July 11, 2020

Film Rats Club

Let's Talk Movies

Dialogues: How funding in film really works by Ojie Imoloame

Ojie Imoloame is a Digital Consultant and a Film Producer. He engaged the Film Rats Club on source funding and content creation. See transcripts of the presentation.

Direct Funding

Traditional Studio System

Let us look at a traditional studio system, taking Hollywood as a case. Films are conceptualized, developed, produced and distributed by the studios. There are “Major” studios and smaller studios, with the difference essentially is that the majors have more financial capabilities to take on higher budgets such as “Black Panther”, “Frozen 2” and so much more. It should also be noted that production budgets most times are independent of marketing budget, although, both tend to end up forming the total cost of the film. However, in order to remain sustainable and competitive, without a doubt, all studios, major or small seek to invest in productions with the hope of achieving significant returns or simply put, every studio seeks to make “a hit”. Thus, in order to guarantee a hit, studios tend to favour mainstream pictures. These are essentially films that will appeal to as many people as possible.

So, take for instance Jordan Peele’s “US”. {Side Note: Though, some may consider horror quite genre/niche and not mainstream enough, the success of “Get Out”, “It”, “Split”, notably from Jason Blum’s “Blumhouse Productions” who specializes in producing low-budget horror pictures, have reinvigorated interest in the genre}. See cost and revenue breakdown here. As seen, the production budget was reportedly $20M and Universal Studios spent an additional $75M on marketing, effectively bringing its total cost to $95M. The global box office receipts closed at a reported $255.2M and the film generated a net profit of $119M. These are the kind of numbers major like to realize from productions.

Independent Sources

When the picture is considered “artistic” or “genre”, the likelihood that a studio may fund it is low because there is a low likelihood that they will achieve a good return on investment. On this note, the filmmaker may seek independent sources.

Crowd Funding

“Dear White People”, directed by Justin Simien funded its trailer by IndieGoGo .The trailer was used to generate some buzz and pitch the tone and style of the film to studios in Hollywood, and they eventually sought financing from an independent financier. The film premiered at the Sundance Film Festival, got distribution, performed rather modestly with a boxoffice of $4.6M, and Netflix acquired the TV rights and “Dear White People” the series is currently in its fourth season. Spike Lee funded  “Da Sweet Blood of Jesus” with Kickstarter.

Pre-Sales

Here, the film’s rights to be distributed in several territories are sold to distributors based on the cast, director and script (genre, story, style). The money is used to fund the production. Pre-sales usually occur at film festivals like Cannes for instance. “355” starring international stars; Jessica Chastain, Diane Kruger, Lupita Nyongo, Fan Bingbing Penelope Cruz and directed by Simon Kingberg (“Dark Phoenix”) recently used this approach.

Other independent sources are funding are bank loans, personal funds, private or private equity investment or even partnering with big stars to take a lower upfront fee and a share of the profits (See “talent participation” in the “US” breakdown)

Nollywood Funding

In the case of Nollywood, as we know, most sources of funds are personal savings or the small amounts obtained from the quick turnaround of the movies. This has been the model since 1992 or even before. To be clear, Nollywood does employ the studio system, for example, ‘Grand Touch Pictures’ owned by Chico Ejiro, funded their productions. However, due to the small scale, lack of structured distribution network and transparent reporting and other challenges, it was a bit challenging to seek financing from banks and other institutional investors.

However, with the return of cinemas, structured distribution network and transparent reporting and renewed focus on production quality, filmmakers can now seek funding from other sources besides personal funding like banks, PE firms and others. It should still be noted that sourcing for funds for production in Nollywood is still mostly through personal savings or friends/family but there seemingly appears to be a gradual shift from this approach. The Bank of Industry has set up a N1Bil ‘Nollyfund” to support Nollywood productions and support the growth of the industry. Filmmakers like Kunle Afolayan and Jadesola Osiberu have benefited from access to this fund to fund their films (“CEO” & “Isoken” respectively). Private Equity firms have also entered this space such as MBO Capital, who invested in Wedding Party 2. Also, the Government intervened and set up at $200M fund for “Project Nollywood.”

