E = MC2. The Relativity theory of Film Funding.
You don’t have to be Einstein to make a film. Find a story. Not too difficult as DVD stores and the friendly neibhourhood pirate are always around Get some actors together. Walk down New Link Road (Mumbai’s riposte to Sunset Boulevard in Los Angeles though the Marriott is a far cry from the Beverly Hills Hotel) register your script and sell your idea to a producer. Pack your bags and go off on a long holiday with the actors. Remember to pack a camera with some film stock. Come back when you are done shooting and you might have a film. It seems the streets are paved with film stock with stories and talent performing live on the sidewalks waiting to grab their share of the spotlight.
Producing a film seems to be the mantra for big bucks and glory these days. If you park yourself in the Barista situated in the back of Lokhandwala, a busy Mumbai suburban area, you are likely to find a film producer on every table. Actors, directors, writers, cinematographers, production managers, financiers, sales agents can all be found in an area which is all of five kilometers. Dreams are being made and broken over a cup of coffee. All the major labels are a two minute rickshaw ride away traffic permitting. There are four multiplex cinema’s giving you an array of films to view. Come to think of it I met my editor at Barista.
On a serious note, what is it about the business that is making people wanting to pump in the money and time as producers. Barista is not giving any free coffee to this author or editor and the article is being written at least two hundred metres removed from any coffee shop. Neither are we selling promoting tourism in Lokhandwala.
This is an article about raising money for films. Let’s understand what about the business that makes it attractive for people to invest in a film. The entertainment industry is growing at 17% per annum. It is set to double over the next five years from Rs 8500 crore to almost Rs 17000 crore. All certified by various leading business consulting companies. What has been the net result of this in the past three years: the entertainment business has seen explosive growth both in revenues and production scales. Multiplex screens are at 600 plus levels and growing. Digital cinema is poised for quantum growth. Leading companies in the distribution, exhibition and production space have gone the IPO route and raised large sums of money. Some of them have gone to the Alternate Investment Market (AIM) in London and raised even more money. Most companies have had a very good run until now with their results matching or exceeding expectations.
But let’s look west and look at a few examples to see what the world does for funding films. IndieVest is an independent film studio and financier with a member community of high-net-worth individuals who work together to produce top-tier feature films with guaranteed theatrical distribution. Indievest Pictures has Oscar nominated actor Don Cheadle as one of members on its advisory board. Film London launched film production partnerships which had six funds promoting local talent in association with various London boroughs. In a press release Adrian Wootton, CEO of Film London had said: “The Borough Film Fund Challenge creates a unique opportunity for Londoners to make a film. Borough film funds play a pivotal role in supporting local film-makers to take their first steps within the industry and we are confident that this new initiative will encourage London’s next generation of film-making talent.”
The Canadian Council of Arts spends about 7.5 Billion dollars a year though all of it is not on movies but also on other arts and music. The Nordisk Film Fund supports film-makers in Nordic Countries. The Screen Innovation Production Fund The Screen Innovation Production Fund is a partnership between Creative New Zealand and the New Zealand Film Commission. Its purpose is to provide grants to emerging and experienced moving-image makers for innovative, experimental and non-commercial moving-image productions. The fund gives priority to categories such as projects by emerging video and filmmakers of promise that emphasize innovation within or between moving-image genres; projects by experimental or fine art video and filmmakers; projects exploring digital technologies that give priority to the moving-image arts; exceptional, innovative, non-commercial projects by established video and filmmakers.
In co-operation with the German Federal Cultural Foundation (Kulturstiftung des Bundes) the Berlin International Film Festival has set up the World Cinema Fund (WCF) to support filmmakers from transition countries. Until 2007, the geographical focus has been on Latin America, Africa, the Middle East and Central Asia. In February 2007, the WCF announced an expansion of the focus regions: since summer 2007, film projects from South East Asia and the Caucasus are also eligible for support from the WCF.
And last but not the least let me introduce Ryan Kavanaugh the Gordon Gekko of Hollywood. His company Relativity media’s four biggest deals linking Hollywood and various hedge funds and banks, have yielded a commitment of more than $500 million-each. Believed to be the biggest link that Wall Street has with Hollywood his deals have helped fund films that range from Ghost Rider to literary adaptations like Atonement. He is rumoured to be in talks with Harvey Weinstein for funding some of his projects and has a producer credit on 3:10 to Yuma. And most of the above mentioned are people who have seemingly no lack of sources for funding.
So what’s happening in India? In fact, the film industry has managed to evince interest from the most conservative of lenders. Banks, in recent years, have been extending support to the Indian film industry. RBI norms cap the extent of exposure to the sector to 5 per cent and also prescribe stringent rules for lending. Only producers with a track record of more than five years in the field can get access to such lending. IDBI is one of the largest players in this segment. EXIM Bank, too, is a big player, although loans are available only to films that can generate an international revenue stream. Besides, there are companies such as Infinity Film Completion Services, sponsored by GIC (General Insurance Corporation of India), that guarantee completion of films to financiers.
EXIM Bank has extended loans worth Rs 300 crore to the film sector. YES Bank has structured products for content acquisition, not just for filmed entertainment but also for television. As for banks, lending against films is certainly more lucrative, with interest rates at about 12-14 per cent.
Producing a film seems to be the mantra for big bucks and glory these days. If you park yourself in the Barista situated in the back of Lokhandwala, a busy Mumbai suburban area, you are likely to find a film producer on every table. Actors, directors, writers, cinematographers, production managers, financiers, sales agents can all be found in an area which is all of five kilometers. Dreams are being made and broken over a cup of coffee. All the major labels are a two minute rickshaw ride away traffic permitting. There are four multiplex cinema’s giving you an array of films to view. Come to think of it I met my editor at Barista.
