Lunch Lesson Nine - Financing a film

The world-famous Pinewood Film Studios in Buckinghamshire has been home to some of the legends and stars of the silver screen.

Almost 1,000 movies have been made there, including all but one of the Bond movies, and all of the Carry On films.

But although the golden era of British film-making may be a thing of the past, Pinewood is still in demand by film-makers - and it never ceases to impress.

Spending money

The studios at Pinewood occupy 100 acres of land and the sheer size of the operation there is breathtaking.

Its outside water tank is the biggest in Europe, and just one of the backdrops is a huge 200 feet wide and 60 feet high.

With film sets this size, it's easy to see why making movies costs so much money, and that's where Austin Shaw, managing director of Really Useful Films comes in.

He's the executive producer on a new film production of Phantom of the Opera, and has the unenviable task of raising the vast sums of money needed to fund the project.

We halved our risk by selling off the rights upfront. Austin Shaw, Really Useful Films

He says: "It's a big production. Our budget is $80m - it puts us up there at the top of the British independent market.

"You can make films for a lot less but if you're going to make a film on Phantom you need to give it credit and unfortunately that means spending a lot of money.

"We're lucky that because Phantom has such an international following there were a lot of distributors willing to buy the film so we halved our risk by selling off the rights upfront.

Co-production

But what about the smaller budget, less commercial films being made at Pinewood?

They, unlike the new Phantom movie, may lack the big name stars, who can attract the backing of distributors.

For them, financing is even tougher - but there are ways of finding it.

Himesh Kar of the UK Film Council says: "They can come here for public money, for lottery money, they can go to a broadcaster, or a bank.

"They can even go to other countries; we have co-production treaties with Canada and South Africa.

"There are lots of avenues but really it comes down to the material you have and trying to persuade people to finance your production."

Box office

Film-makers can also sell shares in their production to individual investors - tax breaks are available to people who buy a stake in a movie, and the returns can be considerable.

Making films can be labour intensive

"I do the film packaging financially - a producer comes to me with a script and a budget and then it's up to me to raise money from investors," says Mervyn Singer from Random Harvest Pictures.

"We set up a company to exploit the film and then go out looking for investors - sometimes under the Enterprise Investment Scheme.

"This is a government initiative laid down to help British independent films - investors come along and put money into a film and get upfront tax relief on it.

"Private investors are crucial - without them the whole independent industry, especially the lower budget film-makers would collapse."

As the budgets for films become larger, and the expectations of audiences more demanding, the need for film producers to sell their ideas to a variety of backers intensifies.

Ultimately, of course, it's down to box office receipts - the more chance a film has of making money, the easier it will be to raise it in the first place.

---

Student Guide

---

Got the script? Got the stars? Got the locations? Got all the kit?

But what else do you need? Money!!

No movie ever gets made without backers who provide the funds to make it all happen.

Blockbusters cost millions but everyone expects them to make even more millions, so backers are not usually a problem. Smaller low-budget movies are more of a problem.

New people in the industry find it much more difficult; to find a way in - you need to show what you can do.

Trainspotting opened up a whole new world for Ewan McGregor and the production team - so it can be done.

Whatever the movie, there is a trade-off between the projected costs and the potential profits.

Just think...

If you were thinking about putting money into a film, what would affect your decision?

Where can the money come from?

Set up a company
When you set up a company, you sell shares so people can buy into your films. The "packager" puts together an attractive proposal to sell shares to interested people.

They may be big businesses or interested individuals who like the movies and are looking for an opportunity.

Government
The government wants to encourage people in the UK to make films so under the Enterprise Investment Scheme it gives tax relief to people who put money in the business.

Because the private investor is very important to the industry, this scheme helps attract people who might not have put money up without it.

A broadcasting company
Some films are financed by television companies and go out on TV.

This is often a good bet for new film makers although sometimes bigger names choose this route because of the sort of film they want to make.

A bank
A bank can be persuaded to lend a company money if they think that it will make a profit. It'll need a good case because banks don't like taking a risk.

It's probably not a good option for a new, offbeat movie.

Lottery money
When you buy your lottery tickets, the money goes to all sorts of good causes. One of them is helping people to make British films so a good proposal may bring in some cash.

Other countries
If a film has a particular link with another country, there may be funds available from the country's government.

Just think...

What sorts of films are most likely to raise funds from each of the sources?

So what's the profit?

Thousands of films are made every year - just look at the TV schedules. Some have famous names and were hits - but not always.

Others were unexpected successes and made lots of profits for very low costs.

Just think...

Make a list of films that cost a lot.

Make a list of films that were a great success.

Make a list of films that didn't cost so much.

Make a list of films that were less successful than expected.

Which would you have invested your money in?

What's the difference?

For most businesses the usual sources of finance are:

existing profits

friends and relations

the bank

shares

leasing or credit purchases.

Just think...

What are the advantages and disadvantages of each type of finance?

How is finance for films different? Why?