The funding for movies is becoming increasingly dispersed. How will financing be obtained in the years to come?
The entertainment finance sector has been through its fair share of ups and downs; yet, with the industry as a whole undergoing significant transformation, how will financing methods and models develop? The most influential people in the entertainment sector determine the most fruitful types of investments, offer advice on how to develop the most popular forms of media, and find ways to make the most of the rapidly expanding number of media outlets.
The shifts in consumer behavior toward different forms of media, in conjunction with the ease with which low-budget productions may be made, have raised the importance for businesses and investors to carry out in-depth market research and risk assessments. Traditional means of obtaining financial backing, such as equity-based financing, bridging loans, and tax credits, continue to be attractive instruments for independent film producers. Paydaychampion loans from these Locations in the USA may help with money for low-budget films, new filmmakers, and independent projects.
Consider, for instance, the completion bond for film production. This bond is a type of insurance that is backed by a corporation that guarantees the successful completion of the project. This bond provides banks and other investors with the assurance that films will be produced in accordance with a predetermined timeline and budget. It is most commonly used for films that are independently financed. Then, why do the vast majority of films continue to bomb or run out of money? According to Susan Williams, a partner at the law firm Loeb & Loeb, “what oftentimes holds films back in terms of financing is not that they are using their budget incorrectly.” Rather, “what oftentimes holds them back in terms of financing is that many of them are unaware of the bond fee or contingency that comes with a completion guarantee.”
The proliferation of streaming services across many platforms was made possible by the proliferation of media channels such as Netflix and Hulu, as well as Amazon Prime. In an effort to secure a larger share of the consumer market, a number of other businesses, including Sony PlayStation and YouTube Red, have followed suit. The entertainment business is under an incredible amount of pressure to continually deliver tales that are original, low-cost, and appealing as a result of the fact that many of these channels are now developing their own material from scratch.
According to Pozible, “You’ve Got Shows Like ‘Orange Is the New Black’ Gaining a Lot of Popularity,” and Other Streaming Shows Are Doing the Same. “In addition to this, I’ve observed two other phenomena that have resulted from Netflix’s streaming approach. One reason for this is that much lower-budget television series are emerging onto the market and offering a lot of options for production. To visualize this, think of going from $100 million to $5 or $10 million. The aggregation of rights for international distribution is the second item that needs to be done. There is no longer a restriction on content to only include theatrical releases. For the purpose of securing better long-term value, the sector is currently investigating many new options, such as acquiring foreign licensing and streaming materials with businesses such as Netflix.
What is it that’s causing such a stir in the industry?
The consumer market is no longer dominated by the massive cable companies that once controlled digital streaming platforms, which are becoming increasingly competitive. The knowledge that in order to earn long-term subscribers, outlets need to generate their own material is what has led to the recent uptick in the amount of original content that is being published by nontraditional sites. Even firms like YouTube, which have been hosting user-generated content for a long time, have begun to embrace the concept of large-scale original productions with the launch of their paid subscription service YouTube Red.
According to Jeff Geoffray, managing partner of VX119 Media Capital, LLC, a significant lender in the film and television industry, “Compared to the doldrums of 2007 through 2012, there are a lot of new players in the market and there are digital native-content creators for obscure distributors like Verizon that are putting out content at the level of feature films.” This statement was made in reference to the period from 2007 through 2012. These businesses have come to the conclusion that in order to ensure their continued prosperity, they need to produce their own original content.
The fundamental concepts of supply and demand have a significant role in the decision-making process of film finance. The risk takes into account a variety of components, including committed receivables, cost overruns, and future cash flows; however, the appearance of new streaming outlets can frequently make the calculation more complicated. Today’s financiers are required to factor into their calculations profit margins that are derived from projections of future cash flows generated by residuals and third-party distribution outlets. This also concerns the global market, which is one of the primary motivating factors behind Chinese investment in Hollywood. Pozil says, “Take a look at the successful contract that was struck between Hunan TV and Lionsgate.” There is a well-developed China strategy in place, and it comprises forming partnerships with entrepreneurial organizations in order to broaden the scope of activities worldwide. “Sicario,” “Age of Adaline,” and “Gods of Egypt” are just a few of the films that would not have been made without the collaboration that encourages co-development and co-production.
