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International Film Financing - Media Desk Polska

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International Film Financing - Media Desk Polska Powered By Docstoc
					Beyond Film financing
      Thierry Baujard
       Peacefulfish

         Warsaw
     7 December2012
peacefulfish
                      Clients


                 Content Producers
              (film, TV, animation, multimedia)
       Co production/Financial strategy/Fund Strategy
                 Public Institutions
       (European Commission, film commissions, etc.)
    Financial mechanisms/film funds/Markets/Intelligence
               Financial institutions
              (Banks, Tax/Equity/Film funds…)
    Due diligence/Market intelligence/Investment strategy
                Service Companies
     (studios, training programmes, (digital) exhibitors)
      Business plans/EU funding/Competitive Strategy



3
    Projects supported by MEDIA

Closing the Gap:
Prepare producers to access private equity inc real
  pitch to investors

ENTER : Training for financiers interested to be
  involved in film industry

Production Finance Market: with film London- Finance
  market for films

3D Film Mart: with Twist in Liege – Only 3D co
  production market in Europe.

4
      Access to finance projects

New policy research and implementation:
Norway, Estonia, Croatia, Malta, Netherlands,
Hessen (Frankfurt), Apulia (Italy), Barcelona, Dubai…
Currently Kosovo, Grand Paris, Lyon
MEDIA research projects:
- Role of banks in Europe
- MEDIA Production Guarantee Fund
- Digital Cinema implementation
- Local social network for local digital cinemas (Pilot
  projects)
Eurimages:
New distribution scheme for non MEDIA countries
5
      Access to finance projects

DG Enterprise
IMmediaTE project: Financial tools for the Creative
   industries between 5 media clusters: Rome, Paris,
   Barcelona, Malta, Amsterdam
CI Factor:
Investment barriers to the creative industries: Online
   questionnaire to 250 investors + interviews
DG Culture
Pilot projects on technology-driven cultural companies
   in Europe
DG Regio:
   Interreg project on impact of film on Tourism (with
   Film London)- Euroscreen.org.uk
6
            Sister companies

MEDIA DEALS:
Pan European investment network for Mediatech
  companies - 3 to 4 Investment readiness
  programmes and pitches per year
www.media-deals.org

Just Temptation:
Investment fund focused on film/TV and Video Games
  music. Publishing company offering music financing
  and promotion. 10 films in 2012 ….
www.just -temptation.com


7
2 traditional worlds of financing films


US / Asia                            Europe
equity driven model                  public funding model

● film = commercial property         ● film = cultural property

● producer => shareholder            ● producer => mostly no own
                                                   financial resources
● financing => private investment,
               money can travel      ● financing => soft money,
                                                    territorial requirements
● distribution => key to attract
                  investors          ● distribution => domestic deal is key
                                                       to access funding
è    closing budget out of
     1 country                       è    closing budget via co-productions
          2 ways of co-producing films


“real” co-production                 co-financing
based on co-production treaties      not based on any treaty


● bi-lateral                         ● independent of governmental
                                       agreements
● multi-lateral
                                     ● not limited to treaty criteria
● qualifying as ‚national‘ film
                                     ● not qualifying as ‚national‘ film

è    full co-ownership of the film   è    „co-producer“ owns nothing
                                          and usually gets domestic
                                          exploitation rights
          film financing mix in Europe

1. Subsidies
   Ÿ Europe: MEDIA 2007
             Eurimage

  Ÿ national (production!)
  Ÿ regional
  è 170 public funds +
     ~600 programmes

2. tax incentives

3. pre-sales in cinema/TV

4. state & private banks:
   gap & discounted
   contracts

5. production deals:
   studio & post production

6. equity funds of
   private investors
              public funding in Europe

European public funding (production funding) is motivated
by „location spend“

general criteria of public funding:

  ð   100-150% of the grants need to be spent at location,
  ð   local production company (co-producer) receives the funds,
  ð   often: minimum budgets or minimum production share,
  ð   often: capped grants,
  ð   often: cultural test,
  ð   often: conditionally repayable loans.

motivation:

  ð local economic effects:
     1€ subsidised generates 2-6€ production spend at location,
  ð the higher the production spend the more attractive the
     production.

