This week, I’m focusing a lot of my time and attention on budgets. I find financing to be the most consistently confusing part of making a movie, and I definitely still don’t fully “get it”.

For two of the projects I’m working on, the budget looks like it’s going to be in the neighbourhood of $1.2 million.

If you asked me how it will be spent, I’d have to say “I’m not there yet – we only have the vague totals in mind and everyone (who’s more experienced than me) says it’s realistic, so I’m trusting the professionals until I can sit down with some kind of money person and an actual line producer (they manage the day to day operations on a shoot and keep an eye on budgets) to break it all down. Till then, I  won’t have a clue about how that $1.2 million will be spent. All I know is, I ain’t getting rich off it, because if there’s one thing everyone seems to agree, it’s that a million bucks is peanuts when you’re making a movie. It’s a hard fact to wrap your head around because in almost any other life context, it’s a huge amount of money.

But anyway. Rookie musings.

Now I don’t know about you, but for me the first question that comes to mind when you’re talking about raising over a million dollars is “where the fuck are we going to find over a million dollars!?” Very slowly, I am starting to find out the answer, but boy is it convoluted.

how does budgeting and funding make me feel?

how does budgeting and funding make me feel?

First, there are the government funds (in Canada, at least). Telefilm Canada, the OMDC, Astral’s Harold Greenberg Fund and various others all provide funds for various phases of the filmmaking process. they all have very specific rules, regulations and requirements. For example, the OMDC will give you up to $400,000 for a feature film, but it has to be a maximum of 15% of your budget (so if the budget is $1.2M, that cap is actually more like $180,000), and they have to be “last-in”, which means you have to have raised the other 85% of your budget before they’ll enter the picture. Telefilm has a different maximum, which has to be a different percentage of your total, with different requirements about what you have in place when you come to them. I’m simplifying, but you can already see how it can easily become a real jigsaw puzzle trying to put this together.

Then there’s sales. If you get a good international sales agent on board, they can help to raise some of the money for your film, either by pre-selling the film (on the basis of something that makes it attractive to distribution companies in other countries before it’s even been made – like a big star, or a concept that’s a guaranteed crowd pleaser, or a genre that works particularly well in their country, or who knows). Basically, if your film is pre-sold, the distributor gives you an MG (a minimum guarantee) which is an advance against sales you’re likely to make in their territory. Sometimes pre-sales give you actual cash in hand to help you make the film. Other times, it’s just a guarantee of future revenue.

Then there’s tax credits. In Canada, there are all kinds of tax incentives for shooting your film here, and they vary from province to province. For every dollar you spend on labour during your film shoot in Ontario, you eventually get back something like 35%. There are rules about what expenditures are eligible, and there are all kinds of bonuses. Your percentage gets bumped up if you shoot outside of the GTA, for example. But then you have to calculate whether the amount will be worth the expense of having to travel somewhere and put everyone up in another town for weeks, instead of letting the majority of your (let’s face it, very likely Toronto based) crew just live at home during the shoot.

Tax credits can amount to hundreds of thousands of dollars, but the government could take up to a year (sometimes even longer) to get the money to you, so if you need that money to help your cashflow situation, you need to get a bank loan (or something like it) in the amount of your future tax credits, which you will then pay back when they arrive. This also means calculating bank interest into your budget. Complicated, right?

Some producers seem to feel that tax credits should be considered a cherry on top of a completed budget – not a crucial part of what you need to get the movie made. But increasingly, everyone I talk to considers tax credits to be necessary because it’s hard to put all the pieces together without counting on that extra cash.

Some companies (be they production companies, sales companies, distributors or big movie studios) have their own pools of money which they can invest into a production. One sales agent / distributor that we’ve worked with on a previous project is able to finance films fully up to about the $2M mark. Of course, the high end of that is very, very rare, and they’d much prefer that you bring them a brilliant script for $700,000. However, they’re out there, and they’re looking for projects.

Of course, figuring out who those companies are and how much money they have is a difficult task. That’s a large part of the scouting I did in Berlin and also in Cannes – meeting with people, introducing them to my slate of projects, finding out what they’re after and then figuring out whether anything I have might appeal to them. Attending markets is expensive and might not seem like  the best investment if you’re broke and just trying to get a little project off the ground. But it might be the most efficient and cost effective way to get your project to the right people, actually.

Then there’s investors. If you’re incredibly lucky, or if you travel in wealthy circles and are a smooth talker, perhaps you can get a private investor on board. Investing in a film (instead of, say, the stock market) can be a wise and lucrative move for someone with lots of money, and there are lots of people out there who do it. In exchange, they get a percentage of ownership in the project and usually a credit (like, Executive Producer). They get paid back for their investment first, and if the movie makes a profit, they get a percentage of that as well.

Worst case scenario, if the film fails to make a profit (as often also happens in the stock market), at least the investor can point to a completed product that they are hopefully proud of and say “hey, I produced that”. The glamour of being “in the movie biz” is not to be underestimated. Lots of people want to be involved even if there are no big stars or even the promise of big money, because movies are cool and glamorous. It’s a myth Hollywood has been building for a hundred years, and people really buy into it. Best case, the investor makes back their money and perhaps even a bit of a profit, enjoys the process and wants to do it again.

are you bored yet?

are you bored yet?

One of the films that I’m working on is hoping to put together a budget that is 75% various government funds and 25% a producer / sales agent who can contribute financially to the film. That is, if we actually get the maximum amount that we’re technically eligible for from each of those funds, which is a huge gamble. They could easily choose to give us less, and we’d be stuck with a big gap. Plus, the deadlines for each of those funds (and the dates by which we’d hear from them about whether the project has been approved) don’t coincide very well at all with our projected schedule, so we may end up having to delay everything by a few months.

The second project is going to be 30% private investment from Canada, 25ish% from a North American distributor, 20% from Canadian government funds, 25ish% from government funds and a distributor in Germany. That is, if we can convince everyone that the terms will be favourable to them. We’ve got five partners on this one and four out of five are assuming financial risk in the situation, so they have to be very sure that they’re comfortable with the terms. Guess who’s not assuming financial risk? This guy.

See what I mean when I say it’s complicated?