filmmaking/financing

Why banks don’t lend money for films

Posted on by ndorra / 1 Comment

Filmmakers often wonder why banks won’t lend them money, so that they could complete their financing plan. Often it may be only a 10% gap that needs closing, a sum that would seem like peanuts for any bank. But still they get rejected and wonder why.

In this situation it helps if you try to put yourself in the position of the banker. What is their view of you or your project? What is their business model like? How do they usually handle bank loans? And why wouldn’t they usually lend money for films?

Think like a bank

First off, conventional banks are not in the business of taking risks. Banks are interested in securities, low risks and timely repayments. They lend money only when they are quite sure to get it back, and be able to charge an interest on it.

Now film is a business of risk taking through and through. Film is not a product industry, where you can prototype as long as you need to get it right and then multiply the prototype for profit. Each film is a prototype and you don’t know how well it will sell until you’ve put it out in the marketplace. Now that’s a serious risk – and few banks are interested in taking that.

Film financing is a perplexing discipline

And there are more issues that make film production companies or film projects less desirable credit takers for a bank:

  • Banks seldom know the film business. If a car manufacturer asks for a loan, there’s almost certainly someone in the bank who has previous experience in the business and can handle the account. With film that’s not the case very often. Especially in Europe, there’s a lot of regulations and special financing instruments at play. This means that a project can become very hard to “read” for a banker. They need to sift through lots of documents to understand what implications the legal framework brings to the loan, and how the different elements of film financing affect the bank’s position.
  • The film business is quite small. Banks like to lend lots of money, with big securities for long repayment times, so that they can charge their interest for a long time. A film project’s loan and repayment schedule are usually not proportionate to the amount of risk.
  • Projects often have much bigger budgets than their respective production companies have equity. Depending on the country you can have a single purpose company with 2.500-10.000 euros in equity and no financial assets producing a film with the budget of 15 million. That’s a big red light for a banker!
  • Banks like secure securities. That means, that for a banker your sales agent’s pre-sale estimates aren’t necessarily worth anything, especially if the whole film business model is alien to them. They have questions like “but what if the film never gets made, who’ll pay?”. This is where completion bonds come in, which basically are insurances designed to make sure a film gets made and the financiers get paid. But completion bonds are usually expensive for European film budgets, which again makes securing bank loans difficult.

So what can you do?

If you can finance your film with other instruments, do it. Money is attracted to money, and banks make no exception. It is far easier for big corporations, listed at the stock exchange to get bank loans, even though it may seem unfair.

If you’ve exhausted all other avenues and still come short, be prepared to role-play a banker. Think about your project from their side of the table. Think about everything that could go wrong, all the angles that might threaten the repayment of the loan.

Then think about reasonable ways to work around those problems and prepare a good summary of the financial instruments and administrative legislation that is applicable to the financing of your project. With these you might have a chance, but it’ll still be a tough job.

New developments in the EU

If you are a producer in an EU country things are getting better. The European Commission has established a new support mechanism with the MEDIA Production Guarantee Fund, scheduled to start in January 2011. The idea is that the fund will guarantee a part of a bank loan, and lower the threshold for banks to enter the film financing business. I’ll write a separate post on this soon.

(Post based partly on the presentation by Isabelle Devaux from Cofiloisirs at Cartoon Feature Munich 2010)

animation/filmmaking/producing

What makes an animated film expensive?

Posted on by ndorra / 1 Comment

Animation productions are quite different from live-action films in the factors that influence a project’s budget. There are many elements that determine the budget size, and in this short summary I’d like to go through the most important ones. If you think I have left an important one out, please reply in the comments!

Script – Complexity. The more characters you have on screen at the same time, the more work it will be for the animators to co-ordinate and animate the movement. There is a reason why crowd animation and crowd simulation software is a good business. Also, the more action the script and storyboard call for, the slower it is to animate and the more it will cost. Talking heads are cheap, especially if they have no lips that need to be lip-synced to the dialogue. Complexity also includes the amount of characters, locations/backgrounds and props in total, as all those have to be created from scratch.

