Film and TV Financing WorkshopPresented by AAA Entertainment

Local FinancingTypes of Financing

Film Financing vs. Television FinancingInternational Financing

Finance Plan and Budget

• Grants• NFVF, KZNFC, GFC

• Rebates - Tax and Cash• DTI - QSAPE, TPE

• Tax Incentives• 12.O

• Equity• IDC

• Debt Financing • Gap and SuperGap

• IDC• Pre-sales

• MNET, SABC, ETV• MG’s

• Ster Kinekor, TMF• Product placement and integration

• Agencies• Crowd funding

• Indiegogo, Kickstarter, Thunderfund

local financing : types of financing local

NFVF : development, production, distribution - Tier 1-3documentary development - up to R150kfeature documentary production - up to R350kshort documentary production - up to R200kfeature development - up to R200kfeature production - up to R1,3Mshort film development - up to R100kshort film production - up to R200kTV format development - up to R200kMarketing and Distribution up to R250k

KZNFC : development, production, distribution (modelled on NFVF)GFC : development, production, distribution

No fixed amounts. depending on annual budget between R100k & R1.5M

grants

Cash Rebate (Tax Credits not applicable to South Africa)DTI - Guidelines can change any time

Emerging Black Filmmakers Incentive - no CAP50% of QSAPE up to R6M & 25% thereafterQSAPE < R1M

Local and Co-Production - no CAP35% of QSAPE up to R6M & 25% thereafterQSAPE < R2.5M

International - CAP R50M20% of QSAPE & 22,5% post QSAPE > R1.5M & 25% post QSAPE > R3MQSAPE R12M

QSAPE has to be 75% to TPE. Producer/Line Producer must expend according to guidelines to get rebate. Last milestone can be withheld and production invoiced for non-qualifying expenditure

rebates - tax rebates and cash rebates

SARS 12.0 Tax incentivePreviously 24FInvestor must purchase exploitation rights (equity) and not give a loan or creditGives investor option to do one of two

1. Declare film as a loss 2 years after completion and write off net loss of investment against tax bill that tax year

Part of investment that can be written off is relative to investors tax bracket and tax bill in that yearAny revenue accrued will come off the net loss

2. Declare film as a profit and get tax exemption on the profits of the film or series If the film was declared as a net loss prior to going into profit, the investor will be taxed on the profits thereafter

tax incentives

IDCRequirements rough guideline

Pre-sales preferableSales projections from reputable sales or distribution companyAnother equity investor alongside them preferableQualify for BFI, local or co-production DTI incentive

Equity to be recouped in first position, unless GAP financing is in placeAfter 100% recoupment, profit share usually 1 to 1 with investment portionMaximum investment is 49% of the budget

MNETFlexible recoupment positionAfter 100% recoupment, profit share usually 1 to 1 with investment portionUsually alongside license fee in a ratio of 1 to 4

Private Investors - as per agreement reached

equity investors

Gap Gap financing is when you get a loan against the unsold territories to close the gap in financing

Gap is junior in recoupment only to a senior bank loan that is not equityGap is senior to all equity loansGap is generally 10-15% of the budget requiredGap loans generally charge higher interest than a straight bank loan

Super GapSuper Gap is when the Gap loan goes over the 10-15% markSuper Gap charge substantially higher interest due to the increased risk

IDC does Mezzanine financing (Gap and Super Gap)No traditional banks in South Africa are currently doing any Mezzanine financing International banks usually have special devisions for this that employ executive producers or producer

gap and super gap (mezzanine financing)

Pre-SalesA pre-sale is the sale of specific rights in regards to territory, platform and period, on the script and package of the film, to be collected on delivery of the film if done according to contract requirementsA pre-sale is a contract between a buyer and the producers that can be used to get loans againstA pre-sale can also be paid out in milestones during production like with MNET or up 20% deposit on the full resale amount

Minimum Guarantee (MG)A minimum guarantee is similar to a pre-sale, except that once the buyer or distributor has recouped the MG amount from the sales and distribution revenue in their territory and platform(s), additional revenue thereafter will be subject to an agreed distribution commission and the balance paid to the producer or rights holder

pre-sales and minimum guarantees (MGs)

