Aspiring Filmmakers See Rise of Funding Options
Making a movie isn’t cheap. Generally, a low-budget film is considered anything made with a budget of less than $2 million, and that’s not exactly chump change to most people.
So how are movies financed? Typically, they’re funded through a combination of means: investors, tax credits, grants, etc.
Here’s a look at some of the most common ways for funding a movie, whether you’re making a movie through a studio or on your own.
Grants. Governments, nonprofit organizations, film festivals and film institutes all offer filmmaking grants and fellowships. Some are lottery-based, others are merit-based and there are grants available for every stage of the filmmaking process, from development to production to post-production to distribution.
Tax incentives. Countries offer tax incentives, deductions and rebates for filming within their borders. Governments offer these breaks as a way to promote tourism. But beware: Tax incentives aren’t available until after production is finished and the movie’s accounting team has filed its taxes.
Pre-sales. This is where you sell the distribution rights of a film before its completion. In these sorts of arrangements, financers can request that specific actors be added to a cast or that the movie touch on certain topics or tropes. If filmmakers can’t or won’t follow through with those requests, pre-sales funding can and often does collapse.
Product placement. This is a form of financing where filmmakers agree to showcase a specific product or brand in their film and in exchange receive free products or money. This is often how cars are chosen for chase scenes.
Debt financing. Otherwise known as negative pickup deals, this is when a producer sells a film project to a studio for a set price, but the producer only collects after the entire film has been completed. Until that happens, the filmmaker has to find money elsewhere, but often that’s not too hard, because he or she can borrow against the value of the negative pickup deal. But there’s a big risk built into this kind of arrangement. If the film goes over budget, the filmmakers will have to find a way to cover the cost.
Gap financing. This is when filmmakers take out loans against the film’s unsold rights – box-office rights, streaming permissions, DVD sales, etc. This is a very risky form of financing, as it’s impossible to predict how a film will perform commercially.
Private investors. Some people with means like to diversify their investment portfolios by funding films. Other rich people just love movies. This is an excellent source of funding, if you can find the right patron. But that’s often very difficult to do.
Nonprofit sponsorship. This is when a film team partners with a nonprofit organization in order to receive tax-exempt status, thereby making the film eligible for more grants and tax-deductible donations.
Crowdfunding. Some small-budget films have been made by their producers pitching their idea to the masses and soliciting donations.
Cryptocurrency. Mogul Productions, a decentralized film financing (DeFiFi) company, is pioneering a system for funding movies through the use of cryptocurrency. It’s currently producing “Bonded,” which might be the world’s first crypto movie. Among its other innovations is using STARS tokens, both purchasable and rewardable through in-app activities, and which are used to vote on and buy a stake in a variety of films awaiting production.
The film industry is facing unprecedented changes to technology, distribution and financing. Industry observers have been predicting massive problems for the movie theater industry for decades, yet movies always make a comeback.
If anything, the industry is moving away from a one-size-fits-all approach to the variety of funding options mentioned above. This widening of possible opportunities for funding will hopefully lead to a movie industry that’s just as robust, but with more diversity in the kinds of movies that are made and who gets to make them. The future of film is wide open for innovation.