The Pains, Promises and Pitfalls of Funding Your Picture
By Michael S. Emerson
While recently enjoying tea with Dr. Baehr, I was discussing the many false leads and dark alleys I had to venture down before finding the needed funding (fifteen million dollars) for my next film. After hearing of my many “adventures” into the world of film finance, Dr. Baehr suggested I put my experiences in written form in hopes of saving other Producers and would-be Producers seeking that same elusive animal (funding) from making many of the same mistakes I did.
First, some background on me. I have been in the entertainment industry for over four decades. I started in radio back in the ’80s, where I created and hosted the radio news feature, “FACE TO FACE”, heard daily on 126 stations throughout America and 697 stations in 41 nations around the world. From there I went on to Produce three feature films and hundreds of commercials and television programs for The History Channel, Discovery, Bio, A&E, etc, etc. I have been fortunate to win over two dozen national and international awards for my writing, directing and/or producing not including a Clio nomination (I lost) and two Pollie Awards.
The feature films I produced were low budget pictures, but in each case, I was hired to produce the films after the owners of the film had secured the necessary production funding. Consequently, my job was simple; to put as much of that money as possible “on the screen” to help ensure its audience appeal, thus the financial success of those films.
For those of you who have already successfully produced one or more films, you know that job is tough enough, but taking an idea and then developing it into a viable film property and then finding the money needed to bring it to the screen is a whole different animal.
First and foremost, if you don’t have a pragmatic side to your creative genius, find someone with whom you can work who does. Why do you ask? Because, in spite of all its glitter and glamor, Hollywood is a business.
There is little of no difference between a feature film and the latest home widget. They are both driven by market demand. If there is no sustainable market for your film or its subject matter, don’t waste your time trying to get it made.
The picture for which I have recently secured the funding (RAVEN FOUR TWO) is the true story of the most decorated woman in US military history, and the Military Police Unit in which she served while serving in Iraq. Her name is Leigh Ann Hester and, at the time, she was a 23-year-old shoe salesman from Bowling Green, Kentucky who joined her local National Guard and found herself deployed to Iraq during some of its most intense fighting. She and her Unit became the target of the largest Al Qaeda attack in the history of the Iraqi War.
Does her story sound as if it has audience appeal? Of course it does, and so should your project. If your film doesn’t have wide audience appeal, I suggest you save yourself a lot of heart-ache and find one that does.
As mentioned, Hollywood’s middle name is “Business”. The only reason studios were formed in the first place was to provide films (widgets) to film distributors so the distributors would have something to distribute to make money! Once you realize and accept that reality, you are on your way to finding your funding.
First, the hardest money to find is “Development” money. Specifically, the money you will need to 1.) secure the rights to your story (assuming there are rights to be secured), 2.) spend on a qualified writer to bring your story to life on paper and 3, to then budget and board your script so you have an accurate idea as to the real cost of making that film and bringing it to the screen.
Speaking for myself, I spent, (maybe a better word is “wasted”), almost three full years of meeting with known, qualified producer’s (both
independent and Studio), who after hearing the story, were excited about putting together the funding needed to “develop” the project. I have no intentions of mentioning names because each of these individuals are good, well-intentioned people who simply fell short of their promise to find me the monies needed to get the project through the development stage.
Three years! That’s a long time, but in each and every case, the individuals and/or groups I approached were “positive” they could find the development monies I was seeking. In each case, they were wrong.
Finally after spinning my wheels waiting for someone else to come through with the development monies needed (an estimated $200,000), I decided to raise them personally. I reached out to friends capable of investing in such a venture and made them the following offer;”… for every dollar you invest, when the picture is funded, I will pay to two dollars back”. I also added, for every $25,000 invested, I would add one percent ownership in my film. With that incentive, I raised $100,000. The second $100,000 came from me.
I then reached out to a man I consider a friend, and Hollywood considers a good Director. Working alongside of the writer, with his help and guidance, the script took shape and my picture was “born” on paper.
My experiences have taught me, re-writes would be inevitable, but at least I had a viable script from which I could determine just how much production financing I would need.
The first budget came out at approximately ten million dollars. With that line-item budget, I knew I had a viable project, with audience appeal, at a realistic, yet reasonable cost.
Now began my education in the world of film finance.
The first thing I learned was that I really didn’t need the full ten million dollars. What I really needed was to gain the attention and interest of an established national and international film distribution company capable of accurately assessing the market sales projections of a picture of this genre (Action/War etc.) both domestically and internationally. Those projections would determine the financial viability of my picture.
About this time, I was asked to speak before a group of upcoming producers, writers, and directors at a film seminar in Culver City, CA. I went there to impress upon them that the worst thing a director or producer can do is to rush into production BEFORE they had fully thought through how and where their film would be distributed. Also, speaking that day was a woman who was well known and respected for her knowledge of film distribution.
She spoke after me, but I purposely waited to hear what she had to say. I was impressed with her knowledge and after her presentation, I approached her and asked if I could buy her lunch, because I had a project for which I wanted to seek her expertise.
Once she learned of my project’s storyline, she too fell in love with it and put me in contact with the owner of a well-respected, international film distribution company.
Once he and his staff heard the storyline, they too fell in love with the project, not because they were overly patriotic or catered to stories about strong women, but because they instantly recognized its “marketability” both domestically and internationally. In other words, the film’s high probability to “make money”.
Thus began my “education”
This is what I learned. (Please keep in mind, formulas change, but for the time being, the following information seems dead-on.)
A Studio’s “sweet-spot” for a film’s production costs in in the range of 12 to 20 million dollars. They have found these size budgets, can result in good production quality with marketable “Star Power” (talent) attached, while at the same time, keeping production costs low enough to maximize the possibility of a decent ROI (return on investment = profit).
