British film and tv producers can tap a wide range of local finance sources.
Trouble is not one has deep pockets and only a handful are true equity players; most look to secure their investment against the revenue stream of individual projects, usually by taking a piece of the pre-sales.
There are no tax-breaks for film or tv investment in the U.K. and government assistance is limited to very small subventions from British Screen Finance and the British Film Institute production board.
The U.K.’s biggest film company, Rank, no longer is directly involved in production, although it does pre-buy foreign distribution rights. As a consequence, there is no British equivalent to any of the U.S. majors.
Instead, the production scene in both film and tv is characterized by a handful of medium-sized companies surrounded by hundreds of tiny indie-prod outfits.
In general, tv production companies are more substantial than their film counterparts and a clutch of leading companies work in both media.
Backed by consortia
Heading up the film production lists are Jeremy Thomas’ Recorded Pictures and David Puttnam’s Enigma. Both are backed by consortia comprising a mix of Japanese, British and American distribs and banks.
Thomas and Puttnam thus enjoy the luxury of knowing in advance how their next production will be financed. Same holds true of Island-World, which is sitting on a mountain of cash raised by joint chiefs John Heyman and Chris Blackwell.
Others are not so lucky. Working Title, Palace, Initial, Goldcrest and Zenith usually are forced to finance their films project by project. All have foreign sales arms, which makes the task easier.
First stop for the would-be producer is British Screen Finance and its subsid, the National Film Development Fund (NFDF). Former organization provides production coin for mostly low-budget movies, while the latter ponies up for development. Resources are slim, with the two companies sharing an annual budget of less than $9 million.
Alternatives to NFDF include commercial development funds, Persona (financed by BBC Wales and S4C), Union Pictures (financed by Greater London Enterprises, Dentsu and Warner) and Workhouse (backed by merchant bank Robert Fleming). Each has limited resources and a modest appetite. Only big-time player on the development scene is Jake Eberts’ Allied Filmmakers, which works in tandem with Majestic Films and major studios.
Second stop are the tv companies. Channel Four is a major source of coin for movies and independently produced programs. Leading ITV companies Thames, LWT, Granada, Yorkshire, HTV and Central likewise provide production finance, secured against U.K. tv rights. The BBC, too, gets in on the act, as a co-production partner and as a pre-production buyer of tv rights.
The BBC is planning to set up a fully fledged film production company of its own. Of the 38 feature films produced in the U.K. last year, 22 counted tv coin as part of the equity mix.
Indie coin squeeze
Upheavals among the ITV companies, who are having to defend their franchises from counter-bidders this year, and cutbacks at Channel 4 and the BBC, mean that there is a squeeze on availability of coin for indie production. On the other hand, broadcasters soon will be obliged by law to farm out 25% of their program spend to indie suppliers.
Third stop are the sales agents, notably Glinwood Films, Majestic, J&M, Goldcrest, ITC, Manifesto and The Sales Co. In exchange for international distribution rights, agents will put up minimum guarantees toward production costs. Sales agents are not as healthy as they were, and guarantees are getting smaller even as budgets continue to rise.
More ambitious projects are offered to the Hollywood studios, which can be counted the fourth stop on the producer’s journey. Initial has produced two pictures financed by Universal, which also has a first-look deal with Prominent Features. Fox, which has a deal with John Goldstone’s Revere Entertainment, has Francesca Barra shopping for projects in the U.K. Paramount has Ileen Maisel and MGM has Sandy Lieberson. In addition, Warner Bros. has a housekeeping deal with Allied Filmmakers, Tri-Star is linked with Roland Joffe’s Lightmotive Films and Universal has a three-picture deal with Sir Richard Attenborough.
Fifth stop are the banks specializing in media and entertainment finance. Barclays and Guinness, Mahon and Coutts are the leaders, offering project loans and corporate loans mostly secured against distribution contracts. British & Commonwealth still is in the frame, though stymied by the collapse of its parent and the long hiatus while administrators shop around for a new owner.
Quick & Hamon, a two-person unit that broke away from the film division of Hill Samuel, has likewise been hurt by fallout among its shareholders. London offices of Manufacturers Hanover and Berliner Bank discount distribution paper, as did Security Pacific until it decided to pull back. Samuel Montagu, which has substantial media interests (parent bank Midland Montagu put together the refinancing of Rupert Murdoch’s News Corp.), has talked of getting involved again in film and tv financing and Robert Fleming, which has a track record in venture capital investment, also is moving into the area.
For producers who have most, but not all, of their production finance in place, there is a sixth stopping place: insurance companies that will guarantee recoupment of investment coin. Two London-based companies now offer the service, Cork Bays & Fisher and Pan-Financial. Both seek high premiums. Advantage to the producer is the guarantee can be used to raise further loans from the banks.
Similarly innovative steps are being taken in the fields of facilities deals, debt finance and soft-currency investments. In recent years, Brit film producers have been especially active in Eastern Europe, Latin America and Africa, putting together deals that effectively reduce the cost of finance.
A split decision
Finally, the would-be producer can go on his or her knees to investment institutions in the City. U.K. pension funds, insurance companies and investment trusts have put coin into movies in the past with uniformly disastrous results. Consequently, film producers tend to be given short shrift. Even so, money can be found if the deal is right. For example, building society Norwich Union has an equity stake in the Palace Group, while Electra Investment Trust has a piece of Allied Filmmakers.
Film and tv investment coin is split between project finance and corporate equity. The latter is hard to come by, and few Brit film companies have reached a size where such investment is attractive. Record giant Poly-Gram is a minority shareholder in Working Title, food distribution behemoth Booker owns one-third of Film & General, U.S.-based venture capital company Media Ventures has a controlling stake in Cinema Verity, and, as noted above, Norwich Union has a stake in Palace.
Within the industry, Carlton Communications, which owns Technicolor, has 51% of Zenith, alongside minority partner Paramount.
There is greater interest on the tv side, with U.S. investors in particular looking for access to the rapidly evolving U.K. and European marketplace.