Screenwriters create it all, but where does it go from there?
It takes money to make money. We have heard that saying from folks our whole lives. Usually, the context for that bit of financial wisdom is a situation in which we are reluctant to spend our own money. You may say this wisdom is a deterrent against penny pinching. For film financing companies and film investors saying it takes money to make money is no idiomatic statement or folk expression. “It takes money to make money” is the rule of all aspects of corporate life. True wisdom is in the details. Knowing how, when, where, and on what to spend the money directly affects how much and how often the company makes money.
What are Film Investors looking for?
Film investors are the very people behind well-known, typically large, and hugely successful corporations which have determined that joining the ranks of movie investors is money well spent. “It takes money to make money” for them means investing in a film production in exchange for reaping the benefits of its ticket sales once produced. Bryan Sullivan with Forbes writes, “Equity based financing is simply having investors contribute money—actual cash—to the production in exchange for an ownership interest in the film and the profits derived from the exploitation of the film.” And of course, it does not always work in the favor of the film investor. Fred Smith, as noted by Sharon Swart at Variety, is the sole pure equity source at Alcon. Alcon Entertainment is a film investment and production company. Fred Smith is founder of FedEx, the package shipping company. Two seemingly unrelated industries with seemingly unrelated interests, yet they are in an economically symbiotic relationship.
But Swart talks about the struggles of late for the film industry in finding film equity investors who will invest anymore. The investors are scarce. Fred Smith himself expressed this reluctance to invest after being burned. Jeff Snider reports to Business Insider that “Alcon has sought to minimize its involvement in the wake of up to $30 million in losses from the disappointing performance of Johnny Depp’s big-budget sci-fi movie, “Transcendence.” “That was not a good one, that’s for sure,” Fred Smith lamented to TheWrap.
Failure is not failure, however, as long as we learn something from it. As a matter of fact, failure is information for success. The goal is to take what we learn from failure and use it to do better next time. And that is exactly what the various film equity investor companies are out there doing. Sharon Swart notes that “fewer and, hopefully, better projects will get made…”
It takes money to make money, indeed. One of the ways corporations make money is by spending money to invest in film production. They put money into the project upfront with the hope of seeing returns after the film hits theaters. These corporations get a cut of the ticket sales. Everybody wins. Yet it is getting harder for film producers to secure contracts with these film equity companies since these corporations have become much more selective about which films they are willing to invest.