netherlands. They raised a total of 165.1 million euro, which is an average of 7.02 euro per visitor. The Dutch films took 17.68% of the total turnover. That is 29.189.680 euro or 972.989 euro on average per film.
There are half-truths, lies and then statistics so lets stop here. But some nice things can be concluded. For a good feature length film (were 'good' is not absolute but depended of the targeted audience) people are willing to invest, let say, 7 euro. So if your able to make a nice film for a small budget of 50k euro all in and want to make a profit of f.e. 20% (risk investees probably aim for a high percentage) you only need to collect 8.571 paying visitors. Oops, that seems a lot and you still have the hurdle of being accepted as NVF release and then competing for visitors with 30 other Dutch films and 266 foreign films. This seems like a difficult business case, certainly for a starting film-producer.
So what are the alternatives? Of course you can aim for assignments like making tv productions, commercials, company movies etc. Then financially you don't really care whether the principal achieves his/her (economic) goals. You just agree on a price and make sure that your costs stay (preferably far) below that. Of course then you need to win the production order. Some pre-investments need to be done. Building a good reputation, preparing and executing a perfect pitch / offer and networking for the best resources for the job. There are a lot of small production companies fishing in the same bowl.
Interesting in this area are modern initiatives like 'brandfighters.com' and, more international, 'mofilm.com' . They organise film contests for filmmakers of mostly viral, commercial short movies. Nice (mostly money) prices are offered for the winning movies. Big brands offer the price money with the aim to create an interesting new way of advertising, mainly via Internet “Youtube” films. The advantage is you can easily participate. The downside is of course that you have to do your own pre-investments and only the winners receive the money. You better be damn good.
Recently there are some new film-financing experiments. 'Proudly found elsewhere' in the music industry (from the music investment initiative: sell-a-band). Some filmmakers have adopted this principle of 'crowd sourcing' or 'crowd funding'. How does it work? Well in principle very simple. You start with a film proposal and you try to find a lot of fans that are willing to invest a little money in return for any product or service you are willing to offer. Eh, … , of course strictly related to your film production. This can be things like pre-sale of the DVD, invitations to the premiere, VIP arrangements, getting your name on the subtitle, winning prizes but also taking a part of the possible profit.
One example of a film created this way was 'The age of stupid'. A film about a man living in 2055, looking back and wondering why we didn't stop climate change when we had a change. This film was financed by more than 620+ ordinary people raising more than 850.000 pound (roughly 961.000 euro)! Wow, an average of 1.550 euro each! That's a large sum for a free DVD. Who's stupid now? In fact the model was a bit more advanced as shown by this diagram from their website.
Of course this was a special case with a lot of people worried about climate change issues but still, the film is made and is still making money. You can buy the DVD for 16 euro. On their site are also a lot of nice tips and budget examples if you might want to try crowd-funding yourself. (www.ageofstupid.net)
A recent example of a local crowd-funding experiment is 'Cinema Reloaded'. An initiative of the 'International Film Festival Rotterdam'. Three projects are presented in which you can invest a minimum of 5 euro to become a co-producer. For this donation you get regular updates from the filmmaker, view the premiere (online), have your name in the credits and possibly an invitation to the theatrical premiere. With this offer they try to raise at least 30.000 euro per project. With 6.000 names in the credits these might become long movies! No, seriously, lets hope this initiative is successful because it would prove that a lot of people are willing to invest in your dream. Great! They just need to open up for any filmmaker / any project but that is probably a goal for the future.
A third, international and open, initiative is 'Indiegogo' (Indiegogo.com) currently the largest online film funding platform. As answer in their FAQ they say “IndieGoGo is a collaborative way to fund ideas. Anyone with a project - creative, cause or entrepreneurial - can raise money, offer perks and keep 100% ownership of their idea.” It was launched in the beginning of 2008 and there are currently more than 3000 projects (film / photo / music / art / gaming and more). Indiegogo offers this Internet platform for 9% on the funds raised and you get a maximum fund-raising time of 120 days. A good business concept, at least for Indiegogo. It seems a high price for just offering the platform but well, for many people this seems to be no problem. And if you achieve your own goal you get 5 % back so it only cost the real founder 4%. Unfortunately it is hard to find success statistics of the concept. This might indicate that Indiegogo is not as successful as hoped for.
