Traditional financial models are a thing of the past, with digital platforms offering a double-edged sword of bigger buying with hard-hitting competition, and with economic volatility overseas, many experts say global independent film financing is riskier than ever.
Indeed, studios released today are only franchises, “We’re in a period of uncertainty, both domestically and internationally,” told IM Global CFO Miguel Palos to Variety. Other industry heavyweights like Weinstein Co. COO/President David Glasser says, “In the U.S., you used to say, ‘If my budget is $30 [million]-$35 million and I spend $20 million on P&A, I’ll get a minimum amount from home video and a minimum MG from certain territories.’ Now Netflix, Hulu, Amazon, and others are creating so much content that it’s difficult to model out what return you’ll get on your investment.”
Though the scenery is wobbly, some specialists note that the opportunities are superior now more than ever. “Independent financiers are now instrumental in the backing of almost every independent movie inside and outside of studio slates, and more often, they’re the ones that greenlight many of the most successful commercial films,” says executive producer and financial expert Angel Cassani. “This is not what the business looked like 10 years ago.”
Angel has made incredible strides on an international scale as the executive producer of critically acclaimed films such as the fast paced assassin film “Hell’s Chain” with Latin American action star Hector Echavarria from “Los extermineitors,” one of Argentina’s most successful action films in history. As an expert finance guru and film producer, Angel knows exactly what it takes to produce a high-grossing film, and his keen attention to changes in the market combined with his ability to adapt is what keeps him ahead of the curve.
Angel says, “The increased risk is moving financiers to focus on either $10 to $20 million-and-under films, and to partner with studios on select features above $60 million, where you can hopefully protect the majority of it from international presales,” Angel also believes that. “Budgets are probably lower now for international distributors, and how much product they can acquire has lessened.”
Angel has produced successful independent films and now is set to play a big part in Hollywood. Since entering the industry in 2009 as the producer of the film “Never Surrender,” starring Hector Echavarria (“Death Warrior,” “Unrivaled”), award-winning actor James Russo (“Django Unchained,” “Not a Stranger,” “Donnie Brasco”) and Patrick Kilpatrick (“Minority Report”), Angel has continued to make a powerful mark in the industry internationally. And much of that success comes from the fact that he has not only found a niche and ever-growing market by focusing on producing films that tie in the popularity of the world of UFC fighting, but also because he knows how to adapt to the demands of the industry.
An informal survey of sellers points to some of the top buyers in key international territories: eOne in the U.K., Australia, and Canada; StudioCanal in France, Germany, and the U.K.; along with several other well-capitalized distributors such as Universum, TeleMunchen, and Constantin in Germany; Metropolitan and SND in France; Roadshow in Australia; Elevation in Canada; and Entertainment Film Distributors in the U.K. “And In a lot of circumstances, we’re selling to studios’ international divisions, whether it be Sony or Universal or LionsGate,” says Solution Entertainment Group co-founder Myles Nestel.
Angel Cassani is one producer/financier taking a new approach to the way he leads the film business. “When I started producing seven years ago, there was seemingly one way we made films. We fully financed them and didn’t need foreign pre-sales in order to cash flow the film, or need to sell them for distribution to greenlight them,” says Angel. “That’s all still true, except now it feels like each movie has a creative way to be made so I have come up with the perfect formula that make sense and we are now implementing and is working at perfection.”
“China is recognizably much more significant,” Angel says, “and even though you get a smaller percentage of the box office with what the government gets to take, it’s only rising at great speed.”
Angel is known for producing some of the best fight films in recent years, such as the action-packed love story “Death Calls” starring Echavarria, Yolanda Pecoraro (“Dancing Still,” “Death Tunnel”) and Ron Roggé from the five-time Emmy Award winning series “Stranger Things,” and Echavarria’s recent film “No Way Out,” which stars “Machete” star Danny Trejo as the villain and the dazzling Estella Warren (“Transparency”) In order to increase the profit margin, Angel brilliantly decided to have the film “No Way Out” released on Blu-Ray and DVD in Germany where he saw a special opportunity to increase sales, in addition to having the film theatrically released in the U.S.
As for new trends in film financing, Angel says while the basic formula has remained the same — a combination of debt and equity from P&A lenders, mezzanine lenders, and money providers — “there are several new mezzanine players in the marketplace who are taking a more aggressive position than traditional lenders like the banks would.”
“Any producer looking at a program has to think about an incentives certainty in the law, in the process, and in the funding, to be sure the state or country actually has the money to pay you,” he says.
Atlanta, New York, and New Mexico are now among the top selections due to their incentives and organization, and he’s also seen a recent tendency of producers heading to Canada to take advantage of a 20%-25% tax rebate, on top of federal and provincial encouragements.
In China Dalian Wanda Group and the Qingdao municipal government’s new 40% rebate (offering $750 million over five years to attract productions) possibly impacting U.S. productions that might else go to Australia, Canada, etc.
The much-discussed arrival of Netflix and other high-end digital platforms has proven to be a mixed blessing.
Netflix is a much-appreciated buyer, “especially with U.S. distributors that have gone into bankruptcy in the last few years, and in this tumultuous period where you’re not sure if companies are going to be able to continue their services,” Palos of IM Global notes.
The ways financiers and sellers are acclimating reveal growing tendencies in global financing: more co-funding partnerships, more companies developing TV divisions, and a greater emphasis on developing projects with international appeal.
“Producers have to be open to change, take more risks, create content that’s not as U.S.-centric,” Angel says, “and not necessarily follow traditional models over the next few years, since things are up in the air.”