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Microbudget Films Aren’t Getting Covid Coverage

admin   November 3, 2021

Expert speakers of Production Conference-I at AFM discussed in length about how Covid protocols have increased film production costs and what makes a film investment-worthy

With Covid disrupting all fields, entertainment sector is no exception. Covid protocols can be anywhere from 8 to 20% of your budget and the pandemic certainly has caused the budgets to increase because of the necessary requirements, said speakers at Production Conference-I at AFM.

While Jeremy Kay, Americas Editor, Screen Daily, was the moderator of the session, the panelists were Brian Beckmann, CFO, Arclight Films; Michael Heimler, Head of Production and Finance, Black Bear Pictures; and Kent Sanderson, Acquisitions and Ancillary Distribution, Bleecker Street.  

A lot of money is solely earmarked for Covid, Covid testing, protocols and procedures, insurance, said Beckmann, adding that it certainly has caused the budgets to increase because of the necessary requirements whether it’s on state level, government level, financing level, bond level.

“There’s also a lot of microbudget films that aren’t getting the Covid coverage or aren’t going with a bond which is a guerilla type of filmmaking…which can be risky,” he said.

Echoing the same, Heimler said the reality is today there are Covid costs that are a necessary line you need to be prepared for from a variety of perspectives and a variety of reasons- to protect your production, making sure everything you do makes sense creatively, financially, logistically. “I think that’s the biggest change over the last 18 months. Covid protocols can be anywhere from 8 to 20% of your budget,” Heimler added.

Talking about what are they looking for in the elements of a script, Heimler said, “We try and look for things that are unique within whatever genre that it’s in.  We don’t look for one specific thing since we’ve made horror films, romantic comedies, dramas, but try and do things that you haven’t necessarily seen before. Ideally our motivation is where you find that cross section of quality and also commercial.”

Speaking about the same, Beckmann said, “It’s really about the uniqueness and originality of the script. Even if it’s a product type script we’ve seen before, having that unique flavor to it really gives it something else to compete with.”

Presenting another view, Sanderson said, “Bleecker is primarily and an acquisitions company but that doesn’t mean that we don’t come on early. 50-60% of our slate we come onto during something resembling the package stage and the financing stage.  4 out of 6 of the films coming out next year – we came onto when there was maybe one or two actors committed a director and a script and a production plan.”

Throwing light on co-financing, Heimler said, “We may not go out and bring on a co-financier, but the way we might mitigate some of our risk would be to pre-sell international or in the US or world and to know that we have a backstop value in certain territories and understand what level of risk we have that’s open against the US or certain territories. That really comes down to at the point that we’re introducing a project to the market, what kind of package do we have and how good of a sense our international partners and buyers are going to have on what the project is going to be based on the package we’re presenting to them.”

On the rise of streamers and shrinking theatrical window, Sandeer said, more than ever, we are having to consider what makes a film that will travel well on VOD, because the specialty market has not come back for theatrical, it’s nowhere close.

“So, the way we’ve approached it is we look at theatrical as one tool on a Swiss army knife. We’ve released 14-15 movies since COVID began and…there’s probably been 7-8 windowing strategies, VOD price points, length of theatrical windows, and everything varies. So, it becomes a much more extensive calculation.”

Last, but not the least, talking about content, Heimler said content is doing well in many other revenue places, not just theatrically, for their specialty type of projects, that those audiences are still consuming those, but in different ways than they did previously. “So I think that’s the biggest adaptation that’s going on now, where the different segments of the audience are watching different genres.”

At the end of the day, people still want to see great, unique content with actors and filmmakers that they know and love and want to see more of.

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Finetuning Financing for Films at AFM

admin   November 2, 2021

With the absence of pandemic insurance adding complexities, expense and risk to most productions, financiers and producers discussed strategies that can get films made, what projects are side-lined by the insurance gap, and how to know which are ultimately worth taking the risk

The continued lack of pandemic insurance has added to the difficulties of filmmakers. Speakers at AFM’s Finance Conference-I felt that while commercial banks don’t want to take risks, it is really tough to say whether it would become more expensive to make a film post Covid-19.

The meet saw stakeholders discussing strategies to get funds for films. While Jill Goldsmith, Co-Business Editor, Deadline is the moderator, the panelists were Steve Hays, Founder & Managing Member, 120dB Films; Peter A. Marshall, Managing Principal, Media Insurance Services, Epic Insurance Brokers; and Nick Spicer, Partner, XYZ Films.

In March 2020, they halted all of their pre-production activity, started off Nick Spicer, adding: “We all thought it was going to go on pause for a couple of months.  No one really had a sense of how long this was going to last but it wasn’t until September that we actually went into production on another movie. The traditional independent financing model was impossible because of the gaps in the insurance policies and completion bonds so the traditional bank financing wasn’t available which meant we all had to find different ways of doing things.”

