Film financing

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Under film financing refers to the procurement of capital for the production of a film . The financing phase in film production should usually start parallel to the development of the material .

Before the start of the financing phase, all costs that will be incurred in the production of the film must be determined with a film calculation . Only when the financing of the film has been secured will the production release, called Greenlight , be granted.

Film financing models

While in Europe contract production makes up the bulk of film productions and cinema films are in most cases dependent on film funding , in the United States self-production and self-financing of films dominate. This is possible because the large US film production companies have a well-developed marketing and distribution system and large advertising budgets.

The common type of production in the age of television is commissioned production . Television broadcasters, rental and distribution companies usually act as clients. In contrast to in-house productions, they are less dependent on public subsidies such as state and federal film subsidies or privately launched film funds , but rather draw their financial resources from the payments made by the client. These financial contributions are usually paid out to the producer in stages by the client. Due to the increasingly tight budgets in the TV business, the broadcasters have been willing for some time to grant producers license rights in return for financial participation.

Funding elements

The own funds used can be cash, but also necessarily repayable loans . Borrowed funds can include risk investments by financiers (equity), provisions (deferment of payment of partial claims until payment of proceeds) by employees and actors and benefits in kind, proceeds from pre-sales and licensing of rights (presales) and minimum proceeds guarantees from the allocation of distribution rights, e.g. B. to a rental (rental guarantee) or a world distribution. Depending on the size of a film project, several national and international producers can join forces in co-productions and jointly finance the production of a film.

In individual states there are options for financial support for film production in the form of tax breaks through to direct subsidies or aid. Tax relief can be tied to quality specifications, such as the fulfillment of the requirements for obtaining a film rating . Aid is also mostly linked to criteria, such as B. in the case of the German Film Fund (DFFF) . Here is u. a. the completion of a cultural test is necessary.

These activities by the states are intended to strengthen their own film industry and also to support their own film culture. In accordance with legal regulations, film producers in these countries can use these financing options.

Any financing will lead to a claim to proceeds from the exploitation of the film, at least until the respective funds used have been repaid in full. Exceptions are subsidies / aid and tax refunds. In addition to the repayment of the funds used, there is also the possibility of profit sharing. This is usually divided between the producers according to the share key in the copyright of the film. These revenue and profit claims are determined according to a distribution key in different levels or ranks in the respective financing agreements.

A television film ( TV commissioned production ) is usually financed by placing an order with the producer with one hundred percent financing of the production costs. The production costs for a 90-minute television film in Germany are around EUR 1–1.5 million.

Every financier will measure the marketability of a product in order to be able to assess the level of his risk. The lower the marketability of a film, the lower the film's budget will be. Since German cinema films are often only evaluated on the national market, it is seldom possible to completely reduce the financing of the production costs. For this reason, there are usually only limited budgets available for films produced in German, which can also be reflected in the appearance of the films in contrast to blockbuster films from the USA. Since dubbing is not accepted by the audience in the most important market (USA) , the risk of financial loss for the producer or the film investor is much higher with a German-language production than with a film produced in English. In order to increase the budget and thus also the production value , u. a. Film funding can be applied for. However, since film subsidies are committee decisions, this source of funding should not be regarded as a fixed, calculable quantity.

German television films are fully refinanced either through fees or advertising income for the broadcasters. However, the freeze on fees and ever decreasing advertising revenues are the reason for the television stations to place orders with reduced financing, which leads to a cheaper product and thus the program. Depending on the source of the financing, a distinction is made between in-house production and TV service production.

For the purpose of the presentation, the potential investors must be presented with a package consisting of the script , the calculation , cast for the main actors and the direction, a financing plan and evaluation options (see film evaluation ).

Completion guarantee

The completion guarantee or completion insurance is an important part of the film financing and is contractually agreed before the start of production. Private investors - in the USA also special companies - undertake to raise the necessary funds for film production if the budget is exceeded. In return, a fee is charged, which is usually four to six percent of the budget, or a profit sharing is agreed.