Script – SFX. The amount and complexity of special effects called for in the script and its interpretation by the director, Art Director and storyboard artist, directly affects the special effects budget.

Script – Running time. The longer the film, the more animation will have to be produced and financed. This is the reason for many animated features having a running time of 75 minutes instead of 90, as you can tell a complete story but save 16% in your budget. Also see “Storyboards and animatics”.

Storyboards and animatics. These are your most important tools in controlling costs! Full blown animation is not a medium to experiment with, unless you do it on your own money. Unlike live-action, you can’t just do a different take to see what works best – it would blow any budget. With storyboards and animatics however, the cost for changing things around and trying different approaches is next to nothing. Use this to your advantage, make a perfectly timed and framed film at this stage and your accountant will thank you for it.

Technique – Manpower. It is a very different thing to make an animated film with CGI, puppets, pixilation or the good old paper and pencil. The largest cost factor in any film project is manpower, and the various techniques differ in how work intensive they are. There’s no easy rule to say that one technique is cheaper than the other, it always depends on the specifics of a project.

Technique – Equipment. The choice of animation technique will also affect your needs for hardware, software, render farms, studio size, prop and puppet department, etc. Again, you have to choose a technique that does your script and target audience justice, so keep them in mind.

Production design. It starts with the script and the level of detail put forward in the director’s and AD’s plans. If your characters have four instead of two legs (or are octopi!), your animator’s will have a lot more to do. The more intricate the textures and surfaces, the more details on the characters, the more work it will be to create, animate and possibly render them (if the project is CGI). Fur, water and fire for example can be major headaches in CGI animation.

Camerawork. You can do a lot to make an animated film cheaper with smart use of the camera. This is where good planning and an excellent animatic pay off, as you can possibly save days worth of animating legs, if you frame your shots right.

Coproduction. I have discussed the added costs of coproduction in a previous post. Of course you only enter into a coproduction if it enables you to raise more money than what you could raise on your own. However it is good to keep in mind, that some of that money is never seen on screen. Animated coproductions also have a different structure from live-action ones, so I find it important to list this point here as well.

In closing
The idea should never be to kill all possible costs, that would only leave you with a bland film. It is however imperative for a producer to know what elements affect the budget and what can be done to keep costs on an acceptable level. In the end it is a matter of finding the right balance: Producing the perfect animated film in a way that it can be financed.

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animation/financing/producing

On stereoscopic 3D

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This week I attended the Cartoon Masters Feature seminar in Munich. A big theme in several presentations was stereoscopic 3D or S3D, with such speakers as veteran director Ben Stassen, who’s made more IMAX films than anyone else. Here are some of my take-aways from the lectures:

On storytelling

The most important discussions centered on how S3D is not just a gimmick, it is a possibility to change the language of cinema. Just as the advent of sound film changed writing (you needed dialogue all of a sudden!), acting, directing, editing etc, S3D changes the way you think about film – if the filmmakers do it well.

This was best illustrated when Stassen showed an excerpt from his film “Sammy’s Adventures: The secret passage”. Compared to films like UP or Avatar, this was just a completely different experience. It wasn’t a film conceived as 2D with a bit of depth here and there, the whole cinematic language, framing of the shots, compositing of elements, everything was different. It felt like a breath of fresh air, this is how S3D is supposed to look like!

Of course, all speakers agreed that not all films have to be made in S3D and not all films lend themselves to it. Interestingly, James Cameron was quoted saying “A real filmmaker doesn’t change the way he makes films.” I was left wondering, whether people who think like this will find themselves in the same problems that silent actors did almost a century ago. I’ll chime in with Stassen, that if you make a flat film, make a flat film. If you make a S3D film, don’t just write it as a flat film and add some gimmicks, do it well.

On marketability

Sales agents, distributors and cinema marketing experts all repeated the point, that without a S3D version, your feature film may suffer at the box office. Gregory Chambet from TF1 International gave the example of Sylvain Chomet’s “The Illusionist”, which didn’t have a S3D version and flopped in cinemas despite of critical acclaim.