On a serious note, what is it about the business that is making people wanting to pump in the money and time as producers. Barista is not giving any free coffee to this author or editor and the article is being written at least two hundred metres removed from any coffee shop. Neither are we selling promoting tourism in Lokhandwala.
This is an article about raising money for films. Let’s understand what about the business that makes it attractive for people to invest in a film. The entertainment industry is growing at 17% per annum. It is set to double over the next five years from Rs 8500 crore to almost Rs 17000 crore. All certified by various leading business consulting companies. What has been the net result of this in the past three years: the entertainment business has seen explosive growth both in revenues and production scales. Multiplex screens are at 600 plus levels and growing. Digital cinema is poised for quantum growth. Leading companies in the distribution, exhibition and production space have gone the IPO route and raised large sums of money. Some of them have gone to the Alternate Investment Market (AIM) in London and raised even more money. Most companies have had a very good run until now with their results matching or exceeding expectations.
But let’s look west and look at a few examples to see what the world does for funding films. IndieVest is an independent film studio and financier with a member community of high-net-worth individuals who work together to produce top-tier feature films with guaranteed theatrical distribution. Indievest Pictures has Oscar nominated actor Don Cheadle as one of members on its advisory board. Film London launched film production partnerships which had six funds promoting local talent in association with various London boroughs. In a press release Adrian Wootton, CEO of Film London had said: “The Borough Film Fund Challenge creates a unique opportunity for Londoners to make a film. Borough film funds play a pivotal role in supporting local film-makers to take their first steps within the industry and we are confident that this new initiative will encourage London’s next generation of film-making talent.”
The Canadian Council of Arts spends about 7.5 Billion dollars a year though all of it is not on movies but also on other arts and music. The Nordisk Film Fund supports film-makers in Nordic Countries. The Screen Innovation Production Fund The Screen Innovation Production Fund is a partnership between Creative New Zealand and the New Zealand Film Commission. Its purpose is to provide grants to emerging and experienced moving-image makers for innovative, experimental and non-commercial moving-image productions. The fund gives priority to categories such as projects by emerging video and filmmakers of promise that emphasize innovation within or between moving-image genres; projects by experimental or fine art video and filmmakers; projects exploring digital technologies that give priority to the moving-image arts; exceptional, innovative, non-commercial projects by established video and filmmakers.
In co-operation with the German Federal Cultural Foundation (Kulturstiftung des Bundes) the Berlin International Film Festival has set up the World Cinema Fund (WCF) to support filmmakers from transition countries. Until 2007, the geographical focus has been on Latin America, Africa, the Middle East and Central Asia. In February 2007, the WCF announced an expansion of the focus regions: since summer 2007, film projects from South East Asia and the Caucasus are also eligible for support from the WCF.
And last but not the least let me introduce Ryan Kavanaugh the Gordon Gekko of Hollywood. His company Relativity media’s four biggest deals linking Hollywood and various hedge funds and banks, have yielded a commitment of more than $500 million-each. Believed to be the biggest link that Wall Street has with Hollywood his deals have helped fund films that range from Ghost Rider to literary adaptations like Atonement. He is rumoured to be in talks with Harvey Weinstein for funding some of his projects and has a producer credit on 3:10 to Yuma. And most of the above mentioned are people who have seemingly no lack of sources for funding.
So what’s happening in India? In fact, the film industry has managed to evince interest from the most conservative of lenders. Banks, in recent years, have been extending support to the Indian film industry. RBI norms cap the extent of exposure to the sector to 5 per cent and also prescribe stringent rules for lending. Only producers with a track record of more than five years in the field can get access to such lending. IDBI is one of the largest players in this segment. EXIM Bank, too, is a big player, although loans are available only to films that can generate an international revenue stream. Besides, there are companies such as Infinity Film Completion Services, sponsored by GIC (General Insurance Corporation of India), that guarantee completion of films to financiers.
EXIM Bank has extended loans worth Rs 300 crore to the film sector. YES Bank has structured products for content acquisition, not just for filmed entertainment but also for television. As for banks, lending against films is certainly more lucrative, with interest rates at about 12-14 per cent.
But returns from lending do not compare to the potential returns that can be earned through equity. This is the new oil rush. Equity funding through route is fast gaining credence as investors believe in “winner takes all”. After all, if a film is a success, a producer can get returns in close to double digit multiples in double quick time. Please welcome the birth of the Indian Film Fund. These funds mobilise money to invest in movie productions. While not all films are successful, and it is a risky business, the payoffs from those that are successful can be huge. Vistaar Religare Film Fund, a venture capital fund has been recently set up to fund films. The fund would set up special purpose vehicles (SPVs) to fund each film project. The revenues from the film will flow directly into the SPV and will be re-distributed according to the ownership pattern. The filmmaker too will have a stake in the SPV.
Pyramid Saimira plans to launch two such funds. One would merely finance a film and offer investors a return of 12-14 per cent. The other would be a pure risk fund, meaning that it will undertake the entire risk of film production and therefore offer investors potentially higher returns. The Mahindra & Mahindra group also plans to launch a film fund with an initial corpus of $50 million to invest in the group’s film business and other media initiatives. Surely, as this is being written, there are more entrants making their plans. What one is really hoping to see is a full fledged industry outsider taking the industry by the scruff of its neck and redefining the business. The only parallel I can think of is what Kishore Biyani did to retail and he did retail before any one else thought it was sexy. Surprisingly the Future Group which has produced films in its past avatar as Pantaloons hasn’t yet announced any plans for the film and entertainment space.
Can someone please find a way of getting Ryan Kavanaugh to India? Only until Mr Biyani or someone like him decides to do it bigger and better in India. The Indian film and entertainment business badly needs an upstart.
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