… in a sea of paperwork.
Perhaps you’ve been wondering, over the past few weeks or even months, what I’ve been super busy with. It is equally possible that you have not noticed that I’ve been especially busy, because you have your own lives to worry about. Either way, here it is.
In addition to programming The Royal and continuing to consult with REEL CANADA (especially on the exciting National Canadian Film Day initiative), I’ve also been trying to get some film projects off the ground. You already know this (because you are my fan and dedicated blog reader).
What you might not know is the elaborate shenanigans I’ve been engaged in for the past several months as I try to patch together financing for one of the films I’m working on.
I’ll keep it anonymous for now because I don’t want to jinx any of the money we are waiting to hear about in the next few days and weeks, but the film is a Canadian production with a fluctuating budget that’s gone up and down over the past year from anywhere as low as $1M CAD up to $1.6M CAD.
I’ve done countless versions of the budget (sometimes with the help of more experienced producers and/or line producers, sometimes muddling through on my own even though I don’t actually know how things like “union tiers” and “tax credits” and “f*@#ing film budgets” really work.
I’ve had to learn a lot of film-specific lingo! Like, when someone says “don’t do X because it will grind your tax credits” what they mean is, it will reduce the amount of tax credits you’re eligible for. New use of word “grind”: learned!
Let me back up. Quick lesson on tax credits:
To encourage film productions to do their business here instead of elsewhere, the province of Ontario offers a refund of up to 35% on the money you spend on labour in Ontario. There are eligible and ineligible costs, and lots of rules, and blah blah, but basically, you get a fat cheque back from the government after you’ve made your film, and that’s pretty great.
Each province has their own (or in some cases, they don’t). Many US states also have similarly competitive tax credit schemes. It’s a popular thing. But you don’t get the money until several months, or even a year, after your film is made.
That means that if you raise a million bucks to make a film, and you make it for that amount, a year later you might get a bonus cheque. Hurray!
But if like most people you can’t raise the full budget amount up front, you end up counting those tax credits in your financing plan even though you won’t get the money until after the film’s been made.
How does that work? Lots of possible ways, but a common one might be to get someone (like a bank) to loan you the money in advance, so that you can use it to make the film. And then when you get the tax credit money a year later, you pay the bank back. With interest. Which you calculate into your budget, of course. It’s complicated. And feels like you’re pulling a fast one. It feels like “FILM HACK: You Can Do This One Incredible Thing to Increase Your Budget By Hundreds of Thousands of Dollars!”
And yet, somehow, it is totally above board and normal and everyone does it.
Anyway. Back to my story.
We’ve received confirmation of funding from one government entity. Hurray! Where do we sign for our money?
Slow down little pony. You don’t get the money. Yet.
First, you prove that if they gave you the money and you didn’t manage to raise even a single penny more, you’d still be able to make the film.
Some government funding bodies say that you have to have 100% of your financing tied up before you approach them. Or 100% minus whatever you’re hoping they’ll pitch in, anyway. Others don’t have that kind of requirement, but at a certain point, they want to know that if they give you the money you’re not going to fuck it all up and end up not shooting the film, which will in turn make them look bad.
Okay, fair enough.
Except, in order to prove to them that we’d be able to go forth and shoot even if we didn’t raise any more money, we’ve had to slash our budget by about a quarter, from $1M to $750K, and we’ve had to adjust all kinds of things in various fairly insane ways (cutting the shooting schedule from four weeks to three, for example, and nixing the idea of a highly paid “star” in favour of an “everybody gets the same piddly fee” approach – hey, it’s piddly but at least it’s fair). All of this has taken a lot of time and effort. More time and effort, perhaps, than should be required to present what we actually consider a worst case scenario Plan B.
But who am I to complain? I just want them to please give us the money. In the meantime, I’ll be over here silently weeping into my fifth cup of coffee.
Now, all of that effort might not have taken the equivalent of two full time jobs’ worth of hours (for weeks if not months on end) if I knew what I was doing when it came to the world of tax credits, deferrals, recoupment schedules, budgets and financing plans. I’m learning a lot (and fast!) but it’s my first time around the track and I have been drowning without help.
I have a very creative, smart Director (who unfortunately also doesn’t know how this stuff works – not on the level required for The Government, anyway) and a very helpful Exec Producer (who does know how it works and provides useful advice when needed, but doesn’t have time to coach me through everything step by step – which is fine, he was upfront about that when we first agreed to work with him).
All of which is to say (I’ve buried the lede, I know) that I may have found the magical unicorn who can actually help me make sense of this nonsense: a line producer. Thank you, oh film gods, for smiling upon me in my hour of need and sending me a line producer who knows what he is doing and is willing to help out even though we won’t be able to start paying him for another few months. I am truly blessed.
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.
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.
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?