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Ted Hope on How Staged Financing Could Save Independent Film

09.10.13 @ 7:00PM Tags : , , ,

Money_02According to indie superproducer Ted Hope (now the executive director of the San Francisco Film Society), Staged Financing could act as a solution for a number of issues with film financing, including diversifying the creative class, putting quality over risk mitigation, and incentivizing creators throughout the entire filmmaking process. But what exactly is “staged financing,” and how could it “save indie film?”

On his site Truly Free Film, Ted argues convincingly in favor of staged financing, but we reached out to first clarify exactly what it is. Here’s how Ted defined staged financing:

Currently filmmakers seek out their financing essentially all up-front. If they don’t succeed they do it in a haphazard catch as catch can manner. Either way is reckless behavior with the former predicated that you will deliver what you promised and the latter requiring one to work without a net. Institutionalized stage financing would give filmmakers a way to get started, deliver a proof of principal, and receive subsequent funds due to merit. You could argue that the stages of development and marketing are already institutionalized to some degree — although there is no real sources to go to other than those you know. Staged financing would offer additional steps beyond that.


Unlike up-front financing, staged financing provides film financing for a specific stage of production, rather than a large lump sum. Hope says:

Staged financing is part of a much bigger solution that we urgently need to bring to our industry: a sustainable investor class. We need smart money and need to stop seeking, encouraging, and propagating dumb money. Most film investors get out, win or lose, by their third film — The value of most independent money in the film biz is the money itself, and that is not good for anyone.

In Hope’s opinion, its adoption and implementation must be the industry’s immediate goal. To read the full list of 10 reasons why he thinks this financing method will “save indie film,” head on over to Hope’s post here.

What do you think about staged financing? Do you think it could help independent film? Let us know in the comments.

[Money photo by Flickr user Philip Taylor PT]

Link: Staged Financing MUST Become Film Biz’s Immediate Goal — Hope For Film

COMMENT POLICY

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  • IMO, the most important factor is in finding means to deliver the final product to the potential customers. If the audience doesn’t know where to find those films, it doesn’t matter what the films are. They’re fallen trees in the forest.

    • Bingo. Distribution is the real barrier. We need a path to put movies in a place where consumers are already looking, instead of trying to get consumers to find us. That is the real tipping point for us indie filmmakers.

  • Lipstick on a pig and absolute nonsense from Hope an experienced producer who should know better.
    Try explain this structure to a financier whatever your budget is. The nature of independent US film is risk and occasional reward. There is little or no state or arts council funding you find in Europe that can support this staged financing meaning the man with the bucks wants his 1st money out 1st.
    Smart money, dumb money. Cash is cash whatever the source.

  • Cotty Chubb on 09.11.13 @ 6:46PM

    Just wish i understood how Ted sees an investor willing to put up money for a production stage with no finishing stage, or delivery stage (or even a distribution stage). Development stage is less money and so might be easier but at least as risky, maybe more and is not easy at all. Ted’s way smart and experienced. I’m missing something but I didn’t find it on his post.

  • Here’s how I might run an “independent studio” :
    .
    1) establish a streaming/VOD/PPV platform via major browser/ISP site – Yahoo, Google/YouTube, AOL, MSN/Bing.
    2) Sublease studio/soundstage time from the currently existing structures or build one of your own.
    3) Hire shooting crew, including DP, grip, AC, SFX.
    4) Hire a quality production/management team

    The general concept is of the early (i.e., the 1910′s-1920′s) Hollywood – read scripts made for studio production, audition filmmakers, shoot a bunch of quick 7-10 day films. This is essentially what Prospect Park has done with the canceled ABC soaps “All My Children” and “One Life to Live”. They stream on Hulu and show (older?) episodes on O!, The exact execution of the idea can obviously vary but this is a workable outline.

    • Very smart. Call me at Caliber Media, I’ll raise the money. Not “staged”!

      • It seems that the media have been suggesting two polssbie motives by mentioning: 1) the Asian Club to which he belonged in high school or college and 2) his love for his dog, his job description as a lab tech for animal research, and recent email tiff he had with Le regarding her research methods.I wouldn’t be surprised if the motive ended up being animal research related ( work place violence ) and not sexual or personal motive. This is not a generalization of all Asian scientists doing animal research but I’ve noticed, in my work, that many of the research subject protection measures including ethical animal research protocols that are in place are often met with blatant rejection. When confronted with a disciplinary action for violation of research ethics, I’ve often heard Asian (especially recent immigrants) researchers say, Fine, we’ll follow these rules but they’re just animals and research is more important for human kind. Of course, I’m not saying that there aren’t other races or nationalities who feel this way. However, I’ve talked to animal lab techs who progressively form negative feelings toward Asian researchers for their continued disregard for humane treatment of research animals. I don’t know if it’s just a cultural thing? I know that my mom has laughed at my sister for treating her cats like humans and buying special food for them and she’s kicked them out of her way much to my brother-in-law’s dismay! Sorry, I digressed Anyway. I know that other blog sites have latched on to that allure of us Asian women that drive white men into homicide I’m not saying that there aren’t some legitimate reasons for that theory but, as an Asian woman, I can’t help flinch when Asian men are the ones automatically assuming: Asian woman engaged to a white man murdered by a white man = Asian woman’s a ho whose only (un)redeeming quality is her exotic allure. It is very polssbie that she was an unethical researcher who pissed off a deranged fanatic PETA member.Do we really need fellow Asians perpetuating that stereotype of Asian women?

