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Film financing is ... complex, to say the least, but the classic debt financing model is backed by presale agreements, where you shop a package (script, directo
by HillRat 5y ago
Film financing is ... complex, to say the least, but the classic debt financing model is backed by presale agreements, where you shop a package (script, director, actors, etc.) to distributors, who agree to buy territorial rights (which may include derivative rights to the IP, such as toys or novelizations); those contracts are then used as discountable collateral for the actual financing. (There are approximately 1,795 other ways film is financed, many requiring a comprehensive understanding of multiple national tax codes, but that's the way it used to be done.)
- b20000 5y agook, so a distributor thinks a movie will make $100MM, they buy the rights for $50MM, and the bank discounts this to $10MM, so they get a loan for $10MM?
- HillRat 5y agoApproximately, yep! For a variety of reasons this approach doesn't hold the pride of place it used to in the indie space; instead you see filmmakers taking on alternate funding, including equity, and then selling distribution at market (the idea here being that a good film with strong reviews will command higher prices after screening, particularly if streamers are interested). For smaller filmmakers, debt instruments are generally relegated to gap financing: high-risk and expensive loans that cover relatively small percentages (10-20%) of the total budget, and are backed less by secured contracts and more by the track record of the team package (including sales agent) -- basically, think mezzanine financing.
- b20000 4y agoweird film people can raise debt on their reputation without personal guarantees but tech people cannot