The major challenge with seeking funds for Nollywood films is poor quality films and scale of cinema distribution. The typical Nollywood film does not play cinemas internationally particularly due to quality issues, therefore limits it to local cinemas (218 screens across 63 locations as at 2019) unlike Hollywood films that are distributed globally. Once we can fully solve the quality issues and consistently produce exportable films, we will be able to tap into a global cinema distribution network and can also access more funds from a multitude of local and international sources. The shift is changing as, “Isoken”, “King of Boys”; “Wedding Party” successfully obtained foreign cinema distribution.

Indirect Sources

Product Placement & Partnerships

Hollywood has long used product placements for films. “Sky fall” was a walking advert with brands such as Heineken, Adidas, Omega, Aston Martin and others heavily featured in the film.

I recall Ecobank partnered with ‘BAP Productions’ for the release of ‘Bling Lagosians’. Almost as something of a coincidence, I happened to be at Ecobank on the opening day of the film and I noticed the staff was asked to dress in “Bling” and the film was promoted on the bank’s platforms. “Merry Men”, if you ever watched it, you will see that it was shot in Transcorp Hilton hotel, Abuja and featured the hotel numerous times. These partnerships would have obviously helped to cushion the production and/or budgets. ‘Ndani,’ ‘Accelerate,’ and ‘Red TV’ are platforms, which are owned by GTB, Access Bank and UBA respectively. Who says they may not be willing to fund features?

Tax Reliefs

The UK Government has utilized this approach to grow its film production industry and as such has used this to encourage productions to move to the UK. For example, “24: Live Another Day” took advantage of this opportunity and moved its production to London. Netflix and other major Hollywood studios/ investors are taking advantage of this opportunity by investing millions of pounds in productions to be filmed in the UK.

In summary, there are numerous means of seeking finance. Direct means via a studio or independent means via crowd funding, personal savings, bank loans, pre-sale at festivals. There is also the indirect means via product placement or tax reliefs. The truth is, we can unearth these means of funds, but there is first a need to get the quality right. Once we can achieve this, the floodgates will open! With foreign distribution guarantee, you can even use that to seek a bank loan, partnerships with Cooperates and so on. It all boils down to the distribution being as wide as possible.

Ade: Well done. I like the simple and concise presentation. So, using a short film to fund a feature, how effective/feasible is that in the Nigerian space? For instance, suppose you make a short film, an extract from your feature film idea, in order to attract investors.

Ojie Imoloame: I think this may work, Isaac (a fellow Rat) put up something yesterday about how a short can used to tickle the fancy for investors. Effectively, you are giving the investors something to see. It would also be helpful if the film has played festivals, won awards and maybe was a hit on YouTube. Therefore, they can ascertain its commercial viability. “Pariah”- Dee Reese’s fist film went through this route. It was first a short, and then was made into a feature on the success of the short. I think it can work here.

Ade: Do you think it’s okay for one person to control both distribution/production and exhibition like FilmOne/FilmHouse does?

Ojie: It being ‘okay’ is arguable. Is it novel? No. If I were in their shoes, I would do the same. For one, it is cheaper in the long run really. I control production, distribution and exhibition, I manage costs better. So, It is really neither right nor wrong, just business. However, the key is you, as the producer needs to produce good content. You need to know exactly what it is you are bringing to the table to get the best possible deal.

Ade: There are no policies against it for now, so I can’t say they’re doing anything illegal.

Ojie: It’s going to take quite a while; the government, I believe is just understanding the business itself. When the West started calling us “the third biggest film industry in the world” we all woke up. Once Nollywood starts showing billions in box office, I promise you, regulations will set in. This is exactly what happened with gambling, even financial services to a degree. The government is also a major revenue stakeholder i.e. taxes. The Federal and State government have their regulators for mature industries, and so, they will step in big time once Nollywood starts making serious money. Good thing is, seeing as oil is now less valuable than water, the next viable industries in Nigeria are Agriculture and Nollywood.

