Progressive Financial Ventures In the Film Business

Guest Post By Matthew Helderman & Luke Taylor  Buffalo-8-Logo-Round

History of the film business & financial industries

The film business and financial industry have forever gone hand in hand — even though wide spread public knowledge long viewed a separation between the two structures for many years. Regardless of how far the business of Hollywood, the independent sectors and the newly emerging platform may seem, even in the earliest days of Studio production – financing still came from Wall Street.

O’Selznick & Meyer like the Weinstein & Rudin of today – raised equity from one-off investors, returning investors and built stables of revolving financing from traditional and progressive models to drive production, marketing and distribution.

In theory the Studios were fully self financing from development through distribution — but in fact the only thing truly different today is the process and engagement structure from the Studios and outside production companies. While the Studios may be financing only a portion of a mid-budget or blockbuster film – their costs have shrunk across the board.

From less films producer per year, to outside arrangements with debt lenders (banks and private institutions alike) and a major shift in the off-setting of costs from outside companies like Annapurna, Skydance and Indian Paintbrush.

Bearing only the burden of a fraction of the traditional costs has shifted along the way as the business of filmmaking became focused on explosive results internationally with limited studio product on bankable genre’s, stories, stars and directors.


Deregulation of the markets coupled with scalable technologies in the late 1970’s / early 1980’s

Dissecting this transition leads is as fascinating as the financial and marketing structures themselves. In the late 1970’s the world experienced exponential growth at an infantile stage that gathered accumulation of momentum that greatly surpassed nearly all of man-kinds organization and progressive abilities up until that point.

With the creation of a universally scalable user-interfaced operating system and a deregulation on international economies & stock-markets — the world was re-birthed as an accelerated version of itself year after year.

Economies began speculating on valuations (IPO’s), leveraging risk against opportunity (short-selling and hedging financially) and driving revenue through compounding/factoring/multiple models that basically sent money to “work” without much superseding value in the overall economy.

With these changes, the investments into Hollywood didn’t cease – but like all else- changed. As the exponential compounding nature of Moore’s Law detailed – technology advanced, barrier to entry in nearly all facets was lowered and capital cost shifted once more — this time in a rapidly expedited fashion for film investing.


Introduction of more complex financing models in to the film industry

The trickle down nature of financial interpretation of usage through these changes significant haltered the film business.

Likened to an IPO valuation structure, pre-sales became a practice commonly used to cash-flow large chunks (typically no greater than 30% of an overall budget) of the bottom line. By assessing the elements at play – the cast, story, genre, director, budget and release strategy – international territories purchasing figures could be estimated and lent against — bringing together both a simplified cash-flow lending model and a valuation system — the film business once again found itself strikingly similar to the financial industry.

Additionally – the usage of debt through lending against first-waterfall payments, tax incentive cash-flowing and soft-money injections – each of which were at the time new to the film business but traditional models for the financing industries that spawned and effectively pawned to the film business for a newly focused interpretation.

The bottom line was obvious — with so many opportunities to earn a return elsewhere in the economy of expanding global markets and opportunities — film needed to dress itself up to look like a financing venture similar to its competitors.


Leading up to 2008 and the the after-math of the crash

The 1990’s were a time of great explosion for the film business — credit being attributed to the macro-scale presence of technology and financial market expansion.

Private equity investments began funding start-up ventures, technological advancements made it easier to produce, exhibit and sell an independent film — and the world was still more than ever in love with Hollywood – yet this time had more expendable income per-capita than ever before.

The events leading up to 2008 have long been reveled over – and from a film perspective everything changed overnight. Bank lending dried up, private equity investors began licking their wounds from the economic fall-out of their portfolios and audiences no longer had expendable income.

Coupled with a rising increase in the ability to acquire as much content as possibly desired — both through the legal means of iTunes, Netflix & Amazon as well as the non-legal means such as Torrents, Frostwire and boot-legging — the film business was at an economical cross roads.

Burdened with a faltering investment system, shrinking return figures due to technology leveling the playing field and a shifting in audience appetite for pricing and attendance – the business was forced to pivot.


Emergence of technology as a financing source

When an industry finds itself up against a wall — the only option is to pivot or face extinction.

The film business, like so many of the stories on screen, is a saga of drama and never ending action.

Interestingly enough, the saga continued through a resuscitation by means of technology once again — this time in the form of organizing user bases and built-in audiences to introduce projects, finance films and distribute content directly to viewers.

The obvious suspects of Twitter, YouTube, Indie GoGo & KickStarter lead the revolution with filmmakers finding ways to scale their ideas by utilizing a pre-existing base of followers to enable a project to go viral before it had even been produced. We immediately revisit the Zach Braff & Veronica Mars crowd-sourcing success – but there are countless stories of success being found through integration of audience based technology platforms.

Paired with the newly available debt options, lower production costs and performer rates — the film business once again looks to find its footing in a shared existence at the intersection of technology, finance and media.


Our introduction of BondIt

When we first toyed with the idea of relieving the stress of the union burden for productions – from paperwork through payment – we discussed what worked, didn’t work and would potentially work in the future as the lines between film & technology blurred.

We’ve been thrilled to see how many filmmakers find the service useful and also to witness their interpretation of how best to adopt it into their arsenal as producers and filmmakers.

The goal at BondIt continues to remain consistent — ease the filmmaking process by simplifying a pre-dated system at each major union. By centralizing information and expediting cash-flow we look forward to engraining ourselves in to the fabric of the long standing history of the film businesses relationship with financing models.

Bottom line — BondIt is a force for positive change and together we can build a better system.

Screen Shot 2014-04-24 at 17.05.15

BondIt was founded by independent film producers Matthew Helderman & Luke Taylor of Beverly Hills based Buffalo 8 Productions. Having produced 30+ feature films, the team recognized a dilemma in the production process — union deposits — and launched BondIt to resolve the situation to assist producers & union representatives alike.

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