Just as the marketplace for independent features is shifting on the distribution side, so is the world of film financing. Since 2009, raising financing for low- to mid-budget films has been in a state of flux, a series of changes now culminating in the dominance of streaming platforms, which are disrupting traditional territory-based sales models while also employing inscrutable algorithmic methods to guide their purchasing decisions. 

“The middle has dropped out, and budgets are getting smaller,” says Matthew Helderman, partner in BondIt Media, which provides credit financing for film and television productions. Projects that a few years ago might have been budgeted at $7 million are now $5 million; $5 million films are now $3 million. Helderman says that name casts no longer guarantee sales, and pre-sale values are slipping, in part because of streamers’ desire to obtain all international rights. As Creative Artists Agency (CAA) finance agent Maren Olson emphasized during a panel at Estonia’s Tallinn Black Nights Film Festival late last year, sellers are increasingly focused on worldwide deals. This trend toward company partnerships could be seen at Sundance, with Neon and Hulu acquiring Palm Springs for a record-breaking $17.5 million (or $22 million, taking into consideration a reported bonus fee), and Apple and A24 purchasing documentary Boys State in a worldwide deal for $12 million. 

Pre-sales combined with gap, tax credit, soft money (if available in the respective countries where the film is made) and equity were formerly cornerstones of many films’ financing plans. Because including pre-sales in a financing plan is now considered risky, equity is playing a bigger role.

Beverly Hills–based production and sales company Bleiberg Entertainment’s head of acquisitions and production, Nick Donnermeyer, says he noticed more films out of Sundance made up mainly of equity financing. But such financing plans bring their own risks as a slot at Sundance doesn’t guarantee a sale, much less a deal that is assured to provide recoupment. “Even films with big stars now get picked up for a low six figures,” says Donnermeyer. “It’s crazy.”

Co-owner of New York–based Submarine Entertainment Josh Braun also notes the difficulty in selling dramatic features. He says Submarine has “passed on more narratives than you can imagine,” and that the industry is attempting to base film finance structuring as they would have for films that played Sundance in 2008. “It is like a time warp,” he says. “People come to us with a $1 million indie drama with no cast. We have to remind them it has to be Beasts of the Southern Wild or it is not going to find distribution. A million dollars is not a huge budget, but it is if you don’t find distribution. And that is harder to come by for independents these days.”

While the company is finding easier solutions for documentaries, thanks to a stronger market on the television and streaming side, Braun and his twin brother/co-founding partner Dan Braun agree that with the middle dropping out and sales figures either hitting the very highs or very lows, producers are forced to think creatively and intelligently when putting together finance models. 

Despite these risks, many in the industry will nevertheless say it’s an exciting time to be in the independent film world. Whether it’s due to financing entities turning to producing, independent distributors affiliating themselves with streaming companies, producers looking to partner with international cohorts or micro-indies getting inventive with do-it-yourself fundraising, there’s a production boom going on.

Inroads with the streamers

Obtaining a worldwide deal is the financing dream for many independents, as Sundance proved with a record number of worldwide announcements from both streaming entities and theatrical players—often with the two in partnership. (Indeed, deal-making producers spoke of receiving at Park City this year minimum guarantee offers from distributor/streamer partnerships at one level and then distributors alone at significantly lower levels; the higher number would often be tied to a shorter theatrical window before the film would move to the streaming service.)

“At the financing stage, no one wants to pre-sell territories anymore because that would obviate the possibility of someone like Netflix coming on board,” explains Steve Farneth, Cinetic Media’s head of finance. “The possibility of landing with them is hard to turn away from.” Sometimes, sellers hope to do pre-sales and then, if a Netflix or Amazon wants to buy the world, the sellers will go back and buy out the original pre-sale partners. However, says Braun, “Most of the time, the territories are not willing to be bought out. We have tried. More often, the streamers just move on.”

Olson said at Black Nights that she has seen instances where the streamer has bought out pre-sold theatrical territories. “A deal can always be made,” she stated. Olson also noted that distributors worldwide seek alignment in their releasing models, so if a film is not going to be released theatrically in the United States, theatrical distributors in other countries will often follow suit.

Farneth used the example of Max Barbakow’s Palm Springs as a “no-brainer” case for modern-day financing. It has a strong script, a filmmaker with a talented comedic voice, and a star (Andy Samberg) who is meaningful on broadcast and streaming platforms. “Without guesswork on international sales, reason tells you the movie has inherent value for a streaming platform. To get it to work, the reps take it to Sundance, it has a through-the-roof screening. Sky’s the limit—theatrical distributors want to go big, and you have a bidding war,” adds Farneth.

A scenario where an independent feature will get snapped up for a worldwide deal is far from typical, and it is not a reliable financial model, a handful of producers told me. Producer Alexandra Byer, whose well-reviewed Nepal-set drama The Mountains Are a Dream That Call To Me premiered in Sundance’s NEXT section, adds that getting a film without stars or a streaming-friendly hook to stand out amongst the sea of content can be a challenge. “I often hear from buyers, ’We really like your film, but there is nothing we can do for it.’ I imagine much of this has to do with the huge amount of original content that these streaming platforms are producing and exhibiting.”

