Monday, July 09, 2007

Financing Animated Films -- Part 2

Once again, I talked about making a part 2 of an article and then ran out of steam. I’ll try to get through this and not cop-out completely.

When a studio makes a film, there are an infinite number of places they can get funding. However, a source that many don’t know about is the film fund. These things act almost like a mutual fund where many investors pool their money together to buy a lot of shares in a lot of different companies. The mutual fund is a great way to diversify and remove risk from an investment of one company. A film fund has similar methodology.

Several wealthy individuals or companies can put money into one of these funds knowing that it will go towards a slate of films. Usually the films are “pre-selected film slates”. Meaning, the studio picks what goes into the slate and what doesn’t. Low performing comedies are in, risky vanity projects are in, and traditionally profitable films … out?

Sure enough, that is what happens a lot of time. Animated films are generally excluded, as are franchise films (i.e. Harry Potter, Spider Man, Pirates OTC, etc). With these two removed from the slate, you are really limiting return on investment.

To their credit, some studios are doing Sequential Slates. Meaning that a fund is investing in any release the studio puts out over a certain time period. Disney has one called the Kingdom Fund. However, they call it Semi-Sequential because they wanted to remove Pirates of the Caribbean and all animated films! Talk about stacking the deck in their favor. Face it, the studio is smart and personally funding the pictures they know will perform well. The investors are being a little slow on the take by throwing their money in the pot hoping to make money on a surprise success like Borat.

If I had a bunch of money lying around, investing in films would be the last thing I’d do. With the creative accounting that is so rampant in Hollywood, it just doesn’t make business sense. Combine that with these lopsided funds, I’m not sure why anyone gets involved.

So, if you were wondering one way Hollywood gets a ton of easy money, film funds is an example. Although it doesn’t seem very profitable for the investor, it still manages to put billions of dollars into the film industry. Someone is doing a good sales job!

Now, if a studio came along and put together a film fund that actually includes the animated and frachise films AND had open book accounting (make sure no funny business is going on)… Then we are talking a good idea. People are trying it. Let’s see what happens.

2 comments:

Rajaraja Cholan said...

we are developing a 90 minutes 3D animated movie looking for co-producer / investor. please let me know how to reach "kingdom fund" or any Investor

brad a, said...

a lot of the funding and business financing for these independent films is because of the name involved. if you fund a film, you get put on all kinds of lists and instantly become someone to know in hollywood. and if you invest in a movie and it loses money, you get a tax break. you see it as a lose-lose situation; i see it as win-win!