Film Financing

Film finance is a subject of project finance, this means that the film project’s cash flows are used to repay other investors and generally not from external sources. However this has been met with new ways to repay investors to protect principal. Film financing happens during the development stage before pre-production, and it is an aspect of film production. It determines the potential value of proposed films. In the US the value is usually based on either a forecast or revenues.


There are four main methods of financing  the production of a film:
1. government grants
2. tax schemes
3. private equity and hedge funds
4. debt finance
5. equity finance


Government grants

The term government grants means where a number of governments run programmes to subsidise the cost of producing films. For instance the UK film council does provide funding to producers but only if certain conditions are met. States such as Louisiana, New York, Connecticut, Michigan and New Mexico will provide a subsidy or tax credit on the condition that either all or just part of a film is filmed in that state. The reason governments are willing to provide these subsidies is usually based on the fact that they want to attract more people to come to their territory's, so by allowing films to be shot in their state gives them the benefit of being able to advertise their location to an international audience. So in my opinion I believe that government grants is a very good idea as it gives off advantages on each side and doesn't come with risks as the government expect no financial return. 


Tax schemes
Tax Schemes are created which effectively sell the enhanced tax deductions to wealthy individuals with large tax liabilities, the individuals then have to pay the producer a fee in order to obtain these tax deductions, the individual will often become the legal owner of the film or own certain rights relating to the film. A number of countries have introduced legislation that has the effect of generating enhanced tax deductions for producers or owners of films. Too much of the tax benefit is siphoned off by promoters of the tax scheme, also films with littler commercial are produced simply to generate tax deductions.

Private equity financing


When a film maker can not afford funding, they have to use private equity financing this requires them having to sell interests in either the film or film company in exchange of funding, however this method does come with risks for the investor as they will only receive their money back if the film proves to be a hit, however for example if a film maker sells 50% of their corporate interests to an investor and the film turns out to be a failure then the investor will loose his entire investment, although if the film is a huge success then the investor will receive 50% of every pound/dollar of profit, which is far more than what a lender would usually get. So although this can sometimes work out for both the film maker and the investor it doesn't always work out which is why I do not agree with it, as I don't think its fair that the investor will not always get their money back.




Debt finance
Debt finance is based on pre-sales. 

pre-sales:
Pre sales are based on the script and cast, selling the right to distribute a film in different territories before the film is completed.Once the deal is made, the distributer will insist the producers deliver on certain elements of content and cast. In order to gain the “marquee names” essential for drawing in an international audience, distributers and sale agents will often make casting suggestions.For example they will insist that the people in the cast are popular to the public as this will help the film become more attracting to the audience and want more people to watch it because of who is in it.  The reliance on pre-sales explains how much the film industry rely on movie stars, directors and certain film genres. Usually when signing a pre-scale contract, a buyer will pay a 20 percent deposit of the films collection account with the balance of 80 % due upon the films delivery to the foreign sales agent.

Television pre-sales:Although it’s more usual for a producer to sell the TV rights of a film after it has been made, it is also sometimes possible to sell the rights in advance and then use the money to pay for the production. In some cases the television station will be a subsidiary of the movie studio’s parent company.

Equity finance
product placement also known as embedded marketing is a form of advertisement, where branded goods or services are place4d in a context usually devoid of ads, such as movies, music videos, the story line of television  shows, or news programs.

Examples of product placement in movies
Product placement is an investment for brands trying to reach a niche audience and there are strong reasons for investors to expect that film product placement will increase consumer awareness of a particular brand.

In Fritz Lang's film "M" released in (1931) there is a prominent banner display on a stair case in one scene for Wrigley's PK Chewing Gum which is right in the viewers eye for around 20-30 secondsIn the filmLove Happ (1949),






 Harpo Max's character cavorts on a rooftop among various billboards and at one point escapes from the villains on the old Mobil logo, the "Flying Red Horse". Harrison's Reports severely criticized this scene in its film review and in a front-page editorial of the same issue.

Self Promotion
Self promotion is one of the four elements of marketing mix, it is the communication link between buyers and sellers for the purpose of influencing, informing or persuading a potential buyers purchasing decision.
A fine example of self promotion is what Twentieth Century Fox do, they are a subsidiary of News Corporation and  has promoted it's parent company's own  Sky News channel through including it as a plot device when characters are viewing news broadcasts of breaking events.