Partners Josh and Dan Braun say that competition is healthy for the market: “There is a lot of strong content out there. At the moment, you have to just see what sticks.” To get in early, the Braun brothers and Submarine have been producing and developing doc series, including Wild Wild Country, Evil Genius and, most recently, The Devil Next Door with Netflix. “We will show early material and put together a sample reel and broken-down story lines to get financing. We get initial feedback and develop further. Because we have a good relationship with a number of companies, we can cater to them a bit more before the proposal is ready to be greenlit.” 

Helderman’s BondIt Media is also active on the doc side. Similar to Submarine, the financing entity will pre-arrange financing for the likes of upcoming music doc Immediate Family with HBO Max. “The producers shot footage, and we helped with a sizzle and sales teaser. HBO put up a number, and we had to finance the rest against what they were going to buy it for. As a financier, you are protected because you are building in your fees against what HBO is already buying it for.” 

This early approach model is not as simple for most independent producers. Jeffrey Brown, whose doc Nothing Stays the Same: The Story of the Saxon Pub was SXSW’s 24 Beats Per Second Audience Award winner last year, notes that it depends on having both an existing working relationship with the outlet as well as streamer-friendly content. Losing creative control of a production is also something to be mindful of, says producer Benn Wiebe, whose An Elephant in the Room is premiering in 2020 at SXSW. “If a streamer comes on board early, they are often very creatively involved, dictating a lot of the direction. Many producers don’t grasp that concept and can be frustrated.” 

Producer Chris Panizzon, who recently completed the doc LA Woman Rising with Rosario Dawson as executive producer and narrator, says that in most cases the only time a television or streaming outlet will bring production financing is if the film is an original production. “You can’t come to them late in the game [when other rights are sold],” he says. “And being an original is a whole other bag of worms. It means you’re pitching to their development team, and you become work for hire.” Creating confusion, there are many situations where an independently made feature is bought at a festival and then rebranded an original.

The Importance of Equity

The decreasing importance of pre-sales has implications beyond just risk management. It’s now more difficult to establish a film’s marketplace value through the forecasting of sales estimates. “One of the first things I would do with a new project would be to send it to a handful of international sales companies to ascertain the rest of the world numbers,” explains Farneth. With those numbers, he could rely on indicative pre-sales or a range of outcomes that he could build a financial model upon. “Now, it’s must less secure. It’s more about making bets on material and filmmakers and seeing what you can build on that.” 

This type of risk-taking is the model of Astute Films, formed by ex-Columbia and Universal production exec Fred Bernstein and investor Rick Jackson. The company privately funds the type of mid-level budget films that are no longer produced by studios. (Astute also works with lower-budget independents, having recently partnered on Rashaad Ernesto Green’s Premature.) 

Astute’s equity allows it to finance films like their upcoming Tiffany Haddish and Billy Crystal comedy Here Today up front and focus solely on selling international rights at market. “It is tough out there,” says Bernstein, “and this is by no means the best formula. The streaming companies mean you can’t rely on the pre-sale market, and you can’t rely on distribution as you might have been able to in the past. For instance, distributors may ask us to pay for the P&A—they were a good source of that before.” 

Other current equity financing players include Participant, Black Bear Pictures, Big Beach, Black Label Media, 3311 Productions, BRON Studios, LA Media Fund, Level Forward, Topic Studios, Argent Pictures and Tango Entertainment. “To get an investor to bet on the future of a film while not having so much collateral is tricky,” CAA’s Olson said in Tallinn. She explained that each financier has a different focus and range of interests. Some are looking for a project that can attract a worldwide buyer at market. Some still insist on pre-sales and a more traditional model. Others are motivated by a film’s message and are less concerned by the probability of recoupment.

Producers and sales agents also note there is more money “in the field” than there has been in previous years, and most financing companies employ development executives who track talent early. “I will call around to the various finance companies at an early stage and let them know I think they should meet a director and talk about the film they want to make,” says Farneth. There are still new investors, who continue to dip their toes in the film business, often embracing more of a portfolio approach. Tiffany Boyle, Ramo Law’s president of packaging and sales, says that she has clients who want to see how three to five films go before deciding whether they want to stay in the industry. 

For producer Brown, the key to drawing in new investors, who can include everyone from philanthropists to nonprofits, has to do with finding those wanting to champion a film’s cause. Panizzon, meanwhile, is a fan of what he calls “experiential investing,” in which he has dinner parties showcasing materials from the film. “It’s organic. People inevitably want to support your film,” Panizzon adds. 

The rise in investors looking to make social impact has resulted in more equity financing for nonfiction projects—a dramatic change that’s occurred over the past five to seven years. Says Farneth, “You could find grants, self-funds, maybe presell TV and video, but capital for docs did not exist. That is flat out not the case right now. It’s an exciting time for big concepts and interesting docs.” The flip side is that buyers and viewers have rising expectations when it comes to nonfiction films. “Expectations of what [a filmmaker] has to bring to the market in terms of finished materials and vision is high,” he says. Farneth’s Cinetic helped secure sales and distribution on RBG and Knock Down the House and is currently securing sales on a Swedish-produced Greta Thunberg doc helmed by first-time feature director Nathan Grossman.

