Investors trickling back to film biz

New models for financing pics on program at Film Finance Forum

When it comes to financing movies, the tables have turned.

Hollywood had more investors than deals to give them in the cash-flush days of 2005-08, but the 2008 financial collapse scared off many Wall Streeters, some of whom are just starting to trickle back into film financing.

That cautious return to the biz was one of the upbeat themes at Wednesday’s Film Finance Forum West presented by Winston Baker in association with Variety.

These days, whoever holds the cash has more power than they might have had just a few years ago. And as studios making big-budget tentpoles continue to feel the pressure from corporate parents, the majors need to share the risk — and the upside — more than ever.

Producers at the confab, including Nicolas Chartier, spoke of the growth of alternative funding options, especially for gap financing deals.

“Most studios feel like they need to have a stable of financing partners … and that’s a fairly recent development,” said Jean-Luc De Fanti, founder and managing partner at Hemisphere Capital Management. De Fanti spoke on a panel at the conference aimed at guiding investors and filmmakers through new models for financing movies.

“The financial investors, I think, should be very disciplined, very educated, very thoughtful about their process,” Clark Hallren, managing partner at capital raising and advisory firm Clear Scope Partners, told the audience.

Hallren added that for studios, taking on those investors is just good business. “It’s prudent for them to share risk,” he said.

That means that studios are also getting increasingly cautious with the type of material they’re willing to take risks to produce themselves.

“We have an extremely rigorous greenlight process,” said Ellen Shallman, an attorney and VP at Universal. “It’s very detailed, very thoughtful, very much a bottom-line driven analysis of what films get made … We just don’t have the luxury of making vanity pictures.”

That luxury is left largely to the indies, many of which are finding more of an opportunity than ever to bring financed projects to the studios.

But raising money for an independent film, especially one without the commercial appeal of a tentpole, presents a world of other challenges. While it’s gotten easier to raise money than at the beginning of the credit crunch, even the biggest Hollywood players are turning over rocks in search of equity.

“We have been involved in a number of projects where the producers claimed to have secured a portion of the budget via equity, but when it’s time for the equity to show up, it’s almost never there,” said John Flock, CEO of W2 Entertainment Finance.

That’s why many in Hollywood see China as a knight in shining armor. Several high-profile fund announcements have come out of the country in recent weeks, propelled by China’s loosening restrictions on film imports and Hollywood’s need for capital.

China Main Stream Media National Film Capital Hollywood Group is one of those new players. The company recently announced it was raising funds for Chinese co-productions with an emphasis on pics with international appeal.

“The film cannot be too Chinese to appeal to global audiences,” Eugene Zhao told the audience.

Fund leaders privately told Variety that they hope to invest in between three to five films per year. Using an interpreter, fund leaders including Yang Bu Ting and CEO Wang Guo Wei said they hope the fund’s first films would spring from Chinese book series “Tibetan Code.”

The group hopes to make three to four films at about $60 million each but would not disclose how much capital the fund currently has at its disposal.

And while fund leaders say they’re currently negotiating with Chinese vfx and distribution companies, they need something only America can provide: Hollywood creative talent. Visiting Los Angeles this week, Yang and his group want to meet with American producers who can help attach American writers and directors to their English-language projects.

That expertise won’t just make each film more commercially viable. Many Chinese investors want to learn as much about the movie business as possible as part of a government mandate to build the domestic entertainment industry.

Wang and others compared the tone of “Code’s” to that of the “Tomb Raider” or “Indiana Jones” pics. Asked whether Steven Spielberg would be their top choice if they could get any director, Wang was quick to joke, “Could you help us get him?”