 è fierce competition among the European film regions!
              public funding in Europa

               supports European co-productions:

ð full-length feature films, animation and documentaries (>70min)
ð based on bilateral co-production treaties or on European
  Convention on Cinematographic Co-production
ð min. of 2 co-producers of different member states
ð 50% of financing confirmed in each co-production country
ð some artistic and some production criteria must be met
ð 4 application deadlines per year

ð bilateral co-productions:
  majority co-producer holds <80%
  minority co-producers >20% of the total co-production budget
  budgets >€5 million: majority participation can be at 90%

ð multilateral co-productions:
  majority co-producer holds <70%
  minority co-producers >10% of the total co-production budget      .
              public funding in Europa

MEDIA 2007 (2007-2013, tot. EUR 754,95m) provides funding for:
● development and distribution,
● for training and promotion of European films;
● online and off-line interactive projects,
● grants for European games developers.

of all EU members:
Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg,
Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden,
UK and Croatia, Iceland, Liechtenstein, Norway and Switzerland + accession
countries & pre-accession countries to the EU.
             tax incentives in Europe

tax shelters to investors - equity
     • Belgium, investor funds
     • France, Soficas
     •UK, EIS Scheme

tax credits – cash rebate
     • Austria
     • Czech Republic
     • France
     • Germany
     • Hungary
     • Iceland
     • Ireland
     • Italy
     • Luxemburg
     • Malta
     • Norway
     • Spain
     • UK
     …
           …
              tax incentives in Europe

tax shelters to investors
     • Belgium, investor funds
     • France, Soficas
     • Italy
     • UK, EIS Scheme

tax credits – cash rebate
     • Austria
     • Czech Republic
     • France
     • Germany
     • Hungary
     • Iceland
     • Ireland
     • Italy
     • Luxemburg
     • Malta
     • Norway
     • Spain
     • UK
     • Croatia
     …
• Is it enough today?
  – Lower or limited pre sales
  – Less subsidies attached to higher local spend
  – Lack of cash flow financing
  – Requires new marketing partners (distribution)
  – Needs for some transmedia elements (higher
    budget)
  – Distribution challenges (more films, more
    platforms)
  – No Gap finance
          Change of paradigm


• Moving from subsidies-only model to more
  sustainabilty

• Involvement of new financial partners….

         here are some hints….
                Approaches


1.   Company capitalisation
2.   Transmedia approach
3.   Crowdfunding
4.   Cash flow financing

With some examples of initiatives
      1 Company capitalisation


§ Develop slate financing instead of single
  project approach
§ Look for equity investment for company

But problem: immaterial assets, lack of
 expertise in the sector and negative
 company results
      1 Company capitalisation


ØDeveloping attractive company for
 investors: high risks/high returns – global
 reach – value creation
ØTargetting expert investors
ØLinking production to distribution
ØIntegrating distribution in the offer
ØMaybe grouping different companies
 together for developping deal flow
         2 Transmedia approach


•   Film is not isolated anymore
•   Links with other sectors like Video Games
•   Include new types of revenues
•   Create new distribution strategy
cross media financing+revenue model
    media                financing                         revenues

 film       pre-sales, MGs                   production fees
            public & private funds           box office
            tax incentives                   license fees (DVD, TV, web, mobile)
            equity investors                 merchendising
            brands
            cash flow provided by banks
 games      advances on future royalties     sales (console, PC)
            prototype funding                virtual goods, power-ups,
            equity investors                 licenses
            brands
            cash flow provided by banks      memberships (MMG)
                                             in-game advertising
                                             online: various payment
                                             models for consumers
 internet   broadcasters                     online sales
            distributors                     membership fees, subscriptions
            equity investors                 downloads to rent/to own
            brands                           advertisements
                                             community services
 mobile     broadcasters                     apps
            mobile operators                 Apple Store 30/70
            distributors                     revenue shares between mobile
            advertisers -> “advertainment”   operators and content providers for
            brands                           content sold on operators’ mobile
                                             portals -> 50/50, 40/60
           cross media financing

Brand integration
product placement/branded sponsorship/
branded entertainment
• increase production value
• reach your audience
• try to get cash
• exploit cross promotion potential

Distribution
• bypass established gate keepers
• benefit from „world distribution“
• establish early relationship with your audience
  i.e. through social networks
• open new revenue streams
         Experiences interactives

Regional fund in the North of France

1.2 M € fund per year with a cross border element through
financing from Wallimages and Flemish fund

Projects and companies are being financed through the
fund

Financing of Transmedia part only or an integrated
transmedia project

Budget up 20% for 2013
               3 Crowd funding

• Many platforms in Europe now
• Very few are focusing on cinema only
• Average finance raised going up
• Some platforms have a business model based
  on VOD
• Some BtoB platforms like „people for cinema“

• For professional investors: lack of experience
  but strong interest…and there to stay…
• A good market research platform
                                  IRON SKY

   Finnish German Dutch co production
••Finnish German Dutch co production
   Budget 7,5 M€ (1M€ through Crowd Funding/investment)
••Budget 7,5 M€ (1M€ through Crowd Funding/investment)


   Around 5 years to get to production
••Around 5 years to get to production


   Inherited from Star wreck Internet Buzz
••Inherited from Star wreck Internet Buzz
      – Same Director
     – Same Director
      – Internet Platform (Crowdsourcing/Crowd Funding): WreckAMovie
     – Internet Platform (Crowdsourcing/Crowd Funding): WreckAMovie
      (http://www.wreckamovie.com/)
     (http://www.wreckamovie.com/)


