The Insider's Guide to Film Finance

278 Pages·2007·2.64 MB·English

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The Insider’s Guide to
Film Finance
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To Theodora and Alexandra
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The Insider’s Guide to
Film Finance
Philip Alberstat BSc BA LLB (London)
AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEW YORK • OXFORD
PARIS • SAN DIEGO • SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO
Focal Press is an imprint of Elsevier
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Focal Press
An imprint of Elsevier
Linacre House, Jordan Hill, Oxford OX2 8DP
30 Corporate Drive, Burlington MA 01803
First published 2004
Copyright © 2004, Philip Alberstat. All rights reserved
The right of Philip Alberstat to be identified as the author
of this work has been asserted in accordance with the
Copyright, Designs and Patents Act 1988
No part of this publication may be reproduced in any
material form (including photocopying or storing in any
medium by electronic means and whether or not transiently
or incidentally to some other use of this publication) without
the written permission of the copyright holder except in
accordance with the provisions of the Copyright, Designs and
Patents Act 1988 or under the terms of a licence issued by the
Copyright Licensing Agency Ltd, 90 Tottenham Court Road,
London, England W1T 4LP. Applications for the copyright
holder’s written permission to reproduce any part of this
publication should be addressed to the publisher
Permissions may be sought directly from Elsevier’s Science and
Technology Rights Department in Oxford, UK: phone:
(⫹44) (0) 1865 843830; fax: (⫹44) (0) 1865 853333;
e-mail:
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Contents
Foreword ix
About the Author xi
List of Contributors xiii
Acknowledgements xv
A Note From the Author xvii
Introduction xix
1 Underlying Rights 1
Financing Intellectual Property Rights 1
The Chain of Title Opinion 6
Sample Chain of Title Opinion Letter 8
Sample Chain of Title Documents 11
Certificate of Authorship 12
Short Form Option Agreement 13
Short Form Assignment Agreement 14
Quit Claim and Notice of Ownership of 16
Copyright and Other Rights
2 Co-productions (Alan Harris) 20
Introduction 20
Official Co-production Treaties 20
European Convention 21
Co-production Agreement 23
3 Banking the Deal (Rob Sherr) 45
Introduction 45
Getting to the Term Sheet 45
From Term Sheet to Cash Flow Forecast 47
From Cash Flow Forecast to Commitment 50
Closing Time 52
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Contents
4 Banking Documents (Lucy Walker and Philip Alberstat) 54
Banks and Security Documents – An Introduction 54
Registration of Security 55
Bank Facility Letter 57
Charge and Assignment 67
Letter of Credit 84
Notice of Assignment and Irrevocable Payment 96
Instruction
Notes to the Agreement 97
Acknowledgement of Notice of Assignment 98
Notes to the Agreement 100
Laboratory Pledgeholder’s Agreement 101
5 The Interparty Agreement 106
Introduction 106
Sample Agreement 108
6 The Completion Guarantee 121
Completion Guarantees 121
Application Requirements 122
Documentation 122
The Guarantee 123
Liability of the Completion Guarantor 123
Payments under the Guarantee 124
Force Majeure 125
Abandonment 126
Cut Through 126
The Completion Agreement 127
Completion Guarantors 129
How to Find Sample Completion Guarantor’s Documents 129
Completion Bond Letter of Commitment 130
Film Finances’ Sample Completion Guarantee 131
Film Finances’ Sample Completion Agreement 148
7 Collection Agreements 175
Collection Agreements 175
Sample Agreement 178
8 Recoupment – Net Profits 200
Net Profits 200
Gross Receipts 201
Sample Recoupment Schedule 203
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Contents
9 Gap Financing 205
Criteria for Gap Financing 206
Example 1 – Sales Agent Advance Against Sales 207
Example 2 – Gap Financing Deal (No Sales 208
Agent Advance)
Sample Sales Estimates 208
10 Alternative Financing 210
Enterprise Investment Schemes (EIS) 210
Limited Liability Partnerships 212
Sale and Leaseback Transactions 216
Sale and Leaseback 217
Appendix A: Glossary of Film Production and 227
Finance Terms
Appendix B: Helpful Websites and Recommended Reading 245
Appendix C: Example Errors and Omissions Cover Note 248
Index 249
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Foreword
Barely a day goes by without some film-related story making the
pages of the average newspaper. We are not just talking about the
reviews ghetto, but the lifestyle, travel and business sections.
With some films and film companies having become brands in
their own right, the corporate divorce between Disney and Pixar
was treated to front page treatment.
What does this tell us? Film has become big news, big business
and dominated by the studio big-boys. Maybe.
But at the same time part of its fascination is that film making
is also a cottage industry and a craft industry. There are layers of
detail to which the simplistic approach fed to newspaper readers
cannot do justice.
The independent film community is made up of highly motivated
individuals, struggling to put together financing, logistical and
legal puzzles that would defeat many a 3D chess player. Frankly it
is a miracle that any independent film ever gets made. Even more
of a miracle that any of them are any good at all.
Clearly, it is beyond the scope of this book to tell anyone how to
make a good film or a commercially successful one. It would be both
patronizing and foolhardy to try. After all, some of the best brains in
the business have come horribly unstuck attempting to do that.
But neither is it quite true that ‘nobody knows nothing’, as ace
screenwriter William Goldman once suggested. Studios maximize
their chances through a combination of ‘portfolio theory’ and
marketing muscle. Independents can maximize their chances, if
not of success, then at least of surviving the production
experience by using some of the right techniques. A little
knowledge can go a long way.
That means getting a film’s budget in line with its recoupment
potential; it means knowing what to ask your lawyer and when;
and it means understanding the choices you make when opting
for equity over debt, pre-sales over independent finance; or
shooting on location in Ireland over studios in Luxembourg.
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