Independent films financing
To understand how independent films are financed, what motivates independet film investors, and if crowdsourcing is a successful option. In addition, to understand the size of the independent film space.
Financing Independent Films
- The most common ways that independent filmmakers receive funding are through equity investments, pre-sale agreements, bridge/gap loans, and crowdfunding. Most independent filmmakers use a combination of funding options.
- Tax credits and deferred payments can help off-set the amount of money a filmmaker needs to raise for film production.
- Equity investment financing involves having investors constribute money for the film production in exchange for a share of ownership in the film.
- Pre-sales agreements involve executing contracts with distributors before the film is produced. These agreements can be used as collateral for a loan or the distributor may pay cash up front.
- Bridge/gap loans are smaller loans that make up the difference between financing raised through other methods and the cost of production.
- Crowdfunding is becoming an increasingly popular method for raising funds for independent films. However, crowdfunding campaigns rely heavily on friend and family unless a filmmaker has a cult following.
- Some states or countries will offer tax credits to filmmakers if they film a significant portion of the film in the state/country, hire local film crews, and use local vendors. These tax credits can help off-set the amount needed through loans or other investments.
- Setting up deferred payments for producers and other talent can also help off-set the amount needed to produce the film.
Profitability of Independent Films
- The true profibility of independent films is hard to measure do to deregulation, varying revenue streams, and inaccurate reporting. However, Stephen Follows has studied the independent film market in the United States and has made some conclusions about the industry.
- There were roughly 35,000 independent films made in the United States between 1999-2018. Of those, about 31,500 did not have a theatrical release and very unlikely to have been profitable.
- Around 3,500 of the indendent films were released theatrically. Of these, 2,200 recorded a loss in profits and about 1,300 recorded a profit.
- For a better perspective, of the 35,000 independent films released between 1999-2018, only about 3.4% showed a profit.
- Independent horror films have a greater chance of making a profit, followed by live action adventure movies.
- Film genres least likely to turn a profit are sports films, followed by history films.
- Due to the decentralized nature of the independent film space and lack of financial reporting standards, there is not a true "market size" for independent films.
- In 2019, 14,259 projects were submitted to the Sundance Film Festival, representing nearly $3 billion in financial investment.
- There were 235 films that were selected by Sundance. Of these, 33 made over $1 million at the U.S. box office.
Proposed next steps:
You need to be the project owner to select a next step.
Our initial research found that the most common methods for funding independent films include equity investors, pre-sales agreements, bridge/gap loans, and crowdfunding. We propose further research to provide a more in-depth description of each method, including what they are, how they work, pros and cons, and potential success.
We also discovered that there is not a true market size for independent films due to decentralization and lack of reporting standardization. Therefore, we propose further research to provide statistics on the industry including statistics on the number of films produced, number theatrically released, number that go straight to streaming, and other relevant statistics relating to the market.
Finally, we discovered that streaming and subscription services such as Netflix and Hulu may have a big impact on the independent film industry. Therefore, we propose further research to provide an overview of the impact of streaming/subscription services on the independent film industry.