Ade: That’s true.

Ojie: Financial Services, Oil & Gas, FMCG, Telecommunications are the main industries in Nigeria. However, recent administrations have included Nollywood in their growth strategies.

As content creators, we must be focused on creating exportable content. That is when you can reap the benefits of what you have sown including royalties, residuals. The cast of shows such as ‘Friends,’ ‘Sex And The City,’ will never be poor. They sit at home and get cheques. Why? Syndication money. For TV, the standard used to be 100 episodes and it goes into syndication. Ideally, for films, the first run should be cinema for about 3 months, then ITunes (and physical DVD’s), Inflight entertainment, DSTV, Other TV stations abroad, Netflix, and Amazon Prime etc.

The only way we can enjoy is if we create exportable content and crack the distribution internationally. Naz Onuzo said ‘Wedding Party’ was sold to 22 territories. The distributor would handle the marketing. Your job will just be to answer questions for the press and make your money. Netflix is a savior in this regard especially for when the economics of the movie does not work for the studios like “The Irishman” or “Beasts of No Nation”. In this regard, I believe, the producers were not confident of its commercial viability in the cinema, so they sold it to Netflix. I was in Enugu and was the only person in a 75-100-seat cinema watching “Beasts of No Nation”. Netflix wanted to acquire “Crazy Rich Asians”, the filmmakers declined the offer and sought cinema distribution instead and “The Farwell” too.

Isaac: This turned out to be a wise decision?

Ojie: The Director reportedly went for a lower offer with A24.

Ayo: Yeah Lulu talked about it at the Hollywood roundtable talk.

Ojie: Yes, she did. The film performed well commercially and critically. She said she wanted to create her own brand, which makes sense, what is life without some risk? Back to my point above, Lulu knew her content was good, and she was well prepared to take the risk. Don’t get me wrong; Netflix is a fantastic platform because it instantly gives filmmakers access to over 180 million subscribers across 190 countries. Also, if the movie is a commercial hit at the cinema, you can make the money in the first run. Tom Cruise reportedly gets first dollar gross, Cameron Diaz made ‘Bad Teacher’ and negotiated a good deal to take lower upfront and a share of the backend its $200M revenue on a $20M budget.

‘Half Of A Yellow Sun,’ for instance is a fantastic case, good story, known and established IP, well known cast, yet was not well received by the foreign critics so, it hurt its chances at seeking strong international distribution (it did find a small distributor in America), which is the only way it would have recouped its reported $10M budget fees back. It was also the same year of “12 Years A Slave”, a film that also starred its lead actor Chiewetel Ejiofor. We all know how well that film did.

Imagine if that film was well received and played round the world like “Slumdog Millionaire” did? When your content is good, they will rush you! Subsequently, they will offer you money to make more, see Reese Witherspoon. Her “Hello Sunshine” production company has developed shows for HBO “Big Little Lies”, HULU “Little Fires Everywhere”, Apple TV + “The Morning Show”, Netflix. Kenya Barris has a $100M deal to develop content for Netflix. Ryan Murphy also signed a $300M for Netflix and do not forget about Shonda Rhimes’s Netflix deal too. Netflix obviously went after these prolific producers for the vast contributions to the TV and Film content. It may sound huge, but we can definitely get there. After all, HBO Max picked up ‘Americannah’ starring Lupita Nyongo.

Ayo: Did she get to ‘Idi Ose’ and ‘Okitipupa’?

Ojie: Danai Gurira is the Showrunner and I am sure the scripts are good. Recall, Danai is an accomplished playwright haven been nominated for a Tony award for ‘Eclipsed,’ which starred Lupita on Broadway. I believe the world is looking for Nollywood. Our content is wonderful, dramatic, funny and uplifting. We just need to solve that quality gap and take advantage of the global distribution network. Imagine seeing 10 Nollywood films a year playing cinemas round the world? I think we can close with this. Thank you.