AFM: Panel discusses what makes a film investment-worthy?

(Jeremy Kay, Brian Beckmann, Michael Heimler, Kent Sanderson)

You have a film. The budget is low. And the potential for a huge ROI is there. But is the script good enough to invest in? This week at the American Film Market 2021 (AFM) a group of panelists met to discuss what makes them consider investing in a feature script.

Screen Daily Americas Editor, Jeremy Kay, moderated a panel that featured Arclight Films CFO Brian Beckmann, Michael Heimler, the head of Production and Finance for Black Bear Pictures and Kent Sanderson, Aquisitions and Ancillary Distribution for Bleecker Street. 

Kay first asked the group what are elements they look for in a script to potentially develop that suggest it could be profitable.   

Heimler alluded there are very few generalities to that question as each script is different, “It’s a difficult question because each script is different.  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.  We’re in the business of trying to find films that can find a wide audience…we’re looking for something that can break out and attract meaningful talent in front of and behind the camera…there has to be some level of inherent passion when we’re reading a script and then from there it’s analyzing where does this fit in the marketplace, what budget can it be made for and what cast or filmmaker might be necessary to support that budget.” 

Beckmann touched on the uniqueness and originality of the screenplay. “…It’s really about the uniqueness and originality of the script. Even if it’s a product type of script we’ve seen before, having that unique flavor to it really gives it something else to compete with.  Those projects that have a huge appetite across the globe and those that showcase the art-making process that we know are going to be a darling at a particular festival or during the Oscars or whatnot. We try to find a good mixture between the two.”  

Kent Sanderson of Bleecker Street noted, “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. We’re doing James Ponsoldt’s next film which is in post now and we jumped on to that one when it was just a script because we just love him as a filmmaker.  We are also doing some very quiet developments in the background.  It took a bit of a backseat during the pandemic while we figured out how to get movies out, how to get movies made during this period but for the most part we are a company that does a pre-buy negative pick-up on either the world, on the US, North America or sometimes multiple territories.” 

Kay then pivoted to asking what are the considerations when the group looks at when building out a script, especially when it comes to budgeting.

Heimler answered, “The way we try and put together a film is to put as much of the money on screen as possible. Making sure filmmakers can have as many days as they can to not compromise the creative at all and that we are giving our team the resources they need to achieve their creative vision and what the script calls for.  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.” 

Beckmann touched on what increases Arclight has experienced due to COVID, “There’s kind of a floor you have to meet just to start production and so we’re seeing percentage more around 5 – 8% but 8% on a 30Mil film, that is a lot of money that is solely earmarked for Covid, Covid testing, protocols and procedures, insurance, it certainly has cause 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.”

When the topic switched to co-financing and the considerations Heimler chimed in, “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. If we’re presenting a Martin Campbell, Liam Neeson action thriller, they’re going to have a pretty good sense of what that movie is…so something like that we can pre-sell the world basically prior to production, or most territories, at a value that makes sense for us. 

He added, “But we made a film I Care Alot that had a very specific unique type of tone that read really well on the page but we could understand that some perspective buyers wanting to take more of a wait and see approach and we understood and had the confidence in our filmmaker and the team we put together that we were willing to bet on the execution for that project and wait to find our distribution partners in many territories until we had more of a finished product. It depends on the project you have, the elements involved and the risks we’re willing to take if we want to pre-sell something at the early stage or not.”  

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The group was then asked what other factors do they consider when it comes to producing and financing.

Beckmann noted, “Location is one of top priorities for us – whenever we see a project, the first thing we consider is ‘where are we going to shoot it?’ We produce movies from Canada, the UK, Latin America, and various other places around the globe including China and Asia, so that’s our number one consideration – where can we get best bang for our buck, as well as who has the most friendly and aggressive tax credits, and an additional consideration is which territories, right now, are the easiest to contend with covid restrictions. With Australia, the UK and Canada underwriting COVID insurance, those three areas have been our biggest considerations for productions at this point.” 

He also shared, “It makes up a substantial amount of budget – those tax credits…depending on the situation, the cast, the storyline, that will determine if we need a co-production or how we end up structuring the film overall.”

The conversation became really interesting when the group was asked what are the calculations when boarding something at the pre-buy rather than acquiring a completed film.

 “You just don’t see many completed films that don’t already have a sales agent on from the initial development stage…they’re rare. For the most part, for those films that are the 7-15 Mil range which are the budget range that generates more of the profitability you have to go to that traditionally model that is still very prevalent in our industry for independent films which is a combination of pre-sales, tax credits and soft dollars as well as bits and pieces of equity.  That model that’s been around for years and years is still there.  There’s a new trend…where a streamer will come in and pre-buy an entire project and you basically just become the producer  – that’s an up-and-coming method of producing films but for the vast majority of independent films, it’s still that model of pre-sales, tax credits, soft money and equity. Our films are all based off that model,” Beckmann said.

Sanderson added, “The risk is when you’re looking to pre-buy in the package stage, we generally are not looking to pay a premium to get the movie made.  We want to make sure everyone gets paid, the movie gets made in a good way at the appropriate level, everyone gets their fees…the calculus for us is when the movie is done and it screens for us either at a festival or off market, then the market sets the price.  It doesn’t matter what it costs at that point.  All that matters is our calculation for what it’s worth for us what the producers need and what the marketplace can bear.  For producers the calculation has to be do I go with a company like Bleecker Street or a more traditional company like NEON or A24 or Focus Features and say ‘ok, this is getting the movie made but I’m relying on box office bonuses and award bonuses and my backend participation to really make a meaningful profit on this movie,’ or do you risk it and you wait until the movie is done in which case you could sell for more or it’s not landing how you’d hoped and then you’re going to rely on backend and bonuses just for you.”  

With streaming on the rise and the theatrical window shrinking, the panel was asked to weigh in on what impacts their decisions.

“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,” Sanderson detailed. 

Adding, “Finally, having name cast is really important in the digital age. People aren’t necessarily making quite as informed decisions before they decide to watch something, even if they’re paying $20 for it. The platforms themselves, speaking specifically about platforms where you rent or buy movies, remain very cast-focused in the way that they curate their landscapes. Even though movie stars are harder than ever to get a hold of, they do really matter in this space, whereas if you don’t have movie stars, you have to really believe that your film is going to carry the day because of its uniqueness, because of its singularity, because of its filmmaker. It’s a tough equation”