How To Fund A $3-$5 Million Film While Staying Sane

+ what a recoupment and profitability plan looks like

Photo by Kenny Eliason on Unsplash

Hello there and hope your week is going well!

In my last newsletter about rewriting your financing roadmap I referred to the market-necessitated strategy of becoming ‘small but mighty’ with your productions.

But what IF…what if, you have a $3 - $5 million film? What’s the strategy for that and how do you go about financing that kind of budget?

We talked previously about lessons from Sean Baker and his $6 million film Anora. And the fact that for a relatively small budget of $6 million he made a film that premiered at Sundance and won multiple Oscars. That counts as small but mighty in my book 💪

Sean was able to fund his budget with private equity and then get picked up by Neon after the film was completed.

This is the model for most Tier 1 festival similarly budgeted films….they are almost always funded by private money. Either wealthy investors or philanthropy. But some form of private money is in play for a majority if not all of the budget.

One of the most common questions I get asked is whether the big agencies can help with financing. They see CAA media finance or UTA and WME indie financing representing films at these big festivals and want to know how to make that happen for themselves.

The truth is, the big agencies don’t fund outside projects. I used to work at one so I know the intimate details on how internal projects are chosen to be part of the rarified few that avail themselves of these resources. So let’s assume that agency financing is not an option for you.

For a $3-$5 million budgeted film you’re most likely staring down at a finance plan that includes 100% private money, or 70%-80% private money net a tax credit, and maaaaaaaybe 10% from a sales agent if you have pre-sale worthy talent and director and they can front you an MG. Otherwise the reality is you’ll need to figure out a way to fund these budgets with a lot of cash.

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What’s The Recoupment Plan On $3-$5 million films?

I was talking to the financier on one of my $3 million plus films and explaining how he could possibly see profitability.

First there will be a healthy tax rebate. Check.

But then let’s assume once that nets out he’s still exposed to the tune of over $2 million cash. How can he earn that back?

On a number that big you have to hope for a Tier 1 festival premiere and acquisition from a distributor on the level of a Neon (which there aren’t that many!). Luckily I can source domestic deals for the films I produce and EP and don’t require paying a sales rep 10% to secure an acquisition. So at least the financier will save 10% there (and hey, my Producer fee pays for itself and then some!) 🙌

The real bummer is that smaller, more accessible distributors no longer have output deals with the big streamers so can’t justify paying acquisition prices beyond a few hundred grand if at all - and mostly opting for a no-MG rev-share deal. Around five or so years ago one of my films benefited from a Netflix output deal that our distributor had and we were able to get a mid six figure license fee. Five years later, they no longer have that output deal and license fees are down into the mid five figures at best.

So what if we don’t get into a Tier 1 festival and are part of the rarified few films each year that get acquired for seven figure sums?

That’s when a long tail VOD distribution strategy comes into play and the film recoups from reduced licensing fees plus ad-share revenue, little by little, quarter by quarter.

I’ve only once or twice crossed over seven figures in revenue this way on one of my films and it took 2-3 years to do so. I’m not saying it’s impossible but your film really has to catch legs in the market either through an impact release or positive press that propels successful long tail distribution.

So at the end of the call I think the investor left thinking he still might lose money or at best break even before all is said and done.

And that’s the reality of playing in this budget range!

Become an outlier at Sundance or grind out it out over 2-3 years and slowly pursue recoupment and profitability.

You can see why I’m so passionate about lower budgets right now! It’s hard to sell an investor on anything bigger than that when even our best case - a Sundance acquisition - acquisition prices are not what they used to be.

But I do understand that some films can’t be made for less money (which is the case for the one I’m referring to here). So if you find yourself in that situation either keep plowing forward raising private money until you hit your strike price to trigger production, or shelve it while you knock out a few smaller projects to keep developing a body of work which can eventually turn into something bigger.

Does this sound like a situation you’re in right now?

Comment below and let me know what you think or share this with a friend who could use to hear this right now :)

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Look forward to your thoughts on all this and more on this subject coming soon!

Stacey

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