The reason here is, that cinema owners in Europe have invested lots of money into the new technology, and want to utilise it to return their investment. The technology is deployed for the best and largest screens, so a non S3D film might easily be pushed into the fringes.

On costs

The speakers found it difficult to give anything but rough estimates, because each project is so different. Stassen said that depending on the project, you can expect to see a 10-30% budget increase if you produce a well executed S3D film with parallel camera (his preferred way of S3D). This would mean planning all the shots as S3D and taking into account increased shooting time & rendering effort.

Maria Costeira from XpanD mentioned a figure of 1.500 euros per minute for a badly done conversion, and up to 10.000 euros for a well done one. That is the per minute budget for a European animated TV series!

In conclusion

I think S3D has immense potential to deepen immersive storytelling, as soon as some remaining technical hick-ups are cured and the cinemas become better equipped for S3D needs. The budget constraints will continue to be a problem, especially for independent producers, and especially if you want to do a really immersive film like Sammy.

It seems at the moment, that ideally you would need to make two similar, but not identical films, a S3D version with a certain kind of storytelling and camerawork, and a flat version for TV and DVD.

As a final word: Go and see Sammy, it is the future of S3D animated film!

financing

Crowdfunding 101

Posted on by ndorra / 3 Comments

The 26th Interfilm festival for shortfilms was held in Berlin last week. In addition to some great screenings I also attended the ShortFriday event, which included a panel on crowdfunding. This year crowdfunding has become a buzzword in Germany as well, which is underlined by the fact that three new crowdfunding platforms have gone online during October and November.

The groundrules for crowdfunding

On the panel were the founders of these three platforms (Startnext, Pling and Inkubato) as well as Aaron Koenig from Bitfilm, a veteran player in shortfilm distribution. The speakers formulated a few rules for a project to have success with crowdfunding:

  1. Your community is everything. Without word of mouth and a positive ring to your project you cannot raise financing through crowdfunding. Many successfully crowdfunded productions employ half or full time community managers to keep in touch with their tribe.
  2. The artist is at the heart of all crowdfunding efforts. You cannot sign up to one of the platforms with a project and just expect the money to roll in. You have to give your financiers a good reason to part with their hard earned money, just as with any other sale. Like the often repeated mantra of film financing goes, “at the end of the day, people invest in you“.
  3. Giving back is important. The producer does not share any IP-rights of the film in exchange for money donated by the crowd, so he has to compensate these supporters and early adopters in another way. The possibilities are endless, from signed special edition dvd’s to invitations to visit the set during filming. The point being: Why would someone give you money up front, instead of waiting and deciding when he sees the finished product.

When does it work?

So what kinds of films does this financing model suit? Koenig from Bitfilm summarised it well. It works best if

  1. you need a small amount of money (my guess would be between 500 and 5000 euros). This is still possible for anyone through dedicated effort and mobilising your tribe, and may well take your no-budget film from being a pipe dream to being a reality.
  2. you are a name in the business. Koenig’s example was that Quentin Tarantino would say that he’s had enough of the Weinstein brothers and now seeks crowdfunding for his next film. With his critical mass of fans this could work out.
  3. you have a controversial subject for your film, like the crowdfunding success The Age of Stupid. This requires that people feel strongly enough about your message, so that they want to make sure the film gets made.

In the end, Koenig said, if your film has enough commercial potential you don’t need crowdfunding, but will be able to find the money elsewhere.

Conclusions

I’d say that crowdfunding has it’s specialist uses, but it is not a wonder instrument for financing any kind of film. If your project benefits from the features mentioned above, and you’re prepared to do the leg work, it is an interesting avenue to explore. It could also be very useful in financing development, a phase that is often heavy on expenses and short on funding.