    • Sarah Thompson on 09.12.13 @ 7:55PM

      That was exactly the conclusion I came to. It seems to me that this approach amortizes costs (and therefore risk) across multiple films, whilst also allowing a core group of people the chance to get very good at what they do by being able to do lots of it, also pushing down risk. Equipment should be owned rather than rented wherever possible, greatly reducing costs on a per-production basis. Core staff should be salaried with healthcare benefits, plus a bonus from movies that make a profit. Additional staff specific to individual movies would be primarily working on a deferred payment basis, but with generous profit share terms (that really actually get paid, rather than eaten in creative accounting, so people might actually come back and do more projects in the future!). This keeps the capital expenditure risk for any specific movie to a minimum. A movie’s budget then literally just needs to be the actual direct expenses, nothing more. I suspect that this actually would in practice reduce the cost of making one specific movie by an order of magnitude (maybe even two) in comparison with the approach of making one huge death star of a movie at a time. Making a profit primarily involves spending less than you earn, so this also greatly increases the chances of any movie making a profit, even if just a small one.

      Ultimately this is analogous to the difference between being a high tech startup company and a high tech venture capital fund. It means that you only need a small number of breakout hits in order to make the whole thing work and ultimately become self-financing.

      Distribution is also easier, because it’s a lot easier to make deals if you have a catalog of titles rather than just a single title, so it would be possible to go direct to outlets like iTunes without needing to go through an aggregator. The cost of running a PR department could be amortized over multiple films, as could the cost of going to film markets.

      Then you start your own arthouse cinema chain.

      And then the world’s your toaster.

      • Sarah Thompson on 09.12.13 @ 8:03PM

        It also occurs to me that making an equity investment in a mini-studio like this would be a way better bet than investing in a single film, in the same way that investing in a VC fund is much less risky than investing in a single startup. Maybe something like *this* could be the future of film investing, at least for smarter money? It also occurs to me that this could give access to funding from mainstream venture capital sources.

    • I’m actually in the process of doing this type of plan. Building that platform is actually the step that most people can’t accomplish, online marketing for entertainment brands is a difficult expertise to gain. I saw a gap, so we launched a production company focused on this type of strategy. I’m a relative vet to the process, I spent some time trying to build out the first step for a production company at a major studio, before that I ran one of the first online video agencies.

      We could calculate a guaranteed online audience for a modest budget that would guarantee a return, which made the executives happy. The main obstacle isn’t the means at all, it’s the lack of interest from within the film community to build a 100k audience for 10 months when they’d rather sign a few distribution deals to make their 250% and call it a day.

      It may sound crazy, but the idea of making $1-3 million online isn’t yet enough of a boon to get most feature film companies interested. So I founded a production company that IS interested. Right now I’m working on three TV shows that are within that range since TV is more open to that kind of budget, one has an A-list name associated, and 90% of our investor sales process been explaining basic online distribution strategies to film veterans. So, we’re hoping to focus more on digital native investors with an Angel List page: https://angel.co/newmythic

  • There’s a last week’s article on VOD from the Wrap. IMO, their writers’ conclusion is not warranted but make up your own mind.
    http://www.thewrap.com/movies/article/has-vod-become-over-saturated-114201

    In today’s article, the same co-author extols the virtues and the growing share of digital downloads –
    http://www.thewrap.com/home-entertainment-finds-a-savior-in-digital-sales/

  • BrokenTypewriter on 09.12.13 @ 6:34PM

    For a potential investor I don’t see how the investor would see any good ROI.

    Most indie films don’t break the $10 million mark for box office gross. If the average budget is $5 million you’d be lucky to break even after P & A.

    Currently it seems like investors are financing only one film at a time. Which is why they seem to stop after the third film.
    I think the indie film industry needs to follow the startup industry with some kind of investment fund, where individual investors or companies can contribute into the fund and receive shares. The fund can then invest in a number of films to diversify risk. All films should pay back into the fund once they are in distribution. Then you would only need a few successful films to help fund the next round of investment and pay dividends to the investors.

  • This way a bit not working in Russia. It’s multiply burocracy and real mess, when government money involved.