You will be redirected back to your article in seconds

Producers find tough road to soft money

Film subsidy financing can complicate prod'n, budget

Soft money — tax shelter and government subsidy financing — is often touted as free money, but speakers at an American Film Market seminar warned to expect strings attached and hidden expenses.

“You (can) end up making a different movie than you had set out to make,” warned Howard Kaplan, chief operating officer of Morgan Creek Intl.

His company decided to move location shooting for “The Exorcist: The Beginning” from the U.K. to on location in Morocco and soundstages in Italy to save 20%-25% in expenses. By doing so, it gave up a U.K. sale-and-lease-back infusion that would cover 10%-12% slice of the budget. “It is important to look at all the costs associated with soft money,” he noted.

With indie film buyers paying less in recent years due to declines in TV sales and economic recession, patching together soft money with some pre-sales is crucial to funding independent films.

Attorney Steve Fayne said that 22 sources of financing were required for an unnamed $6 million film. “That seems to be the direction that we’re going,” said Fayne, a partner at Akin Gump Strauss Hauer & Feld. “It requires a lot of effort.”

Bob Hayward, COO of sales company Summit Entertainment, noted that when the Isle of Man offers a production subsidy equivalent to 20% of a film’s budget, it often seeks a slice of the revenue the film generates in a U.S. sale. That so-called cut-through can make it difficult to line up conventional bank financing for the rest of the budget.

To qualify for European co-production funding for “The Upside of Anger,” 75% of the film’s labor costs needed to be spent in Europe, noted producer Mark Damon. “If you miss that by 1%, you don’t get the subsidies,” said Damon, who is chairman of movie outfit Foresight Unlimited.

Shuffling cast and crew to achieve numeric spending goals runs up travel and hotel expenses, panelists warned. “You find that as this progresses, there are a number of compromises being made,” noted Trevor Short, chief financial officer of prolific indie Nu Image.

“There’s a constant struggle between the financiers and filmmakers on what a film will look like and where it will be shot,” Fayne agreed.

With indie film financing increasingly a patchwork of numerous small sources, the failure of one or more to materialize can trigger a collapse. Fayne said that a mini-epidemic is occurring as independent films already in production scramble to patch financing holes from slivers of missing coin.

Sources of soft money include Australia, Austria, Belgium, Canada, Fuji, Germany, Hungary, Iceland, Luxembourg, New Zealand, Scandinavia, South Africa and the U.K. States are also offering incentives, particularly Louisiana, New Jersey, New Mexico and Pennsylvania.

Film finance consultant Lew Horwitz served as panel moderator.

More Scene

  • 'Atlanta' TV show premiere

    'Atlanta Robbin' Season' Will 'Show What Makes the City Tick,' Producer Says

    Soft money — tax shelter and government subsidy financing — is often touted as free money, but speakers at an American Film Market seminar warned to expect strings attached and hidden expenses. “You (can) end up making a different movie than you had set out to make,” warned Howard Kaplan, chief operating officer of Morgan […]

  • Mr Chow 50th Anniversary celebration

    Mr. Chow 50th Anniversary Party Draws Stevie Wonder, Heidi Klum & More Stars

    Soft money — tax shelter and government subsidy financing — is often touted as free money, but speakers at an American Film Market seminar warned to expect strings attached and hidden expenses. “You (can) end up making a different movie than you had set out to make,” warned Howard Kaplan, chief operating officer of Morgan […]

  • Paley Center for Media presents They

    African-American Showrunners Talk Strides in TV Representation

    Soft money — tax shelter and government subsidy financing — is often touted as free money, but speakers at an American Film Market seminar warned to expect strings attached and hidden expenses. “You (can) end up making a different movie than you had set out to make,” warned Howard Kaplan, chief operating officer of Morgan […]

  • 'Annihilation' film premiere

    'Annihilation' Star Jennifer Jason Leigh Responds to Whitewashing Accusations

    Soft money — tax shelter and government subsidy financing — is often touted as free money, but speakers at an American Film Market seminar warned to expect strings attached and hidden expenses. “You (can) end up making a different movie than you had set out to make,” warned Howard Kaplan, chief operating officer of Morgan […]

  • Viola Davis Women in the World

    Viola Davis on #MeToo: 'If You're Dedicated to Change, Let It Cost You Something'

    Soft money — tax shelter and government subsidy financing — is often touted as free money, but speakers at an American Film Market seminar warned to expect strings attached and hidden expenses. “You (can) end up making a different movie than you had set out to make,” warned Howard Kaplan, chief operating officer of Morgan […]

More From Our Brands

Access exclusive content