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animation/filmmaking/financing/producing

Animation is a “born global” business

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The headline is borrowed from Petteri Pasanen, producer of the Helsinki-based Anima Vitae studios, who put it forward in his presentation at the Animation Financing Seminar last June. The gist is that compared to live-action films, animation travels between territories much more easily, even naturally. This statement is also supported by statistics:

According to an analysis by Finnanimation, animation makes up 45% of the audiovisual exports of France, even though the sector only contributes 4% to the total of the country’s film production. The exports of course also includes animation used in games etc, but it still is a staggering difference. Even in Hollywood the proceeds from animation are around 15%, while animation makes up only 3% of production.

But what is it that gives animation such international potential?

  • First, there’s no language barrier. As animation is always dubbed, there’s no problem with the reception by audiences. The voice vs. actor/character relationship is always similar and lip-syncing is not a problem – unlike live-action.
  • Second, there’s no cultural barrier. Whereas you can often tell that a film has been made in Europe or the US or on another continent just by the look, animation has a universal visual language. Besides, the world of most films is a fantasy world after all and the audience is already expecting it.
  • There’s no star cult within animation. Yes, the US market often moves according to which celebrity voices are attached to a project. But even there a foreign production has the possibility of attaching a strong, possibly even partially A-list cast for the english version. And it doesn’t raise the budget in the same way as it does with a live-action film.
  • Finally, many films are children’s or family films. Even though there are subjects that don’t translate, children are remarkably indifferent of things that would keep adults from embracing a film. This last point naturally applies to both animated and live-action films.

Of course, this ability to travel is a prerequisite for European animation. As most projects are impossible to finance in only one country or territory, coproduction is a must. If animation wouldn’t translate so well, the European animation industry would be seriously underdeveloped.

What does all this mean for a European producer?

  • That you even have a shot at making your project.
  • That a) if you didn’t have to presell all your international rights to finance the production, and b) you completed a great project and c) you didn’t choose an approach that’s too local, you have a chance of making a decent profit from the international exploitation of your title. Congratulations!

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animation/filmmaking/financing/producing

Why Finnish animation kicks so much butt

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I state as my opinion, that the different kinds of animation productions coming out of Finland kick lots of butt. Not only do they compete for and win international awards, but they’re also witty, cost effective and have memorable production designs. So the question is, why is it that we Finns make such great animated projects?

  1. Creativity. There is a big untapped reserve of creative people with big and small ideas. Pair that with the Northern European mindset, that is a bit different from let’s say the Anglo-American one, and you get quirky ideas and great concepts that are a breath of fresh air for people used to the standard fare of the animation market place.
  2. Technology. Finland is better known as a country of engineers than it is as a country of film-makers, but that’s ok, we’ll show you soon enough. Also, the deep technical know-how that has grown out of a strong educational emphasis coupled with developments like the Demoscene movement result in a solid backbone for the computer aided animation sector.
  3. Being under-financed. Turning a weakness (cold winters, a small number of inhabitants, less-than-optimal financing options for animation) into an opportunity (ski jumping success, a culture of helping one another, making each euro count) is an inbred trait with the Finns. Now that we’ve learned to make premium quality animation productions with moderate production budgets, we’re ready for anything.

These are my opinions and you may have others (regarding the reasons or even that it’s actually another country that does the butt-whipping). If so, please comment or write a blog post to continue the discussion!

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producing

Co-operation instead of competition

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The Finnish animation producers have been co-operating under the banner of Finnanimation since 2005. It started out as a group of producers who attended the MIFA market in Annecy. They discovered that they could share some of the costs and help each other with all the hassles involved in putting on a successful market presence.

From picnics to presidential visits

The first year saw a great picnic party next to the market area and lots of new connections benefitting all involved. Since then Finnanimation has not only grown in members, but has published an annual tabloid showcasing it’s member’s productions, been featured in Animation Magazine, organised a presidential visit to country’s top animation studios and lobbied the government agencies for more support for animation and the audiovisual sector as a whole.

