- Truly Free Film - http://trulyfreefilm.hopeforfilm.com/ -

Towards A Sustainable Investor Class For Film Culture And Business

Posted By tedhope On June 4, 2013 @ 8:30 am In Truly Free Film | 6 Comments

In my 38 Ways The Film Industry Is Failing Today [1] post, I cited at #2 “The film industry has never tried to build a sustainable investor class”.  That was over two years ago.  What progress has been made?

The need for greater transparency, access, education, and community in film investment circles is only now being generally recognized in the film industry.  For over a century, the powerful kept close hold on the financial side of things, limiting access between creators and supporters.  This required always paying a visit to the representative, regardless of whether you were looking for projects or hunting for money. When the access to funders and creators is an open flow, the power will have changed, and with it, the work that gets financed (as well as the artists who generate it) will begin to look considerably different than what we have today.

In case you are wondering… yes, that is a very good thing.

It is very difficult to innovate when the powerful seek to repeat, consciously or not, what has worked before, hiring those that replicate them, incentivized to maintain the status quo.  You end up with a creative culture that just regurgitates what has been served before.  Business structures influence the art that gets produced, particularly when it is capital intensive.  But there is a wave building, and it’s power to change is phenomenal.

Let’s look at the seeds and see if we can project what the forest will be.

We have crowd funding and that has certainly enabled many artists to launch new projects and aggregate audiences in the process — but for the most part, the scale of things on crowd funding platforms does not allow for established film professionals to rely on it as a primary source of funding for feature length projects (although it certainly can be relied on to foster engagement — provided you deliver the rewards that is).  We have also been witnessing the first dip of the celebrity culture toe into the crowd funding waters, and with it a ripple and wake of effects ranging from new users of the platform to fear of diminished or ill-placed resources.

I look at crowdfunding in general and Kickstarter in particular as an audience aggregation platform for those whole love independent culture. The folks gathered here are not generally people with significant means, but people who do believe a share of their earnings should go back into the system that drives the things they love and appreciate. It is the first indication  of a wonderful transformation: from fans being supporters to actual patrons.  And it has been a game changer — and with it, it points to the potential of an even greater change.

What would happen if a large group of diverse funders entered the independent culture generation sector?  You know what I mean?  What would happen if we had new money in indie film (or any other cultural strand) that wasn’t stupid money, money that worked together to further the culture and the business prospects?  Money that was equally committed to making sure that the creators and their supporters (i.e. them!) were the direct financial beneficiaries of their work? Money that was sustainable and did not get out after a film or two, win or lose, but had a long term portfolio approach?

We have already seen this happen, right?  We are living in the greatest generation gap the world has ever seen.  The difference between digital natives and the old fogies like most of you and me is beyond a giant chasm.  We will never understand.  I personally find that wonderful, and I thank VC culture, primarily the aka Silicon Valley. Smart money, through it’s investment in technology, has brought about tremendous societal change.

Film would be a better investment if we changes both the whom and the how the capital was utilized.  A greater more diversified community of artists would be getting their work made is a mover diverse group of investors entered film culture.  More people would see films.  The audiences’ experience with film — their engagement — would improve if we could change who our investors are, what they demand, and how they think about what film actually is.  The world would be a better place.

Now, what [2] would it take for that to occur?  Well, that brings us back to the beginning of this post and what could happen if we had greater transparency, access, education, and community in the investment side of the film biz.

That’s part of my mission.  Stay tuned.

Tweet [3]

[4]

6 Comments (Open | Close)

6 Comments To "Towards A Sustainable Investor Class For Film Culture And Business"

#1 Comment By Michael R. Barnard On June 4, 2013 @ 3:11 pm

Money is a living, breathing thing that both creates and destroys. It needs to be wooed, it needs to be placated, it needs to be soothed, it needs to be given room to grow. Everyone does that: the “investors” do that with their money, the filmmaker does that with their investors, the audience does that with their donations and choices. Everything about money is sexy — there’s nothing more phallus than the dollar bill — and wooing it is no different than a boy wooing a girl (or whatever one’s preference). The act of creation is parallel between money and lovers. We have the same confused, wondering approach to creating with money that we have to creating offspring — and use the same foibles to exercise that creation (is it power? is it love? is it intimacy? is it force?). Money can kill just as easily as it can give life. Money has its own life, and if you, Ted, and others are successful in
taming this beast and bringing it to the trough of independent film,
fantastic!

But on the serious side: as advocated before, the potential of the JOBS Act’s “Equity Crowdfunding” (versus our current state of “Perks-based Donor Crowdfunding”) still has promise to help filmmakers leap beyond hobbyist filmmaking and into ROI filmmaking (and both are equally valid pursuits). As you published here earlier on Hope for Film, here’s my explanation of some of the financing opportunities that could propel the indie film industry forward: [5]

Also, Slated published a good overview of where we stand now and how we might begin to move forward: [6]

It would be wonderful if money were to become a bit more egalitarian, a bit more open-minded. Perhaps something like REITs (Real Estate Investment Trusts) for the indie film industry, where investors could pool money together under management for broadly evaluated investments (rather than the popular notion of “slates” from a single entity). The risks are great, mostly because we still have no metrics that can be relied upon, no proven paths for the new world of myriad distribution channels, and we are still in the turmoil of the wake of sinking traditional company structures. However, this kind of uncertainty has always existed in the indie film industry because it is an art, it is driven by zeitgeist, it is built upon individual talent. Spreadsheets do not rule here. When money gets hungry enough to start sniffing around in our corner of the cave, maybe it will find indie film to be a tasty morsel.