   Berlinale Trailer: http://www.youtube.com/watch?v=xeIu1FiTTyI&feature=related
••Berlinale Trailer: http://www.youtube.com/watch?v=xeIu1FiTTyI&feature=related
 •Trailer http://www.youtube.com/watch?v=3aTPmGk2P4c
•Trailer http://www.youtube.com/watch?v=3aTPmGk2P4c
 •Shot in Australia – Frankfurt Finland
•Shot in Australia – Frankfurt --Finland
            IRON SKY: Crowd Sourcing

 Crowd sourcing / Crowd Funding / Crowd Investment
 Crowd sourcing / Crowd Funding / Crowd Investment
    Involve the audience: http://www.youtube.com/watch?v=nLRcUcg2TUI
 ••Involve the audience: http://www.youtube.com/watch?v=nLRcUcg2TUI

                                                                   Scenario
 Crowd             Outsourcing tasks to an undefined
Sourcing                   group of people                      Visual Effects

 Crowd          Cooperation leading to networking and          Online Presence
Funding         pooling the participants for money and
                              resources                         Dvlpt of ancillary
                                                              products (ex:Games)
  Crowd                                                          New potential
                    Large number of small investors                investors
Investing
 ••Characteristics
    Characteristics                                             Helps securing
          Money attracts money
      -- Money attracts money                                 traditional finance
          Sense of urgency
      -- Sense of urgency
          Community Management
      -- Community Management
          Transparency
      -- Transparency                                              Impact
                                                                   Impact
             IRON SKY: Crowdsourcing

• Distribution Support
     -“Demand Iron Sky”: Sign in to declare wanting “Iron Sky” in local theatre.




     Community impact. Ex: Release Strategy in the UK, initially a one day exhibition
     only.

          “This is a wonderful show of force of the people, and a great proof that having a
          big community backing you up makes you stronger when somebody is trying to
          walk over you.” Iron Sky Website, 23 May 2012.
             4 Cash flow financing

5 main lending models:

Interim Finance
    Classic Contract Discounting
Tax-Incentive Financing
  Tax Credit Cashflow
Gap Finance
  Classic Gap Financing
Working Capital


Bank Guarantees for Interim
  IFCIC Model (France)
  Audiovisual SGR Model (Spain)
  Landesbürgschaft Structure (Germany)
lending models
             What the fund does

Guarantee to banks (Max 50%) for interim finance

6 M euros used with leverage coefficient

3 years pilot – end 2013

Support producers with fully financed projects in
  accessing bank loans

Cash flow loans against contracts

NOT a completion bond
         How much and for whom


1.2 m euro guarantee maximum (2.4 m loan) per
  project

Independent producers in Media Member countries

European projects (10 out of 19 pts)

Film, Television, Multiple projects
              Benefits to Banks

Local approach/understanding of local markets

Expertise/transfer of knowledge

Use of guarantee on First Call

Easy integration into loan contract

2nd Due Diligence

Flexible partnership to accommodate local specificities
  (framework agreements)
                                     MPGF – Projects Financed
       Project:                                       “LEGENDA OF VALHALLA – THOR”
       Producer:                                              CAOZ, HF. (ICELAND)
       Co-producer:                                   ULYSSES (GERMANY)
                                                      MAGMA (IRELAND)
       Genre:                                         3D Animation
       Financial Entity:                              LANDSBANKINN (ICELAND)




       Project:                                       “NIKO II: Family Affairs”
       Producer:                                              ANIMAKER, Anima Vitae and Cinemaker
       (FINLAND)
       Co-producer:                                   ULYSSES (GERMANY)
                                                      MAGMA (IRELAND)
                                                      A.FILM PRODUCTION (DENMARK)
       Genre:                                         3D Animation
       Financial Entity:                              LOCAL BANK (FINLAND)



This document has been produced by Audiovisual SGR, with the financial contribution of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union.
                    How to apply


        BANK                         APPLICANT



Compulsory

                                                 Approved
       AUDIOVISUAL           Due Diligence
                                                  Denied
           SGR
     (PEACEFULFISH)

n   Applicants can apply directly or through their bank (see
    www.audiovisualsgr-mgf.eu for application forms and more
    information)
n   No deadline, monthly decision meeting
n   Guarantee given AFTER loan approval
                Conclusions


• All these routes go towards similar points
  that need to evolve:
  – digital convergence and distribution
  – mixing public and private financing
  – involving new players in finance and marketing
  – training producers for investment readiness
  – Focus on portfolio returns
  – Involving communities
Thank you
thierry@peacefulfish.com

				
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