Alterations in customer behavior have also contributed to the sector’s upheaval. The experience of going to the movies is in danger of becoming extinct because of the on-demand generation. Despite the growth of streaming networks and the stagnation of ticket sales at box offices, studios continue to explore new ways to increase their bottom lines. This shift in audience behavior has been capitalized on by businesses such as the Screening Room, which now delivers recently released films directly to the homes of audiences for a mere $50 for a period of 48 hours. It is yet too soon to tell whether or not this will become the new method of consuming entertainment, but a shift in the expectations and behaviors of customers is undoubtedly on the horizon, and this shift will impact how the industry is financed.
Funds traveling from the East to the West
This pattern may shift in the future, despite the fact that an increasing amount of money is coming from China to be invested in Hollywood. Paramount Pictures, which is owned by Viacom Inc., has just received a cash investment of one billion dollars from Shanghai Film Group (SFG) and Huahua Media. This serves as evidence of the magnitude of Chinese corporations’ investments in the entertainment industry. The investment is dependent on a three-year arrangement between SFG and Huahua Media, in which they will jointly finance up to 25 percent of all films distributed by Paramount, with the option to extend the deal for the fourth year. It is not anticipated that variables external to the company, such as the political environment or financial rules, will have a significant impact.
In reaction to the growing concern around China’s capital outflow into U.S. corporations, Pozil asserts, “The good deals that make sense will always be accepted.” “Capital controls exist in the modern world, but I am unable to predict whether they will be temporary or permanent. I have no doubt that, in addition to the larger idea of currency control, there were a lot of ill-advised investments; the entertainment business is simply one of those industries that have been highlighted. A number of promising developments have surfaced as a direct result of the recent meeting that took place between President Trump and President Xi. Brazil forecasts that “I expect we’ll see an easing of capital regulations either this year or next,” but he doesn’t specify which year. “And as that becomes less restrictive, we’ll see more money and a greater degree of strategic discipline from Chinese investment firms.”
The American film company Paramount Pictures is not the first of its kind to collaborate or form partnerships with Chinese businesses in order to generate lucrative cash flow. Studios like STX Entertainment, Warner Bros., Walt Disney Co., Dreamworks, and Lionsgate are all examples of companies that have created work with financial backing from China. “We’re getting more Chinese stock, either as the complete source or as part of the financing, and it’s growing more prevalent every day,” adds Geoffrey. “We’re getting more Chinese equity, either as the full source or as part of the financing.” Other recent business endeavors include the Creative Artists Agency (CAA) and China’s CMC Capital Partners forming a partnership to expand their operations in China.
“Box offices in China have expanded from $140 million 12 years ago to more than $6 billion today,” says Rong Chen, chief executive officer of Perfect World Pictures. “Box offices in China have increased from $140 million to more than $6 billion.” “It is only logical that we should all work together in order to acquire the biggest audience margin possible,”
Although they are still uncommon, Asian faces and themes are becoming increasingly evident throughout contemporary entertainment lineups. This is despite the fact that appealing to Chinese audiences has become a higher priority for moviemakers. Take the most famous actress in China, Fan Bingbing, for example; she has recently been seen in films like “Iron Man 3” and “X-Men: Days of Future Past,” and she is looking forward to playing larger roles in the near future. In January, she gave an interview to the magazine TIME in which she said, “In ten years, I’m confident I will be the heroine of ‘X-Men.'”
Pozil advises that in order to be successful, “what you need to do is stand out and create an argument as to why your deal makes the most sense to them.” “There needs to be a good strategic move that will assist the Chinese agencies in growing better ties in Hollywood,” you might quote him as saying.