#2 Comment By Tom Weber On June 4, 2013 @ 5:06 pm

Bravo! But venture capital is not going to begin to flow into the indie film community until something is done about the bottleneck on the exhibition/distribution side of things. Over there, the culture of scarcity and control still holds sway. The audience (at least in the USA) is overwhelmed with choices. Most people don’t trust their critical judgment, so the big media gatekeepers are as powerful as ever in determining what people see. If it doesn’t have a celebrity connection, a stamp of major-media approval, most people think it isn’t worth paying attention to. While we indie filmmakers eke out an audience one fan at a time, the larger audience doesn’t even know that we exist. The kind of film culture that you describe lives in major metropolitan areas. Out here in the heartland, people only know the Hollywood blockbusters and whatever is on TV. We as filmmakers have to work to address that end of the problem, too. Thanks for posting this, Ted.

#3 Comment By kevin k. shah On June 4, 2013 @ 5:08 pm

This is a great post Ted, a lot of food for thought.

I think Kickstarter as a longer term slate approach (as opposed to just the next film) may be an incredible way to supplement an investor’s participation in multiple films under one production house. The campaign(s) would engage fans and create early adopters for specific projects as they roll out. The goal wouldn’t be bringing in as much money as possible, but bringing on as many true fans as possible – people that really care about the project and will help spread the word. Fans just want to make sure their money will be handled responsibly, transparently, and of course used to help deliver a authentic, high quality product they can be proud of enough to tell their friends about it.

I think smart investors would like to know their investment is also bolstered by 400, 4000, 40,000 people who also donated to the projects and believe in them (however small their individual donations might be).

Really great rewards for backers using crowdfunding platforms will help immensely to keep the money flowing — and a portion of the amounts sought would have go back into a really nice reward for the Backer. Maybe a creative or participatory hand in something surrounding the project, such as an experience-perk.

Creative ways of using crowd-funded money to reward the backers themselves (when it is supplementing an investment for a project and not the whole pie) is actually a fun idea, and might just help make fans for life.

#4 Comment By cj On June 5, 2013 @ 8:17 pm

For the foreseeable future, the sustainable investor class would be safer in a managed fund. This investment fund must be an active participant. It must wear the hat of distributor to the extent of buying or having a proprietary operating agreement with its own online distribution platform. Transparent numbers are necessary not only for individual profit calculation but for a mark-to-market evaluation of titles in a portfolio. The lack of transparent numbers is as troubling to investors as the bottleneck of product.

#5 Comment By Richard Watts On June 10, 2013 @ 1:26 pm

Here’s a chapter from the film Entrepreneur playbook. Recently we floated a funding proposal to finance 20 indie films (Fund). The project was conceived as a means for filmmakers to participate in the industry and get a chance to have their project made. We sent it out to an assortment of indie filmmakers for their feedback and comments. We were disappointed in the response and baffled by some of the comments we received. Our proposal involved an investment master fund organized offshore of the US which would target non-US resident investors. Additionally we proposed creating an SEC exempt fund in the US to handle US investors that would feed into the off-shore fund. The pending crowd-funding provision would work even better. Drawing from aspiring filmmakers worldwide the numbers worked like this; 500 investors contribute $1000/unit in exchange for an interest in a defined cash flow generated by the marketing of the films. Buyers of a unit also received the right to submit a film project for funding. $4M was allocated to fund 20 films (@ 200K) with $1M segregated to fund organizational expenses, marketing fees and an operating budget. A board selected the films to be made and acted as mentor for the creator to oversee funding. $200K budget per project. After ROC to the Fund the Submitter/Investor would receive a 25% interest in the net cash flow; The fund would receive a 25% interest in the net cash flow and the investors would receive a 25% cash flow from the marketing of the projects. One fund would be launched every year. A producer out of NYC assured us that, if the projects were of decent quality they could each generate $500K. Comments ranged from lukewarm support to hostility and indignation. We received no constructive comments..I worked on funding studio projects for TriStar.

#6 Comment By Love: Bad investment. On October 10, 2013 @ 11:35 am

We’re interested in what kind of perks you would suggest. producer in credits, digital copy, DVD, a character named after you, a street or business named after you, a extra role, a supporting role? A major issue with crowd funding is that you need the crowd before you attempt it.


Article printed from Truly Free Film: http://trulyfreefilm.hopeforfilm.com/

URL to article: http://trulyfreefilm.hopeforfilm.com/2013/06/towards-a-sustainable-investor-class.html

URLs in this post:

[1] 38 Ways The Film Industry Is Failing Today: http://trulyfreefilm.hopeforfilm.com/2010/05/38-ways-the-film-industry-isfailing-today.html

[2] what: http://trulyfreefilm.hopeforfilm.com/2013/09/10-reasons-we-need-staged-film-financing.html

[3] Tweet: http://twitter.com/share?via=&count=horizontal&related=mohanjith%3AS%20H%20Mohanjith&lang=en&url=http%3A%2F%2Ftrulyfreefilm.hopeforfilm.com%2F2013%2F06%2Ftowards-a-sustainable-investor-class.html&text=Towards%20A%20Sustainable%20Investor%20Class%20For%20Film%20Culture%20And%20Business

[4] Image: http://pinterest.com/pin/create/button/?url=http%3A%2F%2Ftrulyfreefilm.hopeforfilm.com%2F2013%2F06%2Ftowards-a-sustainable-investor-class.html&media=&description=Towards%20A%20Sustainable%20Investor%20Class%20For%20Film%20Culture%20And%20Business

[5] : https://michaelrbarnard.wordpress.com/2013/01/27/filmmakers-its-2013-do-you-know-where-your-jobs-act-is-part-1/

[6] : https://michaelrbarnard.wordpress.com/2013/05/28/from-slated-com-the-new-soft-money-for-making-indie-movies/

Copyright © 2010 Hope For Film. All rights reserved.