Chapter 6

Motion Picture Financing

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This chapter reviews the primary processes of motion picture financing.
It explores the many sources most-often participating in this funding process.
Further, it demonstrates how balanced producers use their bank relationships
to provide capital through financing collateral instruments that include production incentive programs, licenses, and presales, as well as to provide gap
financing.
Beginning with the end in mind is a life practice of many successful people.
Creating each pictures unique financing architecture from todays broad variety of financing sources, and using a bank as a financing participant with a
strong entertainment department to aggregate capital and finance sophisticated
collateral, provides producers with a solid plan to which they can subscribe
contributors.
Establishing a fully functional independent production entity involves
(1) understanding the formidable challenge of financing each unique project, (2) being committed to producing pictures that can fulfill their creative
impact, and (3) structuring financing so that each picture fulfills the investment
return objectives expected by financing partners. It also includes knowledge of
and access to the many foundational production financing sources and having
a relationship with a bank able to provide full entertainment services to exercise
these relationships.
Although it is less expensive, motion picture development is usually more
sophisticated, takes longer, and is a less predictable process than motion
picture production. Consequently, motion picture development is typically
financed separately from production financing. This process is reviewed in
Chapters 11 and 12.
Perhaps not since the beginning of the motion picture industry has motion
picture production and distribution financing been as challenging and sophisticated to secure. The restriction of bank credit facilities around the world has
limited the typical capital resources for motion picture projects, from multinational entities to high-net-worth individuals. Fortunately for producers, the
performance of the entertainment industry, despite the recent overall credit
crunch, remains buoyant, in stark contrast to most other industries. Though
2011 John J. Lee, Jr. and Anne Marie Gillen. Published by Elsevier Inc. All rights reserved.
DOI: 10.1016/B978-0-240-81463-6.00006-1