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Investors are integral to an independent film’s success. Film budgets vary widely, from around $20,000 for a micro-budget film to upwards of a few hundred million dollars.
There is a core independent circuit where the films fall in the $5–$25 million dollar range. These films can prove highly successful and are often featured in film festivals around the globe including Sundance, Cannes, Berlin, and Tribeca. That said, these films do not often have the support of major Hollywood studio machinery in terms of distribution, and marketing; so for this and other reasons, they require independent investors, or financiers, who share the producers’ artistic passion for the project.
No matter how well a filmmaker anticipates the budget, independent filmmaking is still a challenging investment. Regardless, financiers are well aware of this fact, and still find the endeavor worth pursuing, but their contracts need to be negotiated and drafted by a professional who is familiar with the parameters allowed, and knows the concerns important to the investor.
1. Track Record and Due Diligence
It is of utmost importance to investigate the reputation of any producer you are thinking of investing in. Not even the finest contract can protect you against a charlatan. Make sure to complete a background check of the filmmaker and team to ensure your investment is in good hands.
2. Creative Control
One of an investor’s major concerns is the level of control over key creative decisions such as casting or location. There is often significant negotiation on this subject between investors and the production’s counsel, but certain terms should always be included. Any significant investor should receive regular consultation, access to decisions, and attempt to negotiate either significant voting power or, ideally, the capability to veto decisions they strongly disagree with.
Often, the production side will retain final decision-making authority, but given a financier’s investment and the leverage they have based on their position in the industry, they should make sure their attorneys argue for as much creative control as reasonably possible so that they have some recourse if they are not attended to.
3. Budget Ceiling
Another important concern for financiers is the potential dilution of their investment in an uncapped budget. If the project begins to exceed the budgeted cost, and the producers decide to raise additional capital via another investor, initial investment values, if unprotected, may be diluted. Depending on a variety of circumstances, any expenditure in excess of the original budget should be pursuant to the initial financier’s prior written approval.
To this end, the financier should be focused on casting an accurate amount of deferment, which allows the production side to go over budget if necessary. For example, if a production desires an unaffordable Director of Photography, but they’re interested in your film, a deferment will provide for this. It is important that the production side caps the aggregate amount of deferment permitted.
5. Sales Agents
The sales agent is the conduit to your film’s distribution outside of its country of origin. It is important for an investor to create minimally meaningful consultation, a vote, or even outright control regarding domestic and foreign sales agents. Fees (ideally 10% for domestic, 20% for foreign), permitted deals, etc. should all require the investor’s written approval.
6. Tax Credits
New York offers many tax credits for filming. Lenders or banks can calculate what the tax credits will be based on in a film’s budget. They can then use the tax credits as part of the financing plan. These proceeds should be included in gross proceeds that are paid toward the investor’s recoupment of funds.
7. Credits Placement
Producer or executive producer credits are important. If an individual or organization invests a significant percentage of a film’s budget, they will want their name to be front and center—an acknowledgment of their contribution, without which the film would not be possible.
For more information, contact the Law Offices of Aaron H. Pierce, PLLC at (212) 882-1752 or by visiting our contact page.