Alternative Film Funding

December 26, 2018

There is a renewed effort by production service providers to expand their operations into financing and distribution.

Guarantor Now Distributor

In April 2018, Film Finances, Inc. the world’s largest completion guarantor announced its acquisition of Signature Entertainment, one of the UK’s top independent film and television distributors.

FFI Holdings, the parent company of the film and TV completion guarantor Film Finances Inc., acquired UK distributor Signature Entertainment in a deal worth around $6 million.

Signature built a strong brand in the UK distribution market since launching in 2011. It aggregates home entertainment content for Netflix, Amazon Prime and Sky.

Since 2011, Signature has released over 600 titles across film, television, and streaming content.

Service Provider Financing

Many service providers, whether visual effects or other post-production partners, have gradually entered into the financing space.

A common model deployed structures these placements as deferrals or as in-kind investments. For example, if costs associated with providing services is $500,000, the company might defer $250,000. This amount would then be treated as an investment somewhere on the recoupment waterfall.

While in many cases these investments were merely paper investments, whereby costs were inflated substantially to reflect the amount deferred, now many of these companies are becoming more involved as active financing partners.

An increasing number of service providers are contributing hard cash for financing different elements of independent films.

FFI is now one of the fastest growing post-production equipment and service providers.

In November 2017, FFI acquired EPS-Cineworks, a full service, digital, post-editing machine rental business, servicing numerous theatrical and television productions. Later in December, the company acquired Pivotal Post and Buff Dubs, an Australian post-production service provider.

To solidify its dominance in the production insurance business, FFI acquired Reel Media, a US-based entertainment insurance agency and specialty brokerage that offers numerous insurance products to the entertainment industry globally.

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Music Financing

Cutting Edge Group, the largest independent film music publisher, is expanding its role in the financing of independent films by advancing funds for music rights.

Since launching a private equity fund to finance music in films and television, Cutting Edge now puts capital directly into the music budgets of productions in exchange for creating and owning the music copyrights associated with these productions.

The company invests in the music rights as part of the financial close of the film and then oversees all aspects of the music for the production. Cutting Edge then monetizes the rights through the collection of worldwide publishing royalties, soundtrack album sales, secondary licensing of the music to future productions, and more.

These funds provide much needed help close financing on independent productions.

FilmTake Away

As global financial markets slowdown and interest rates increase, independent film financiers and producers will need to diversify the methods they use to finance and create content.

More and more producers are chasing fewer dollars and only those with well-researched procedures and adaptability will survive in an industry only getting more competitive.