I’ve been involved in Finnanimation since autumn 2005 and for me the emphasis on co-operation and the genuine desire for your colleagues to do well is hugely inspiring. There have been numerous instances, when somebody has been wondering aloud how helpful the Finnanimation people are towards one another. As I don’t have experiences from other audiovisual sectors this came to me as a surprise – why would anyone NOT want to work together to put up a good international presence?

Furthering a common goal

Of course producers also compete for some national resources, like production financing from support schemes or TV pre-sales. But the point is, unlike other forms of audiovisual entertainment, animation is a “born global” industry and there is little point in competing with one another on a national level. Instead everyone is embracing co-operation as a means of furthering a bigger goal: The reputation of Finnish animation as a whole.

For it is common sense, that when one project or company from a country does well, it instantly draws attention to the other productions as well. It is not a zero-sum game, but one where you sometimes advance your own goals best by pitching someone else’s production – all known to have happened at the Finnanimation stand.

filmmaking/producing

The One Tip for being a better producer

Posted on by ndorra / 2 Comments

Producing anything from theatre to iPad games requires lots of knowledge, connections and hard hard work. However, there is one thing that, in my opinion, you cannot be without as a producer. I’ve told this to media producer students in my lectures and to people who’ve asked me about my job as an animation producer. Without this ability you can still be a producer, but you will be having a much harder time. Here it is:

  1. You need to know who knows what.

That’s actually everything you need to know to be a producer, when you boil it down to the bare minimum. In the olden times, when you couldn’t get a degree in film production, this is what made people from totally unrelated fields jump into the producer’s seat.

If you know who knows what, you know

  • who can write you a script on a topic you want
  • who should direct this particular story
  • who should do the production design that fits this animation show
  • which studio is best suited in terms of it’s talent and production pipeline
  • which distributor or broadcaster would want your project the most
  • where else you could find financing for your project

And so on and so on. Because the producer’s job is not to write, direct, animate or whatever. The producer’s job is to put together a great project bible, the best possible team and the financing required to implement the plans. And for that you need to know.

You might argue that this is actually just another way to say “networking”, and yes there are some overlaps. However I’d say that knowing who knows what goes beyond simple networking. It also involves thinking outside the box, combining unthought-of elements in a creative way and putting up new ideas to be critiqued.

So how do you get to knowing who knows what? I don’t think anyone can ever master this ability, but you can always try to improve. Some tips I can think of:

  • Network within your industry, but also
  • get to know people outside the industry. You never know who knows whom.
  • Read a lot. Trade magazines, daily papers etc.
  • Talk to people. Online, in person, on the street, in a cafe, wherever.
  • Go to festivals. A lot. Here you meet people, see films, get inspired etc. Also others than just animation festivals.
  • Go to trade events. The MIFA in Annecy is a good place to start.
  • Watch films and note down interesting people in the credits, folks you could consider for future projects.
  • Ask around. Your colleagues, on Twitter, at trade events. Ask who does what.
  • Just be curious in general, it makes life much more interesting as well =)

These are my two cents. If you have an idea, on how to broaden your knowledge, please drop a comment below!

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animation/filmmaking/financing

Coproduction as a form of financing animation

Posted on by ndorra / 7 Comments

In Europe, especially in animation, coproduction is a necessary evil. In most cases you simply cannot finance your animated project with money from just one territory, but you have to enlist the help of one or more coproducers. Of course there are exceptions, where smaller projects or better funded companies (often in France, the largest animation market in Europe) can make do without coproducers, but these are not the norm.

So what a producer has to do, is to shop around at markets (Berlin, Cannes, the MIFA at Annecy) or financing events (BUFF financing forum in Malmö or Cartoon Movie, the premiere financing platform for animated features in Europe), in hopes of finding coproduction partners.

The plight of the producer

Like German film lawyer Patrick Jacobshagen says in his book “Filmbusiness”, coproduction is often like a union between hardship and misery. All coproduction partners are producers and none have much money to invest in the project themselves. However coproducing helps the project in providing access to multiple streams of film support schemes, as each coproduction partner applies for funding at his or her film fund. Some money, like the EU’s MEDIA scheme or the NFTF – Nordic Film and TV Fund, can only be accessed if you have multiple countries on board either as coproducers or at least through sold rights (like the NFTF).

