Industry on the rebound
Just before 11 p.m., a local TV channel’s teaser flashes: “Breaking news about one of Hollywood’s leading men.” Completion bonder Tekla Morgan, who has insured the Sean Penn/John Travolta starrer “The Thin Red Line,” takes a big gulp. “A crisis? Who? Was there a bad accident?”
“Anytime I hear those teasers, I get heart palpitations,” says Morgan, exec VP and chief operating officer of Los Angeles-based Cinema Completions Intl.
While the story was only that Brad Pitt had split with g.f. Gwyneth Paltrow, such suspenseful moments actually are good news for the completion bonders in this town. For the last few years, the business has gone south for several bonding companies, largely due to the fallout of the video market and the absorption of companies such as New Line into larger studios.
A completion bond is simply an insurance policy that a film’s production will be completed on time and on budget. If a pic runs over schedule or over budget, the completion bonder pays to finish the film or makes the decision to abandon production and repays the investors who financed the project. Most independent films need a bond to get off the ground.
“I feel better than I did a year and a half ago, but the business is cyclical,” observes Joan Stigliano, prexy of Intl. Film Guarantors, a Los Angeles-based completion bonding company. “We are seeing things heating up in Europe, particularly with new alternative financing,” Stigliano adds, referring to the United Kingdom’s lottery and other government subsidy programs.
Bonders also are bullish about the rising tide of business from “off-balance-sheet” studio pics made by companies including Fox Searchlight, Miramax and October. The boost in studio joint ventures, in which one studio handles domestic release while another takes overseas duties on one film, also has added revenue. For example, IFG landed the bond on Paramount/Fox’s collaboration on “Braveheart” as well as Disney/Sony’s joint venture on “Air Force One.”
Business is up more than 15% for Film Finances Inc., which is the highest volume operator, bonding about 225 pics in the past year. The Los Angeles-based company’s average pic is budgeted between $5 million and $8 million. On the other hand, companies such as CCI and IFG will bond up to $75 million, and in the case of CCI’s “Air Force One,” that number went higher.
However, as always, there’s a catch.
“When money is easy to get, it often attracts the wrong people,” warns Steve Ransohoff, exec VP of Film Finances Inc. But by and large, “Filmmakers are responsible. They are very passionate and treat films like their children.”
On the bright side, “There’s a lot of money from different sources coming into the business,” says one bonder, referring to subsidies and multiple foreign investors. “A lot of that money is being spread among several productions, which spreads the risks and creates more opportunities.”
Lionel Ephraim, now West Coast prexy of Toronto-based Motion Picture Bond Co., says that in 18 years in the business, he has only been involved with two films “taken over” by the insurer. “There are a lot of stories about bonding companies tearing pages out of the script,” he says. “And that’s what they are — just stories.”
But that doesn’t mean bonders aren’t regularly needed to dig a filmmaker out of a jam.
“About 10% to 15% of the films we bond require financial assistance or require us to assert some administrative controls on certain aspects of the production plans,” Ransohoff says. “It’s not something we like to do, but it needs to be done.”
One recent pic bonded by the Motion Picture Bond Co. required scenes of summer vacation. “But it rained everyday,” Ephraim says. “We had to send in a risk manager to rearrange the schedule, and things came out just fine.”
Then there was the Film Finances-bonded director who could not get several days’ worth of film out of Russia. With an assist from the company’s database, execs found a troubleshooter to help dislodge the film from customs.
Paying high cost of f/x
CCI’s Morgan says the greater technology in pics has created a new kind of volatility. “If the director doesn’t like the look, it can cost tons of money,” Morgan explains. “While it’s safer not to have your leading man sliding down an ice-packed slope, CGI has its own risks.”
But Ransohoff sticks to conventional business sense when deciding whom to insure. Ransohoff says decisions on the 110 pics that Film Finance’s Los Angeles office has bonded in the last year most often were made by evaluating the filmmaker’s character from one or two brief meetings.
“Generally speaking, bad people make big problems and good people solve them,” Ransohoff says. “The key is get into business with good people.”