Another more recent (December 2009) initiative is 'The Biracy project'. They call it 'a social experiment in fan-funded science fiction'. Science fiction because it an experiment with only one film to make: a science fiction film. But it aims to enclose the platform for all kind of movies. The idea is based on 'SOKAP', which stands for 'social capitalism' (I understand they needed to change the 'c' to a 'k' because socap was already used somewhere) which is more or less equal to crowd-funding but also crowd-participation. ‘SOCAP’ is developed for all kinds of projects which use crowd-funding for financing. The experiment of the Biracy project aims to prove that the platform can be used for financing film-productions.
Some new developments might become very interesting for film-producers. The first is the development of high quality streaming video. Film hosting services like Youtube, Vimeo, MySpace and Yahoo video become more and more powerful to produce high definition quality films when and where it is required. This concept is also called ‘Video on Demand’. It is no longer required to scan the newspaper or rent a DVD whenever you want to see your favourite film in the convenient area of your own home. Just click on the video clip of your choice and it will start almost instantly. You might notice I changed to the term ‘video’ to give recognition to the fact that a lot of low quality “home made” material is available on these platforms. But also, now and then, little pearls of creativity and inspiration. For free content there is often a limitation to the length and the file-size so this influences the the image quality.
A second, related development is the increase of Internet band-with which is able to deliver the HQ film- material at affordable prices.
The third important development is Internet TV. Although more and more films are available via the Internet there is a huge gab between watching them alone on the computer and looking at a film from the comfortable cough in the living-room. Together with family or friends. The availability of Internet films in the traditional TV environment might bring a great breakthrough change in free-time time spending. Instead of zapping through the channels on your TV, hoping for something interesting, you select exactly what you want and when you want it. Just after dinner you might want to select the latest news first. Then have a break for your coffee. Watch an episode of a new series and finish the evening with the first half of a feature film. The second half you might want to postpone not to jeopardize your 8 hours of sleep.
For people who like to be surprised with a variety content, providers can create a “watching profile”based on your previous selections or manually set preferences. They can propose an personalized (or “familiarized”, tuned to preferences of your family) program. Of course you can skip the content your currently not interested in which influences your profile again.
Recently Youtube launched a service like this called “Leanback”. Although it is brand new and should still get mature and prove it-selves it clearly shows the possible future development's.
If more and more people get Internet TVs and tune to Internet as their favourite channel selection because of the additional freedom it will probably grow to the major source for film and video distribution. Soon the production and broadcast companies have to change over to a complete new way of producing and programming.
Although fairly new to film and TV this transformation has been reality for the music industry for several years now. iTunes and other music selling sites are intensely used. And, what is more important for this investigation, they found a way to make it profitable despite the increased piracy. Even the ‘free’ Youtube music films are often used for advertising music via iTunes and others.
Back to me as an INDIE. What could all these developments mean for me? Lets summarize them for a start:
- Shift to a major use of video on demand (VOD) also via television.
- Development of a business model around VOD (with proper income for the film-producer).
- Development of viewer profiles. Automatic match to the viewers preference.
These changes mean personalized programming and thus an optimal match between content and viewers. For program makers it will be an advantage or maybe even a necessity to offer a wide variety of quality content. It will be very easy to reach ‘smaller’ target groups (viewers with specific interests) all over the world. This is were specialised (Indie) productions will have a new opportunity. Since Internet makes it easy to measure the actual usage, equally to the current music model, the producers of the content can be paid accordingly, without to much risk and investments for the programmer. Making money with films might finally become ‘easy’! The film business might finally be able to ‘put the ropes together’. This will also interest formal investors. If the risk in productions is limited they will even become more interested in pre-financing film productions.
Of course all these developments still need to become reality but the chances for this are rapidly increasing. The problem of financing your dream is about to become history, I hope.