Spicer said that at XYZ, they do a lot of international production typically, probably half of theirslate is comprised on international productions.  “So, in Q4 of 2020 we went into production on films in Finaland, Norway, Mexico, we started prep on films in Canada and the UK and that’s where we really focused on the places where it felt safer and the risks were mitigated, like Scandinavia, and places that had government backstops that we didn’t have in the U.S. which enabled us to get bank financing or to sit as a security net underneath a completion bond that did have an exclusion for Covid. We transitioned into more creative financing models leaning on equity, private lenders, bridge loans to get through production and parsing out the cash management to mitigate the actual cash risk. Financing became a lot more work intensive than it was the year before.”

For Peter Marshall, there were months of dealing with these terrible shutdowns and the chaos, the claims ensued, and the insurance companies were thrown into a situation they had never seen before – they’re no longer underwriting, they are only responding to claims, there is no new business, there is only loss.  Immediately, the reinsurance world disappeared like a puff of smoke…So, there was no new business being created….It was a loss like the industry had never seen a full scale and wholesale loss scenario like this.  Not from terrorist attacks, not from anything.

He added: “A company like Nick’s [XYZ] that is just incredibly nimble and creative in terms of financial and content, just pivoted…The industry should be very proud of itself for developing protocols very quickly…we knew right away three things were going to happen, movies were going to be more expensive, more of a pain in the neck, and take longer. None of those three things are good but the Independents are incredibly scrappy, and a lot of films and TV got made event in the teeth of the first wave of Covid.”

On how do they see things right now with vaccinations, Spicer said, “I actually don’t know if it’s something you can require.  We have not required it but most of our sets have been almost entirely vaccinated if not entirely vaccinated.  The best practices tend to follow the union rules.  Delta, from my standpoint, seemed to have screwed everything up…the insurance companies, from my conversations, were starting to get a little more open minded. The bond companies were starting to go in the right direction because the vaccination rates were increasing and then Delta punched a giant hole in it because all of the sudden there were breakthrough cases and a vaccination was not full proof so it went in the opposite direction.”

Marshal stated that it’s an A-symmetric phenomenon, it comes and goes at will – that’s what science tells us. It’s not going to hopefully be as harsh as it has been. The direction seems to be going the right way but the path of public health, which thank goodness is improving, is not necessarily the path of the insurance industry which is not really improving so much. So, unfortunately there’s a split in those two roads right now and I think it will continue for years. That is the harsh news.  

He also said that the insurance industry is not going to rebound from this quickly. This is worse than asbestos was for the insurance industry. They don’t have the ability to backstop for catastrophic loss and risk. “We’re going to have to be more inventive and nimbler and I think different ways in transferring risk are going to emerge and have already emerged. They’re tricky because they are often done in the heat of battle and they’re tested as they’re being used for the first time and get modified.”  

On banks slowly coming back, Marshall said, “I’m hopeful but commercial banks don’t necessarily want to take risks. That’s why [finance] companies like Steve’s [120dB Films] are so important. Sometimes their ability to reach out to capital markets is going to be part of the solution…self-insurance I think will be where the most opportunity will be. Private insurance companies that are set up by institutions that have the wherewithal to do that may be the future…or a small part of it.”

Will filmmaking be expensive in the near future? To this, Spicer said, “It’s really tough to say – so many of them are different. It depends on where we are shooting. It varies country to country and there’s just the physical covid production costs of testing, the extra days that we need to schedule, the additional cost of insurance and a bond if you get one without an exclusion – so as low as 8-10% increase up to 20% depending on the size of the budget, how the financing looks, where you’re shooting, if there’s a government backstop. There is a baseline no matter what just to follow the covid guidelines and have a reasonable reserve in case something happens.”

On international backstop programs, Spicer said, “They are not liberal in their interpretation of what a covid event is. Most of the ones we have used have been for co-productions [the UK, Ireland and Canadian funds]. We are doing something in Australia next year that we’re just getting started on and I believe that one is a little more liberal in how it’s defined and who can have access to it.

In Finland, there was no government backstop. When we went there it was specifically because it was a safe place to shoot and then we came up with a unique financial structure – we self finance a lot of our movies as an independent studio – so we equity financed production alongside we used a lender called Bondit to create a bridge through production with no bond…Especially early on with travel restrictions and quarantine periods, it was really hard to schedule actors. We had to work really hard to find locations that would be amenable to the schedules that we needed to shoot at.

In his speech, Hays said, “Anyone who is using a government program should be certain of two things – 1. No insurance company can compete with a sovereign government that can print money for price. They will always be the best price on the way in.  The other thing is they’re [governments] not an insurance company so when you have a claim they’re not going to behave like an insurance company, they’re going to behave like a government…I think when you read the fine print of the Australian, the Canadian, the UK programs, there’s a lot of things that they take on that are really admirable and fantastic but there’s a lot of things they don’t take on that we take for granted. Read them very carefully. “

He added that there are certain expectations of production that insurance companies know because they’ve been insuring us for decades, but government’s have not. They don’t know about certain things we have to do when we shut down. “They don’t understand that travel incurs and sometimes location changes happen, people fall out…read the backstop very carefully and you’ll find out some of the things you’ll run into won’t be covered.”