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Can anyone explain how the mini-major studios like Lionsgate and STX secure financing?

How do Lionsgate and STX secure financing? They seem to have access to millions of $ through Chinese investors and US venture capital, but how are these deals put together?

In the UK, we have an over reliance on funding, subsidies and multiple co-productions. UK film investors tend to only invest on a film by film basis with a few million or hundred thousand UK pounds.

How could we put together a studio in the UK and secure the hundreds of millions in investment like Hollywood does?

  • Matthew,
    As some people have said, film business is a business. Stop asking part-time film people who know nothing about business. Ask full-time business people. Ask people who run restaurants how they do it. (Don't mention film.) Ask people who run companies like Virgin. (Branson runs projects for entrepreneurs. But again, don't mention film, or you'll get bad advice.)
    A lot of UK film investors invest directly in Disney. Americans often look to UK, Germany, and other parts of Europe for investment.

    You can buy shares in Lionsgate through the London Stock Exchange. (One of the world's biggest investment markets.) It only costs about 20 quid a share (much cheaper than stock in Google.)

    To go public, you need to be trading for a certain amount of time.

    Tesco is a UK Company. So is Greggs. And Specsavers. And a lot of infrastructure companies that you may not have heard of. So are most British high street Banks. There are many UK brands that are global. Look at a UK rich list. Most of them are not Russian immigrants running from Putin, but people who made local businesses with British money.

    The UK is not a developing country. It is only people in the arts industries who pretend like it is. The per capita income in the UK is close to that of the USA. For hour worked, it's higher than America's.

    The reason UK investors supposedly invest in one film at a time is because the tax benefits mean you need a quick turnaround. But, they don't always limit it to one film. They often invest in three or five films at a time. I have a few prospectuses that have been sent to investors for five films. (These were successful.)

    However, investor beware. Sometimes these tax schemes are rotten, with experienced producers becoming scammers due to greed. Other times, they are just mistaken, and the investor has to pay the tax anyway (or claims too much, due to misinformation.) There are also scams in real estate.

    If you want to put together a studio, you've got to say that you want to compete with eOne (Canadian), Lionsgate, Sony Classics (Japanese) and so on. And, as a studio, you probably won't get the film tax benefit. But, who really cares, you won't be limited to British taxpayers then.

    Then, be ready for the old **** who get tax-credit dole to oppose you at every corner. Because if you succeed without government backing, they'll have no more excuses for the subsidies and kickbacks.

    11 months ago
  • I should add, outside of the big TV channels, you have global brands like Aardman (Chicken Run 2, no!), video game studios, advertising firms, and other support companies that are huge. Aardman is getting into video games, and is a company to watch.

    The feature film part of the industry suffers because of the dole disincentive. In order to keep the tax breaks and subsidy, they have to prove they need it. So, success would be punished. It's like training wheels.

    This creates a negative attitude. But, the same goes in America. A lot of Americans are extremely pessimistic too. However, the Coen brothers, Napoleon Dynamite and Blair Witch exist because there are no training wheels (or they are hard to find).

    Many entrepreneurs in film and computers are relatively young because they don't have the cynicism or arrogance of experience. But, older people who still have ambition and continue to learn are golden. (Many top TV entrepreneurs in America are older people who just refused to stop learning and refused to quit trying new things.)

    What you have to do is throw out the rule book and make your own rules. Use ethics, sure, and morals, but you don't need celebrities to be Roger Corman, you don't need Hollywood to make Benji, Hollywood itself was a rebellion against Edison's trust in New York, and cinema itself broke the rules of theatre.

    The fact is, the UK can create the next Disney, the next Facebook, the next Microsoft, the next Amazon, the next Netflix. Or, I should say, the replacement for those. One day, a new nation will dominate the english language film market, and Americans might say "we had an industry, once."

    11 months ago
  • They are put together by people who can do maths, for whom enormous spreadsheets are fun* and who understand bank treasury functions and portfolio theory. And who have a razor mind for film people bullshit. In particular they know exactly how the box office and other revenues shred down to actual investor revenue, and what different audiences imply for that return.

    The film people who get that money also have that skill set in some degree and, at bare minimum, know how to dial down the bullshit. (If you want to read up on anything, Portfolio Theory tells you why smart investors spread risks).