Here is where it gets interesting.
Eighty percent (80%), or more, of your film’s production costs can be secured through areas other than equity (investors) financing. These area include, bridge loans, matching funds, pre-sales and, when applicable, tax credits and government incentives.
That’s why you need to associate yourself with a reputable and viable film distribution company. They should have the knowledge, contacts and experience to bring those additional funding sources to the table for you.
However, what is normally needed is what is referred to as “first equity” funding. That denotes the actual investment made by actual investors in your film. A Rule of Thumb seems to be your “first equity” investment should be approximately fifteen (15%) to twenty percent (20%) of your actual production budget.
In its simplest form of explanation, other people are willing to invest on your film through the methods outlined above, but they don’t want to be the “first investors” in your film. That logic makes sense to me so I can’t argue its merits, but as mentioned earlier on, although “Development Money” is the hardest money to raise because it is the money at greatest risk, you will normally find, “First Equity” money to be the second hardest to find.
In my case, I did align with a very reputable and well-respected international film distribution company that felt extremely confident they could easily raise the needed ten million dollars to make my film. I am confident they tried very hard to accomplish exactly that, but in the end, they had only secured eighty percent (80%) of the budget through the various methods explained above, but, they could not secure the needed twenty-percent (20%) in First Equity monies and the entire funding package disappeared before my very eyes. I had lost another year.
Welcome to the real world of film financing.
There are many advantages to attempting to fund your picture through the methods mentioned here, the primary of which you have the highest probability to maintaining control of your picture. Although, when a distribution company provides your needed funding they have every right to name a Line Producer acceptable to them in order to watch over the expenditures of those funds raised by them. However, since the bulk of your funding would be coming through sources other than “equity financing” more often than not, as the project’s originating producer, you should be able to retain a much larger part of the picture’s ownership.
(To clarify, fifty percent (50%) of a film’s ownership is always retained by those who fund it, while the remaining fifty percent (50%) (often referred to as the “Producer’s Fifty Percent”) is retained by the producer and used to share amongst the Above The Line talents whose status will afford them the right to share in an equity price of the project in addition to their talent fees.)
Now, into my fourth year of trying to bring my project to the big screen, I found myself having to start over in my attempts to find my needed funding. The concept of giving up was never an option. Not only is that not in my nature, but I still had to make good my promise to my friends who had made possible the first one hundred thousand dollars ($100,000) spent of the film’s development.
Again, I started talking to anyone and everyone in the industry I could about my film. I knew the storyline was marketable, but by now I was extremely leery of anyone and everyone who showed interest and claimed to have the needed financing. I literally got to the point that I would not enter into serious discussions unless and until I had verified they actually already possessed the actual needed funds and didn’t have to go out and raise them through other investors.
My persistence paid off and before too long I was sitting in a Board Room overlooking West Los Angeles talking to a room full of production people, lawyers and investor representatives. In short, they read the existing script (budgeted at ten million dollars), wanted to make it a “bigger” picture, increased the budget to a minimum of fifteen million dollars, hired new writers and put the script into a full re-write.
The benefits to me? First, the new funding group immediately made good my promises to my investors and paid them off, doubling their original investment with additional participations.
Next, the picture will be made bigger and better and with greater “Star Power” than I could have hoped and it will be assured a wide release (1200 to 1500 theaters or more) with a large P&A Print and Advertising) budget to promote the film.
The negatives to me? Well, even though I am still one of the film’s lead Producers, I had to give up control of my film … not an easy thing to do. Another drawback to me was by doing into a complete script re-write, the actual production the film will now be delayed into next year.
By the time my film reaches the theaters, I estimate I will have been working on making it a reality for seven (7) years! When I mentioned that to Dr. Baehr, he laughed and said I am still ahead of the game because the average length of time for a film to reach the big screen is thirteen (13) from conception to release.
My advice to all you producer’s seeking funding for your film?
First, make sure the topic and the production package has a potentially large enough ticket-buying audience to ensure the probability of a successful financial return for everyone involved.
Second, remember that your time is a non-renewable asset. In looking back over my experiences, the only thing I would have changed is the amount of time and faith I invested in those individuals and groups who wanted to be part of my film. Each one was a viable avenue to funding, but I should not have given them so much time to perform. I should have requested (if not demanded) weekly or bi-weekly updates and then, after a reasonable period of time (ninety (90) to one hundred twenty (120) days), I should have moved on to the next potential funding group. If I had done that, I am confident I could have shaved at least one or more years off my first three years of wasted time seeking funding.
Third, always be optimistic. Discuss your project with as many people as possible always letting your passion show through. At the right time and with the right people, your passion will catch on.
Fourth, always have a back-up project going. Throughout my years of trying to make “RAVEN FOUR TWO” a reality, I maintained my status as a writer, producer, director by working as often as opportunities offered. Not only did it provide needed income, but equally important, it kept me surrounded by other creative talents through whom other doors opened.
Fifth, know your limitations. Trust in your own instincts and abilities, but always recognize your limitations. Knowing what you don’t know and finding trusted individuals who can fill those voids (such as domestic and international distribution, foreign sales etc.) is far more valuable than relying on your own limited knowledge and experiences.
Sixth, never give up. Persistence reaps its own benefits. If your persistence doesn’t lead to the funding of this project, it will open doors to other projects that will reap you your rewards, and finally,
Seventh, never … ever lose faith in yourself. Remember, if you don’t believe in yourself, your abilities and your work, …. no one else will.
Welcome to Hollywood!
**Editor’s note: Award-winning writer, producer and director Michael S. Emerson provides a candid, eye-opening view of his quest to fund his new film.