Income from product placement can be used to supplement the budget of a film, but is often not considered an investment upfront by bonders and banks, until it has been bankedThe Bond franchise is notable for its lucrative product placements deals, bringing in millions of dollars. In the film Minority Report, Lexus, Bulgari and American Express reportedly paid a combined $20 million for product placement, a record-high amount.Local films struggle to show the number of eyeballs that will see the product and an up front TV deal is often more attractive to brands than the theatrical potential of a filmTelevision product placement is far more measurable, but broadcasters know this and deduct product time on screen from the license feeProduct placement may also take the form of in-kind contributions to the film, such as free cars or computers (as props or for the production's use). While no money changes hands, the films budget will be lowered by the amount that would have otherwise been spent on such items.Product placement and integration is often done by specialised agencies such as Mad RobotProduct integration requires the brands to be considered during script development e.g. main character works at the Brand company

product placement and integration

Crowd Funding is essentially selling perks or pre-selling the film in a particular format e.g. DVD in order to finance the budget

IndieGoGo (2nd largest)US based crowd funding site : accepts SA bank accounts. Pays out a lesser percentage if you don’t make your funding target

Kickstarter (biggest by funds raised annually)US based crowd funding site : does not accept SA bank accounts. Does not pay out if you don’t make your funding target

Thunda Fund (local)SA based crowd funding site : accepts local bank accounts. Low traction on film projects to date

crowd funding

• Grants• Hubert Bals, World Cinema Fund, CNC, Blu Ice ; many more

www.filmdaily.tv• Rebates - Tax and Cash

• Georgia, Utah, Canada etc• Equity

• QED and many more• Mezzanine and Gap

• Most international banks like HSBC, Wells Fargo etc• Pre-sales

• XYZ, Lionsgate, Sierra Infinity etc• MG’s

• Same as pre-sales• Product placement and integration

• Agencies, Global Brands• Negative Pick Up Deals

• Studios who will buy the film once completed and give contract up front

international financing : types of financing local

film financing

Soft money based (art house and documentaries)These genres and formats generally do not make profits, at least that can be predicted to some degree, and therefor should use as much soft money or non-recoupable investment as possibleThe themes of these films usually have to speak to funds’ mandate or miss statement and are usually of a social issue nature e.g. the Wound

Commercial basedGenre based

Genre includes Horror, Action, Fantasy and Sci FiBuilt in audience for this type of film and usually requires known director with good track record or proof of concept for first timers

Cast basedDrama and other genres that will attract pre-sales based on cast and director Attaching the talent before raising some finance is challenging but the actors guarantee investment once attached

television financing

AFPAdvertiser Funded Programming requires the brand or sponsor to pay for the entire production budget and the allocated airtime on television. Brands require guarantee of minimum audience numbers

CommissionsBroadcaster pays for the full production budget and producers fees in exchange for ownership of the content produced and has full editorial control

Co-ProductionBroadcaster puts in a portion of the production budget and acts as a co-producer and according to the specific agreement can recoup investment, share in profits and sell on rights. Broadcaster has equal editorial and creative control with producer

Pre-saleThe broadcaster puts money up front to secure the exclusive or non-exclusive rights for their platform(s) for a given territoryPre-sales are higher than license fees and allow broadcaster some editorial and creative control

LicenseThe license fee can secured as a pre-license and used to secure lossLicense fees are lower than pre-sales usually and give broadcaster no editorial or creative control at all

finance plan and budget

Finance Plan outlines the investors with the amounts invested and percentage of budgetFinance Plan outlines the equity held by various investors and talent and crewFinance Plan outlines the recoupment chart and the profit share after break evenFinance plan shows each investor you approach where they fit in and where the other money is coming from at what conditionsFinance plan must include any interest and fees on the money raised to show a true net profit break even

Budget needs to match finance plan and each update as the other doesBudget needs to include any finance costs pertaining to production such as writing contracts, completion bonds etc

ANY QUESTIONS