Television Funding

Television funding


Television companies in the UK attract their funding in a variety of different ways,there are three types of broadcasting which are public service, commercial and subscriber. Public service broadcasters (BBC) receive their funding via the licence fee,which is 145.50 a year, which works out as 12.12 pounds a month and 66% of this value goes to BBC. However BBC make more of their money through syndication. Syndication is the sale of the right to broadcast radio shows and television shows by multiple radio stations and television stations, without going through a broadcast network, but itself could be considered a network. EastEnders is an example of a syndicated programme by the BBC. 
















Commercial Broadcasters
Commercial broadcasters such as ITV and Channel 5 get their funding by advertising, sponsorship, syndication, competitions and merchandising. ITV was the country's first ever commercial TV provider. Advertisements are the main source of income for ITV so they try to fit in as many commercials as possible throughout programmes. Just like Public service broadcasters, Commercial broadcasters also make their money through syndication. An example of this by ITV is The only way is essex as it is also shown on ITV+1 and an example of it for channel 5 is Big Brother.

 Syndication starts off in the country in which the program is first issued then it can expand to international usage by being repeated on other channels. Like the BBC ITV and channel 5 host a lot of competitions, for the example the X factor that is shown on ITV makes millions of pounds by getting the public to vote for the acts they like each week. As this is a popular show advertising revenue makes it higher. Both of these television companies also use merchandising to gain money, as they have websites that have links to their merchandising sites where consumers can buy stuff that has been shown on their programmes.




Channel four is a Public Service Broadcaster and also a Commercial Broadcaster, it is not publicly funded but it relies  on the government. They are funded by sponsorship and advertising and governed by a unitary board made up of executive and none executive directors, these are they to ensure that channel 4 meets its remit and delivers its financial responsibilities. Channel four also has sponsorships this helps give a brand instant fame and makes them stand out, its also great for raising awareness. Like the BBC, ITV and Channel 5, Channel 4 also syndicates programmes such as Hollyoaks.  




Suscriber channels; these are sky and virgin media, these are different from the others because customers have to subscribe to their network and pay for the packages they offer them. These packages contain direct broadcast sattelite, television broadband and telephone services Also, the quality of the programmes shown depends on whether a person will subscribe to them, so its important for Sky and Virgin to show great programmes so they can attract the customers to subscribe to them. Otherwise they wouldn't make much money. There is a lot of competition between these 2 companies, and they are constantly bringing out different packages in hope of new customers subscribing to their networks.      

BBC

BBC stands for the British Broadcasting Corporation it is a public service broadcaster and is headquartered at broadcasting house in the city of Westminster, London. It was founded on the first of January in 1927 by John Reif (director-general) and George Villers (chairman.)

The BBC is a public service broadcaster that operates under a Royal Charter and a licence and agreement from the Home Secretary.  BCC’s work is funded by an annual television license fee which is charged to all British households, the level of this fee is set annually by the British Government which then has to be agreed by Parliament. The corporations guaranteed income from the licence fee and the World service grants are added to other things such as commercial operations in order to make profits, this is done through a wholly owned subsidiary that is BBC Worldwide Ltd. The company’s activities include programme and format sales, magazines and book publishing. The BBC also earn an additional income from selling certain programme making services through BBC Studios and Post Production LTD., formerly BBC Resources Ltd,  which another wholly owned trading subsidiary of the BBC corporation.

The privately owned BBC was the world’s first national broadcasting organisation. The British broadcasting company was created by the British general post office (GPO) and John Reith applied for a job with the existing company and later became its employee general manager.




TV stations operated by BBC
BBC news
BBC one

BBC three

BBC two

BBC four

CBBC

Cbeebies

BBC parliament

BBC HD

BBC get their funding of the public  through the license fee, which is something i do not agree with. The reason they do this is so they do not have to advertise as most other TV channels get their fundings by advertising but the BBC can't do this. However the BBC are supposed to be unbiased because they are a public service broadcaster they cant give their own opinions they are only there to entertain and inform., there for everything they say must be  the truth.
A television licence or broadcasting recieving licence as its also know as, is an official licence tthats required in many countries for the reception of television and in some cases also radio broadcasts. It is a form of hypothecation tax, which allows public broadcasters to transmit television programmes without or with only supplemental, funding from radio and television commercials.