Task one - sources of finance
- 1. Unit 4 – Pre-Production Lauren Whyte Learning Aim A – Understand the requirements of pre-production of a digital media product Sources of Finance for Media Products Corporate Finance Large companies have finance in place if they produce big budget movies. They can create these large budget movies by reinvesting their profits from previous profits that have been earned from earlier productions. This is known as corporate financing. Large companies, such as Paramount, will attract investors due to their success. They therefore have easy access to borrow money. Furthermore, ifa largecompany, like Paramount, have these largefunds, they can afford to have a financial flop of a film, an remain successful. If this was to happen to another, less financially stable company, this may be devastating to them. On 31st December 2009, Disney finalised the purchase of Marvel Entertainment for $4.3 billion (£3,257,701,500). Since then, Marvel have become extremely successful. InJuly 2017, months before the box office success of Thor: Ragnarok, the Marvel Cinematic Universe successfully passed $12 billion in worldwide box office grosses. That's $1.3 billion a year in less than a decade. This is a prime example of a company that have the corporate financeto reinvest into new productions and have the expendable income to potentially make a loss on a film. Distribution Rights Once a producer or a filmmaker makes a movie, they have to start the next process of getting it out for their audiences to view. What they own is the content rights for what they have produced. The producer will then have to sell content rights to a distributor or a film distribution company. These Rights are known as film distribution rights. The content producer owns the film distribution rights at first. Once they sell their distribution rights to a distributor, the distributor owns the rights. The contract specifies whether the distributor can screen films in theatres or sell DVD copies, release the movie through OTT platforms or TV, share music to audiences etc. The contract can also specify the territory and lifespan for the rights. DNA Films made Danny Boyle’s 28 Days Later. After the production had been so successful, they sold the distribution rights to 20th Century Fox. They then continued to use these fees from the sale to fund further productions. This means that they sold all of their rights worldwide in all formats – cinema/DVD/tv etc, to 20th Century Fox. Sponsorship Sponsorships are a form of marketing that provides certain rights and benefits to the buyer or “sponsor”. A company will pay money and in return will have a screen, caption or short video shown before, after and during advert breaks of the show. It is usually in conjunction with a property, venue, personality, or event. Most often the sponsors may use the images and logo of the partner and call themselves an official sponsor of the property. Sponsorship is particularly effective when the sponsor and the property have similar goals, values and vision. Many UK television shows have corporate sponsorships,except on the BBC as it is non- commercial. Examples of sponsorships could include Compare the Market who sponsor Coronation Street, Just Eat who sponsor the X Factor, or Superdrug who sponsored Love Island. Product Placement Product placement is an advertising technique used by companies to subtly promote their products through a non-traditional advertising technique, usually through appearances in
- 2. Unit 4 – Pre-Production Lauren Whyte film, television, or other media. Product placement happens on both TV and during films. Whilst Jamie Oliver conducts his 30-Minute Meals TV show, he uses product placement to promote certain foods and ingredients that he supports. For example, Uncle Bens pre-cooked rice and Yeo Valley low fat natural yogurt can be seen featured on Jamie Oliver’s shows. Furthermore, product placement happens within films. Products are placed within films to gain interest from the audience who are watching. General Motors used product placement in the Transformers movies and Twinkies were promoted in Zombieland. By promoting products such as Rolex and Heineken in movies such as Bond, this will increase product awareness. By placing products in TV shows and films, these productions can generate funding. Franchising Franchising is a process of funding through deals to produce merchandise. Franchising can also be accessed through deals that are made with companies, such as fast food restaurants, for give-aways that are linked to the film. However, franchising is only relevant to a particular kind of film. This type of filmwill usually be fantasy/sci-fi or will be aimed at children for their target audience. An example of this could be a film that is linked to a toy that can be purchased alongside a meal at a fast food restaurant such as McDonalds. Many films have generated awareness for their current production and raised finance through franchising. Examples include Cars, The Minions, Toy Story, Angry Birds and The Fantastic Mr Fox. Crowdfunding Crowdfunding is a modern, online approach to raising finance for a cause or a project. This is where a company will generate a page where they can ask a lot of people to each give a small amount of money towards their production. The people that decide to donate their money through crowdfunding will not become investors in the overall production. This is due to them not receiving a stake in the project. Crowdfunding can be completed through websites like ‘Kickstarter’ where the general public can give money and the producers will therefore take it and use it. The donator will not get anything back in return for their money, although they might be given some kind of ‘thank you’ depending on how much they decide to give. An example of crowdfunding to raise finance would be Veronica Mars. Veronica Mars was a tv series that was cancelled. The shows fans wanted it to continue, therefore the director and star ran a Kickstarter campaign. The campaign to continue the show raised over $5million, so this funding was used to make a film that continued the story from the TV series. Independent Funding Independent funding is where a company fund their own production project themselves. This can be completed through private sources of finance, or private investors. Private sources of finance are where small-scale filmproductions are funded by the film makers themselves. An example of this would be Kevin Smith’s ‘Clerks’. Clerks was originally made for $27,575 (around £18,485), but eventually went on to make over three million dollars (just over two million pounds) at the box office. This was an incredible result as it retrieved nearly 100 times the original amount spent on production. Similarly, films can be funded through finding a private investor. This means that a person will invest their own money in order to fund the project. An example of a film that received its funding through finding a private investor was Monty Python’s Life of Brian. A week before production began, the producers, EMI Films, were alarmed by the subject matter and pulled out their funding for the film. Luckily, the
- 3. Unit 4 – Pre-Production Lauren Whyte Pythons had a fan willing to fund their film called George Harrison. The former Beatle sold his home in London to help raise the $4 million budget needed (£3,030,420). Harrison formed the production company Hand Made Films (that later produced the films: Time Bandits, Lock Stock and Two Smoking Barrels) and oversaw the financial side of Life of Brian. Public Finance Public finance is one of the most significant sources of funding for film production within the UK. As aresult, this could mean that the funding for aproduction comes through a body which is completely or partially publicly funded. Examples of this could be channels such as the BBC or Channel 4 -through BBC Films and Film4, funding aproduction. Furthermore, pubic funding could also mean that the funds for a production come from a part-autonomous agency such as the British Film Institute or Film Birmingham. Similarly, public finance can also mean that the production is establish by funds that come from a body that ‘collects’ public money and uses it for film production like The National Lottery. The National Lottery also channel their money into people like the BFI and Film Birmingham. Finally, public financing could lead to funding coming from the government giving tax breaks to film production. This means that the government would allow them to pay less tax than a ‘normal’ business would. As a result, they would be effectively giving the film production some public funding by not collecting tax from them.