Diversity Is a Goal

As evidenced by the mix of diverse topics and filmmakers that spanned Sundance’s lineup, diversity is now a focus on the business side as well. Boyle, who says that both producers and investors are approaching her looking to work with female producers, cites Annapurna, Black Bicycle Entertainment and Gigi Pritzker from Madison Wells Media as intrepid voices driving inclusive content. 

Producer Effie T. Brown (Dear White People, Real Women Have Curves) has recently been named CEO of financier and production company Gamechanger. What started as a film fund by and for women has transitioned to an investment consortium that embraces content by and from women, LGBTQ+, people with disabilities and marginalized voices. Gamechanger is also expanding into television and digital content with a fully monetized development fund that will enable it to buy, option and develop IP for television, streaming and digital platforms.

“We are looking to finance films around the $5 million range,” Brown explains. “If we go higher, then we will seek partnerships with distributors.” She also says key cast from marginalized communities is a priority. Gamechanger is currently on board Irish filmmaker Oorlagh George’s debut feature, the Sundance Labs project Stranger with a Camera.

International Partners

With pre-sales diminishing, one familiar but still vital way for equity financiers to mitigate risk is to access co-production funds, tax credits and soft money. Partnering with countries that have national film funds—something still unheard of in America—can have its advantages, says Bleiberg’s Donnermeyer. He notes the production and sales company is getting involved with films in Israel, Colombia and France, all of which have cultural funds, because “you can take more risks.” They have a Canadian–UK co-production and an Italian–UK co-production among its film slate, he says. “The soft money helps get other investors interested.”

Aaron Gilbert, CEO of Vancouver-based production house BRON—whose current slate includes Gavin O’Connor’s Ben Affleck starrer The Way Back as well as Taylor Sheridan’s Angelina Jolie pic Those Who Wish Me Dead—agrees that broadening horizons is strategic these days. For some of the company’s films, he says, “We have more of a traditional model where we work with certain partners around the world—often as co-productions.” Working with filmmakers outside the United States also means “gaining access to incredible filmmakers who know how to do amazing things with less money,” he says.

Global partnerships don’t just appeal to US filmmakers, Wiebe observes. The US/Danish producer says film producing has opened up internationally: “Danish directors and producers don’t look to shoot solely in the Nordic region—they now go to places like the US, whereas 10 years ago that would not have been a thing.”

Clay Epstein of sales agent and production company Film Mode Entertainment agrees that looking abroad can be resourceful but cautions that it involves a learning curve. “You need to have a knowledge of subsidies and co-production treaties,” he says. “Mid-level budgets are all about relationships. You need a team of local language lawyers to walk you through how to do those finance deals; it’s not often straightforward.” 

Partnering with Studios 

With studios having all but abandoned mid-sized-budget films, those who do still make these pictures are choosing to partner with the majors, says BondIt Media’s Helderman. But, he says, producers need “an incredible legal team to structure such deals because you don’t want the studio to be able to cherry-pick the deal they have with you.” 

Gilbert adds that part of his company’s investment approach [with investment partner Creative Wealth Media] is having one foot firmly in the studio world and one foot in the independent world. “Depending on the types of project, the size of the budget, the audience and the reach we have, we can build the [different] financial models.” This was the case with Joker, where they strategically partnered with Warner Bros. on the financing side from the early script stage. 

Edward Norton’s experience making Motherless Brooklyn with Warner Bros. offers further insights into a more hybrid experience with a studio. “We made the film independently, so we did it in like 46 days,” says the director, producer and star. “We spent a little more than $30 million, but with the New York tax credit we were able to do it with a budget of around $26 million.”

Norton credits Warner Bros. Pictures Group chair Toby Emmerich for being a “great champion” on the film, which took a decade to develop. “His point to me was: We cannot make this movie inside the studio system for under $60 or $70 million. That would be like the efficient version!”

In an interview at Camerimage in November, Norton described the film’s financing model. Stars Bruce Willis, Willem Dafoe and Alec Baldwin deferred their usual fees in exchange for backend participation. Warner Bros. committed to a negative pickup deal, putting in a quarter of the budget and agreeing to distribute the New York–set neo-noir with a substantial marketing commitment. Emmerich also agreed to a low distribution fee. “So, he gave us the most attractive deal for co-financers you could get,” explained Norton. 

“I had to raise $20 million, mostly from technology investors I’ve had relationships with,” Norton—an early investor in Uber—said. “It was a rare situation where other things I’ve had success with in my life gave me a little bit of a line of credit with a certain group of very wealthy people. The film didn’t have to open big—Toby helped engineer this in a way that it was a virtual guarantee that between [theater] rentals, iTunes and Warner Bros. television output deals, Motherless Brooklyn would not lose money.”