In mid-2009, producers Iain Canning, Emile Sherman and Gareth Unwin faced a crucial decision.
Should they accept an offer from Fox Searchlight to fully finance “The King’s Speech?” Or should they keep control of the project themselves, and take the riskier but potentially more rewarding independent route?
In the teeth of the credit crunch and the global recession, at a time when drama was a dirty word among buyers, the relatively inexperienced producers pieced together the £8 million ($13 million) budget from an intricate jigsaw of presales, equity, tax credits and debt.
The rest is box office and Oscar history.
Their faith, and that of their backers, has been spectacularly rewarded. Made and released with barely a cent of studio coin anywhere in the world, “The King’s Speech” has become one of the most successful purely independent movies ever, with a worldwide gross of $311 million to date, to go along with its four Academy Awards.
Without a studio to hog the upside, everyone involved — producers, investors, talent, distributors, sales agent and lender — stands to share substantially in the wealth.
Just as important, many of the participants also have received a big boost to their companies or careers in a way that adds to the strength and confidence of the indie biz as it starts to recover from the contraction of the past couple of years.
The startling success of “King’s Speech” is encouraging risk-averse distribs to look beyond their obsession with genre and youth, and consider afresh the appetite of older audiences for upscale drama.
“Speech” was bankrolled with cornerstone presales to Momentum Pictures in the U.K., Transmission Films in Australasia and the Weinstein Co. in North America and other key territories. Equity came from the U.K. Film Council and London post house Molinare, with gap and other debt finance from Aegis Film Fund. FilmNation handled foreign sales.
Variety estimates that a worldwide gross approaching $350 million, plus proportionate DVD and TV sales, could ultimately translate to a net profit of $60 million-$80 million, to be split between producers, equity participants and talent.
But the typically convoluted nature of the indie financing structure means the producers now have a lot more work to do in order to track the revenue from 43 different distributors and make sure everyone gets paid their share.
“It’s complex, and there are a number of parties involved,” Sherman says. “We’re working with Fintage House to handle the disbursement, but we’re actually going to hire our own recoupment manager to maximize the returns for the investors and help manage the process.”
This is a headache that indie producers can normally only dream of. For most, net profits are a fantasy, even from relatively successful films.
“First and foremost, you choose your financial and distribution partners to feed into your view of the right way to make your film,” Sherman says. “So yes, fees and net profit were a secondary consideration for us. But we felt we had a better chance of controlling the dealmaking process if we financed the film independently, rather than just becoming producers for hire at a studio.”
“The King’s Speech” was a defining project for See-Saw. It was their first feature since Sherman, an Australian producer based in Sydney, and Canning, a London-based sales and acquisitions exec with a couple of classy exec producer credits to his name, came together to launch the company.
“The choice between Searchlight and going the indie route was a big decision about what sort of producers we wanted to be,” Sherman explains. “We want to control our own films. ‘The King’s Speech’ felt like the next step for Iain and me, the culmination of a lot of experience we had in the independent film world.”
It was a tough time to be pitching a talky, action-free period piece about two middle-aged men to an indie market reeling from the aftershocks of the credit crunch. “But there was something about the emotional spine that people did respond to. It’s about confronting fears and overcoming them, and when those kind of films work, they do work very well,” Sherman notes.
Momentum and Transmission were first to commit. Both have first-look deals with See-Saw, and Transmission and See-Saw have cross-shareholdings. (Transmission’s distribution joint venture with Paramount is the only studio connection with “King’s Speech”). But those key relationships in the U.K. and Australia conflicted with Searchlight’s rival offer for worldwide rights.
The choice was made easier by the fact that Harvey Weinstein had sparked to the script sent to him by Momentum topper Xavier Marchand, and wasn’t in the mood to take “no” for an answer. “He locked us in a room in London for four days, and said, ‘You can’t come out until we’ve got a deal,’?” Sherman recalls.
A worldwide studio deal would have meant crossing all territories — meaning profits in one country could be eaten up by losses in another. Under an indie deal, countries are typically sold and accounted for separately. For “The King’s Speech,” only the territories bought by TWC were crossed.
So Momentum took the U.K. for approximately $2 million, and Transmission took Australasia for $700,000. TWC took North America, France, Germany, Scandinavia and Latin America for just under half the budget.
The U.K. Film Council’s Premiere Fund, under Sally Caplan, invested equity of $1.6 million, and post house Molinare put up $320,000.
But the project was rejected by both U.K. pubcasters — Film4 predictably, because it rarely backs period pics, but BBC Films more surprisingly, given the project’s heritage pedigree, and the fact that BBC radio plays a starring role in the movie. But BBC Films had a mixed experience with Hooper’s previous pic, “The Damned United.”
At a time when banks were fleeing indie film, it was tough to find a lender willing to cover the TWC deal and other presales, as well as cashflow the U.K. tax credit (worth 16% of budget) and close the gap of less than $1 million against the unsold territories. Aegis, the new debt fund of U.K. financier Prescience, stepped up for the whole package, covering about 65% of the budget, but not without some last-minute wobbles.
Because the film was shooting in pounds but largely funded in dollars, a shift in exchange rates forced the producers to cut £1 million out of the budget just weeks before shooting because their $13 million was suddenly worth £8 million instead of £9 million.
At one stage, in the scramble to get the precarious finance structure closed, the project came within 24 hours of collapsing, just as Geoffrey Rush’s plane was touching down in London to begin rehearsals.
“We closed the financing just on the first week of the shoot,” Sherman recalls. “While you’re negotiating, people could pull out any time, and you’re already building sets, employing people, negotiating cast agreements. Everyone knows the producer has the most at stake, so your bargaining position is quite weak, and you do give up things.”
From the start, the producers got vital advice from Libby Savill at London legal firm Olswang, who worked on the project for months without any certainty of getting paid unless the film actually came together. Her experience — particularly her long-standing connection with the Weinsteins — was key to brokering the financing, reflected in her co-exec producer credit.
Despite the shaky state of the market, FilmNation’s Glen Basner presold most of the remaining territories on script at AFM in November 2009, and the rest on a promo at Cannes in 2010. “That promo was really the first time we got a sense of the dramatic and emotional potential of the film,” Sherman says. By the time the pic exploded into the forefront of the Oscar race at its Toronto premiere, the only territory left was Korea, which sold at the fest.
Aegis has recouped its loans from presales, and the equity players are well on their way to seeing their original stake back. The pic has performed far beyond its modest pricetag in all territories, with overages now set to flow from everywhere.
“The amazing thing is we got to £40 million in the U.K. without fully tapping the under-30s,” says Momentum’s Marchand. “The ticket mix is still heavily weighted to 35-plus, with about 30% of the audience over 65.”
In short, it’s an improbable jackpot which keeps the dream alive for independent believers everywhere.
Who gets the ‘King’s’ ransom? | Slicing ‘King’s’ profit pie | Oscar bling brings ‘King’s’ B.O. bounty | U.K. Film Council had chunk of ‘Speech’