1.2 How does distribution finance work?

As a producer, a pre-sale to a distributor is one of the most important potential sources of film finance. It brings money into the production pot and it ensures that the film will be presented to audiences.

But of course, distributors look at it somewhat differently. They are interested in securing a great product for their distribution system at the lowest cost and the lowest risk. Here’s how Alex at eOne approaches film finance.

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Transcript: Video 3 Alex talks about film finance

ALEX HAMILTON

As a company we definitely get earlier into films now. We invest more up front and we are able to finance films. Now there are very many different ways to finance films.

You can finance them through a territorial pre-sales model, sale off the rights around the world, and cover the budget from those rights. That relatively straightforward way to do it.

Another way to do it is to partner with others. So we'll often find ourselves co-financing. So taking certain rights, perhaps our territories, our six territories, we take the rights in those places and we share the rest of the world with another entity who will sell those rights. Or we co-finance with an American company who takes American rights and we take the rest of the world.

In a recent example we are fully financing a British film from Ricky Gervais. We are buying all rights, world rights, excluding the UK free TV rights and we are exploiting those rights in our territories, where we have direct distribution. We're very confident about that one because it's Ricky Gervais reprising his character of David Brent from The Office and revisiting the character more than 10 years later and to us that's comic gold. We think it's a big, big movie in the UK and Australia and that will more than cover our investment. And if you will the rest of the world, maybe some of the gravy.

 And if the US takes off, given that The Office is a sort of cult hit in the US as well as having been remade, then suddenly it's a fantastic investment. So it's like anything, it's a calculated risk but we feel that our r- to me quite often investing in films it's somewhat analogous to going into the bookies. It's like, you know, you're going to put a certain amount of money up for the 33 to one shot.

 You're probably not going to put more than a pound on the 33 to one shot, but you might be willing to put 20 quid on a six to four favourite that's already run the course and distance and has got a good jockey on it. It's, you know, I know it's terrible to use that but we often think about that. What are the odds of this film being successful? But there are so many different ways. We may only be a minority financier where we put up 15 percent, 20 percent of the wealth of three or four territories.

 But it's the key aspect of financing that the banks like and then the banks are willing to lend against the production because they can see that there's an important chunk of financing that the market is telling them the film has that value.

End transcript: Video 3 Alex talks about film finance

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Video 3 Alex talks about film finance

What do you think about the way a distributor thinks about investment in film? From his point of view it’s an odds game. But from the point of view of the producer, it’s more like life or death. Either the film gets financed or it doesn’t. And this is a good example of the creativity vs. commerce conundrum with film. For some players, it’s an ‘act of love’, for others it’s a commercial enterprise.