    Pop Quiz (taken from a real seeding funding meeting. I was NOT the person with money, but phrased for effect).

    You need 200K to develop a movie with a 10M budget.

    You've manged to get a pitch meeting with me, and I like your idea.

    I offer you the 200K on risk equity terms. My terms are that when we get the next level of funding (which I will be happy to lead, since I just put 200K of my money it and know more about funding than anyone else in the room), I get back my 200K plus 100K, and retain a 5% stake in the final film.

    Your instant reaction - is that money cheap, expensive, or just about right?

    But also....

    I just told you something absolutely crucial about my business. What was it?

    Answer - my expected hit rate for raising full funds for projects I seed fund. And by now you have worked out that I need to fully fund what proportion of those I seed fund?

    It's about 1 in 3.

    Should you take my deal? Your call, but now you're making it with full understanding - take my money and you have a 1 in 3 chance of actually making your film. How does that stack up against anything else you have on the table? Make a decision.

    If you can't do that maths in your head, you need someone in the meeting who can. You'll have put in a crazy amount of effort to even get the meeting, don't blow it.

    The people I was with, they completely missed what they were being told. The potential seed investor spotted that straight off and it was game over. Serious investors do not invest with people who they think do not understand at least the basics of money.

    *My personal best, one that would have been over 1000 A4 pages of equations. But that was back when I was in financial services and engaged in an arms race between companies trying to make my analysis impossible to carry out, and me. When I released the behemoth they rolled over :-) That maths should have been a one line equation....

    11 months ago
  • Delete. Never type drunk or with a migraine....

    11 months ago
    • I'd take you in to bat drunk or otherwise mate, experience and wisdom shows out ;-)

      11 months ago
  • Misremembered the numbers, but the math was a hit rate of 1 in 3 to break even. (Which actually makes the money look even more expensive). I'm going to lie down now...

    11 months ago
  • Extra marks will be awarded if you show your working!

    I'm not financially literate, but I am fairly numerate. Three lots of 200k is 600k. A one-in-three hit rate means you got back 200k + 100k, so you're £300k down. (To break even you'd need a 2:3 hit rate)

    But to compensate for that 300k net loss elsewhere, you do have a 5% share in a 10m movie. (We have to assume that the 200k + 100k is part of the £10m budget). If it breaks even, you make a net 200k on an initial 600k outlay. That seems like a pretty poor risk:reward ratio to me, but you did say the figures were wrong. (Maybe your fictional seed investor has a good eye for a commercial proposition)

    Question 1: Do seed investors, the like of whom you speak, aim to get their money back on their seed investment alone? To put it another way, on your figures, would they actually aim for a 2:3 hit rate? Then the 5% of any earnings (not profits) are the real return for them.

    Question 2: Would a seed investor who knew anything about low-budget film really expect a producer to be financially literate in a meeting? Would they not be more interested in the viability of the project?

    11 months ago
  • The meeting I was in, the seed funder was def looking to full fund on 1 in 3, if they did better, they made money. The 5% was for jam. They wouldn't seed fund anything that they didn't think they could get fully funded, but it would take a lot of hubris to have a biz plan based on funding everything, or even 1 in 2 :-)

    As to the team I was in the meeting with (friends of mine trying to fund their first feature). Their odds of getting from zero to 10M were way less than 1 in 3.

    11 months ago
  • There are loads of investors and mostly groups ready to invest. I have a list of 70 plus for feature film but when you write most will not even reply or give a pass.
    Ok I can only speak from limited experience but the base idea people fail in aNd look amateurish when seeking investment and Lionsgate etc do not look amateurish, is they write a film then try to cast, produce and direct it themselves. Get a producer who talks the lingo, can structure deals etc. We are not without multi million funding. Pinewood can do that for projects.
    But bear in mind no one is going to invest 10 million in you as a film maker if you haven’t made a couple of 1-2 mill films first. Studios in UK or US back sure fire film makers with excellent cast and Director with a trAck record. So big groups like LionsGate have a track record and investors will invest a lot because there is a big chance they’ll make a profit . They also know all the investment groups and contacts but so do Pinewood. We don’t need to try we already have it if you know where to look.

    10 months ago