Many
filmmakers begin their careers by persuading private investors to back them.
Indeed, unless you are a star like Kevin Costner or Barbra Streisand, it is
rare for a major studio to finance a beginning filmmaker. Banks will not lend
money without substantial collateral. Loans based on pre-sales are difficult to
obtain because territory buyers want packages with name actors from an
experienced director. That leaves most filmmakers looking to Mom, Dad, and
whatever they can scrape up from friends, relatives, and MasterCard. While such
resources have financed many films, distributor's expectations have risen over
the years. With a glut of independent motion pictures available, many
distributors are not interested in acquiring a feature unless it 1) is shot
with name actors; or 2) wins an important film festival.
Thus, filmmakers are forced to raise increasingly large sums of money to
produce more ambitious movies if they hope to secure distribution. As digitally
shot motion pictures gain greater acceptance, some production costs may
decline. Nevertheless, numerous producers are chasing a small number of name
actors. This competition has driven up the price of talent, even for low-budget
indie films.
As a result, the ability to woo investors has become a critical skill-one that
is not taught in film school. Perhaps the best preparation for an aspiring
filmmaker would be to enroll in business school and learn the intricacies of
high finance. Even if you didn't learn much, you would graduate with a class of
MBAs who would eventually earn large incomes and become good prospects to
invest in your films. Better yet, go to dental school.
Most filmmakers have an aversion to fundraising. Like other
"artists," they would prefer that someone else deal with the unsavory
task of raising money. But filmmakers without personal wealth or a rich uncle
may have no choice but to beat the bushes for cash. Most underestimate the
difficulty of raising funds. Joel and Ethan Coen spent a year raising the
budget for Blood Simple. First they produced a slick trailer. Then they
contacted everyone they knew who could potentially invest. Many of their
friends who promised to back them didn't come through. But the Coen brothers
were shrewd networkers. Those prospects who were unable or unwilling to invest
were asked to suggest other candidates. Whenever they found an interested
investor, they would visit them and show their trailer.
The Coen brothers discovered that the motive for people to invest in film has
little to do with its financial merits. There are no special tax breaks. As
will be discussed later, film is a risky investment. Yet there are many reasons
people invest in film. The primary motivation is usually based on their attraction
to the glamor of the movie business. Perhaps they think moviemaking will be
exciting and fun. They may be turned on by the enthusiasm and passion of the
filmmaker. They might want to rub shoulders with the "stars." They
may have a special interest in a topic. They may seek to impress their friends
by inviting them to a screening of "their" film. They may desire an
"executive producer" credit, a role for their niece, or a role for
themselves.
Prime prospects are middle-class professionals: doctors, lawyers, and dentists.
Most working-class folks can't afford to invest in a movie. Wealthy individuals
are difficult to approach unless you have a pre-existing relationship with
them. They have investment advisors who tend to be financially conservative people
immune to stardust. They analyze investments according to financial criteria,
under which movie proposals fare poorly.
The ideal investor is a doctor who makes several hundred thousand dollars a
year and has substantial assets. He can lose his entire investment and the loss
will not affect his lifestyle. This year instead of going to Las Vegas for a
week and blowing ten grand, he is going to invest in a film in the hope that
the experience will be more entertaining-it certainly won't be less of a gamble.
Investors who will suffer if they lose their investment should always be
avoided.
Film investments have a bad reputation, and deservedly so. There are instances
where investors were cheated and lost everything. Consequently, investors who
have been burned or have heard of such horror stories may be unwilling to
consider film-related investments. A filmmaker needs to be persuasive and have
done his research if he hopes to raise funds. One needs to convince aprospect
that film can be an intelligent investment for a small portion of the potential
investor's portfolio. While film investments are risky, the potential return
from a hit can be enormous. Not only can the film earn revenue from box office
receipts, but there are also ancillary sources of income. These sources include
revenue from television, home video, merchandising, music publishing,
soundtrack albums, sequels, and remakes.