The completion guarantee is usually required for international and large film productions by the lending banks, but also by investors involved in the financing. The completion guarantee - usually referred to as a completion bond guarantee - is generally not a financing guarantee. Only the completion of the film is guaranteed. The completion bond is typically present during production with its own staff and controls the production of the film. In the event of significant cost overruns, he has the right to take control of further production activities. The additional costs are borne by the completion bond. If the completion of the film no longer appears expedient, it can usually alternatively pay out the parties involved in the film financing. In international productions, due to the large number of parties involved, there are typically risks from the production process as well as risks from the possible failure of individual financing elements. The completion bond usually excludes these financial risks from the scope of liability of the guarantee.

Bridge financing

Intermediate financing is required if the payment dates for the agreed individual financing do not allow sufficient liquidity for production. Typically, individual payout installments are agreed on at specific film production dates, such as. z. B. Contract conclusion of the financing agreement, start of shooting, end of shooting, rough cut acceptance, zero copy as well as material delivery. Liquidity bottlenecks often arise at the start of shooting, because then high payouts have to be made. There is also often a need for liquidity because the payment of the last installments is delayed. In the case of higher film budgets, the producer is usually no longer able to provide this liquidity requirement from his own resources or through deferral agreements and target payments. In this case, bridging finance through a bank loan is required.

The basis of the bridging financing is the liquidity planning, in which the inflows and outflows of the film production are compared. This results in the liquidity requirement as the starting point for bank financing. If television broadcasters are involved in the financing, they are often required to provide a bank guarantee ( Aval ) as a prerequisite for paying out the first installments . These guarantees complement the banks' bridging instruments. In the German branch banking system, the possibilities of interim film financing often come up against knowledge-related limits. For this reason, the banks are trying to bundle their experience from film financing in an organizational way. Banks with their own media team are in particular Commerzbank, DZ-Bank and the Investitionsbank des Landes Brandenburg (ILB) . In addition, other banks are always trying to set up their own teams. However, even large institutes have practically given up these attempts.

In France and the United States made its own film banks, which also provides films from independent producers and small production companies are pre-finance. The repayment is usually made in installments, begins two years after the start of production, and lasts three to five years. The loan is repaid through proceeds from film distribution, which in turn is dependent on proceeds from film screenings in the cinemas. In Germany, attempts to establish private film banks failed as early as the 1920s.

literature

  • Udo Bomnueter, Patricia Scheller: Film Financing . Country comparison strategies: Germany, France and Great Britain. Nomos Verlag, Baden-Baden 2009, ISBN 978-3-8329-4908-2 .
  • Dirk Eggers: Film Financing. Basics - examples. 4th revised edition. Schmidt, Berlin 2003, ISBN 3-503-06671-3 ( KulturKommerz 3).
  • Hans-Jürgen Homann: Practical Guide to Film Law. A guide for film, television and media professionals. 3rd updated edition. Springer Verlag, Berlin et al. 2009, ISBN 978-3-540-48378-6 .

Individual evidence

  1. Bjørn von Rimscha: Risk Management in the Development and Production of Feature Films , p. 103f.
  2. Cornelius: Media Fund - Motor for the Development of an Internationally Oriented Film Industry in Germany? , in: ZUM 2005, 711ff.
  3. Beucher, Klaus / Frhr. Raitz v. Frentz, Wolfgang: Loan security for film productions. Pledging and assignment by way of security by the film manufacturer , in: ZUM 2002, 511, 511.
  4. § 10 of the guideline for the German Film Funding Fund ( memento of the original from October 27, 2011 in the Internet Archive ) Info: The archive link has been inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.  @1@ 2Template: Webachiv / IABot / www.ffa.de
  5. v. Reden-Lütcken, Konstantin / Thomale, Philipp-Christian: The Completion Bond. Security means and quality seals for film productions , in: ZUM 2004, 896ff.
  6. Olaf Kühle: How does film financing work? Investitionsbank des Landes Brandenburg (ILB), April 5, 2016, accessed on April 5, 2016 (German).
  7. ^ A b Investment Bank of the State of Brandenburg (ILB): Secured film financing. Investitionsbank des Landes Brandenburg (ILB), April 5, 2016, accessed on April 5, 2016 (German).