It has been a brilliant and manic start to 2018. My colleague, Muireann Price, and I at Double M Films have found ourselves launching a start up – a Hollywood movie studio of all things, with prolific indie film producer Cassian Elwes. And we are doing it from London.
It’s new, it’s exciting and it’s different. But it’s also a logical step and the timing is right and I think it might change how independent films are financed.
The business is called www.MovieCollective.com - Take a look.
I don’t believe Cassian’s list of movie credits can be bettered by sheer volume or quality and ‘post Weinstein’, Cassian is one of the few men standing in the business who has been a voice for women in Hollywood and for diversity. The movies Cassian has produced include Dallas Buyers Club, The Butler and Lawless (the actors involved is a “Who’s Who” of Hollywood talent).
Recently, his movie Mudbound – directed by Dee Rees and picking up four Oscar nominations at the last Oscars (including the first female cinematographer to ever receive a nomination for cinematography) was sold to Netflix for $12.5m at Sundance 2017. The biggest deal that year for the indie festival. Cassian knows how to develop projects, attract talent, execute and sell. The opportunity of working with him is very exciting.
It has meant that Muireann and I have not stopped on this – weekends and through the night. It doesn’t feel like work. It feels like an opportunity that we need to grasp and make work.
At William Morris, Cassian was one of the pioneers of the agency packaged independent film – outside the studio system – and helped bring iconic titles such as Sling Blade and Monster’s Ball (which gave Halle Berry her best actress Oscar) to the screen.
The Movie Collective plan involves shifting how equity investment in movies is made – by crowdfunding the equity investment into a slate of movies – rather than bringing in a large equity investor into a single project.
That’s it. It’s quite simple. And it’s made possible by equity crowdfunding platform www.Crowdcube.com
How does this compare with film finance across the industry? Here is an overview.
At the very top end of the business is the studio system. Collectively, studios borrow billions of dollars to make some really big films with huge budgets. Lately, the studio system has made less movies but with even bigger budgets. Their focus has been remakes and comic book super hero franchises. A movie studio might borrow $1bn in a year from a large financial institutions and hope to make £1.2 or $1.3bn – thus a profit of $300m.
It makes sense for the larger studios to keep making the comic book hero movies, and keep remaking them as long as people turn up to see them. It’s been a great strategy so far and it will work as long as the comic book genre keeps audiences hooked.
Below this, the mid-range dramas, love stories, thriller and character studies that studios used to make, have been made and continue to be made by the agency packaged model. This is something that Cassian helped pioneer when he was at William Morris.
I always used to wonder how these films with big stars were still labelled as independent. They had all the production values and talent of a studio film but were still labelled independent. But they are independent and made possible by the collaboration of very talented people in the business. And they had to be made by someone, once the studios took their focus away from them. And interestingly, some of these films have started off in the studio system and some end up back at the studio system for their release.
It is well known, for example, that the movie Dallas Buyers Club was in development for over 15 years in the studio system before Cassian helped get it made – independently.
The agency backed, independent movie, with star talent, made for a fraction of what a studio movie is made, relies on a finance mix that brings in bank debt (loans against the pre-sale or pre-sale estimate of a movie to foreign territories), mezzanine and gap finance (the loans you can raise between the sales estimates and actual sales of a movie to a foreign territory as well as an advance against tax credits) and private equity (high net worth individuals that come in to finish the financing).
The high net worth individuals that might put in 30% of the budget are the last to get paid after the banks get their loans paid back (with interest) but they also stand to gain the lion’s share of any profits should the film be a ‘hit’. But also, because of the way a film’s budget can be brought into line against the sales estimates of a film, in theory, these high nets (as long as they are in with an agency backed movie that can attach the talent) often get their money back (plus 20%).
This movie – the agency backed indie film – also relies on star talent to take a pay cut. It’s why the screenplay has to be good and the director has to be a draw. It has to be a passion project for all – something that all parties involved with will be proud of. Is there a better movie to make? Did we not become story tellers to make these films?
The plan with Movie Collective is to effectively replace that high net worth individual who comes in to finance the agency backed, high quality, non-studio, indie film with the crowd – that’s you and me. It’s ambitious and I have no idea whether we can pull it off but I know one thing, this is the future.
As I’ve said so many times to people I talk to about this, it makes more sense for 1000 people to put $1000 into a movie project than one man to put $1m. And technology allows us to do that.
It’s like a form of banking, but without the building and costs involved in banking. Why? Because a bank does two things. One, it aggregates capital. Two, it assesses risk.
Technology and platforms can do both very efficiently. Movies are capital intensive and risky. The crowd investing model suits it perfectly.
The difference between what we are doing and what is happening on Kickstater and Indiegogo is that we are creating a company that people can buy shares in and actually own and share the benefits of it. This means we can bring movie projects that have budgets in millions, not thousands. This is not for perks, this is for ownership and an opportunity to be financially rewarded with a dividend.
And instead of doing it with just one film, we want to do it with a slate.
In effect, we are launching a movie studio and financing it via the crowd. Admittedly, it’s a small movie studio and we don’t have anyone on the payroll – as myself and the other directors including Cassian, don’t get a salary but are rewarded with other shareholders on the basis of delivering a profit and a dividend.
But it is a movie studio. And instead of us being a movie studio that borrows money from a bank, we are selling part of ourselves to the crowd.
And if we get this right, then there is no reason why other producers and filmmakers cannot follow the model.
And if we can get it right then it doesn’t stop us from going back to the crowd and doing it again.
And the way we get this right is by making good movies.