The European coproduction system for animation has been alive and working for a long time, and has been criticised for nearly as long. Some major downsides for going into coproduction are:

  • you need to invest time and money into finding a good partner
  • you need to make compromises with the contents of the project
  • you need to give away interesting parts of the work split that you might have wanted to do at your studio
  • you need to implement an approval process, and all important decisions have to be made “by committee”
  • it “costs” about 25-33% of the budget, money that is never seen on the screen

The cost of coproducing

The last figure is only an estimation, but has been repeated by many different professionals in the last few years, so I assume it to be quite representative. This money that is spent “on coproducing” goes into different kinds of costs, for example:

  • costs for flights and accommodation for various producer and creative meetings
  • communications costs (phone, fax, courier services)
  • multiple overheads of each participating production company
  • delays from adjusting to each other’s workflow (on a feature I worked on as PM we had 4 coproducers and 4 different interpretations of the word “shot”)
  • language barriers (most people do not speak a common language as a mother tongue and communicating complex matters can be difficult)
  • delays due to the approval process
  • work that has to be redone due to communication errors

As a thought experiment: A producer would raise 40% of the budget, then enter into a coproduction to gather 27-35% extra financing, with 25-33% being spent “on coproducing”. Of course this isn’t how it is budgeted, but a producer should account for the extra costs early on during budgeting. As a producer, you have to balance these new costs with the possibility of raising the budget required to produce your project.

These downsides to coproducing are a big incentive for producers to try and find alternative ways to finance their projects. At the moment coproduction remains the “beaten path” for European animation financing, but producers would do well in cultivating relationships with investors and financing sources from outside the usual film fund – TV pre-sale – distribution pre-sale triangle.

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financing

The problem with defining target groups

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Working as a hired producer on the Sirius Express series for the Elokas Co-operative, I’ve run into a problem common to producers: We’ve shown the pilot episode to dozens of kids from different age groups, and thus arrived at our target age of 6-9 years. However, we didn’t get selected for this years Cartoon Forum (Europe’s most important coproduction and financing event for animation) and the main reason we were given was that our age target was off. In their opinion the show has a 5-7 years target group. But how can we know which figure is more correct? How did we arrive at such different targets?

Of course, this may have to do with any number of factors, starting with the fact that Finnish kids surely have different viewing habits than say Spanish children. But ultimately it boils down to adults making decisions on behalf of children: What do kids want to see on TV?

And on what proof do these adults base their decisions? The only tangible facts they can get their hands on: the audience ratings for channels. These are gathered through devices which record who in the representative households watches what and when. This information makes up the ratings used to determine which shows are hot and which aren’t. For hot shows you can  charge top dollar for advertising air time, for others you can’t.

This system has been the target of much criticism over time, but the advertisers have remained happy. The TV networks are in an interesting situation, as they basically have two different customers: The audience watching the shows and the advertisers paying the networks.

From what I’ve heard from colleagues in Berlin, the situation in Germany has become worse in recent years. One producer told me that ZDF, one if not the most important buyers of kid’s animation, has stopped buying pre-school content almost completely in favour of family shows. The broadcaster’s problem is that they too need to attract an audience that is as large as possible, so airing shows watched by all siblings and maybe their parents as well, is better business.

But where does this leave more specialised shows? And again, can you really decide what kids want to view just by looking at the lowest common denominator? I’m not sure this situation is very likely to change, as TV stations are run on advertising money and TV ads are targeted at the masses. What we can do as producers, is either try to conform to the ratings, or go via a more labourous route and build a following for our shows elsewhere – demonstrate potential. Then we can present the project to a broadcaster in light of what we’ve learnt about our audience.

It’s really a matter of guessing vs. knowing. Guessing what kid’s might like based on representative samples and past experience, or knowing that your audience actually connects with your characters and your production. As always, guessing is the easy way.

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