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AFM: Digital Platforms Are Shaking Global Film Finance

Netflix and Amazon are not only reshaping consumer viewing habits they are changing the balance of power in film finance. And as they increasingly overlap, the digital platforms may be forcing the film industry to refocus on quality.

“Video was the big driver (of film finance) in the 1990s. Now, with the Netflix-Amazon model, it is about subscriber retention. There are still pre-sales, soft money. But Amazon and Netflix are now a viable finance model for independent film makers,” said Myles Nestel co-founder and partner of The Solution Entertainment Group. He was speaking at a film finance conference at the American Film Market.

“The biggest problem right now is the blurred lines between TV and film, that’s making it difficult for movies, it’s harder getting people off the couch,” said David Glasser, president and COO of The Weinstein Company. “Today’s market more than ever needs high quality. For theatrical the bar is much higher right now.”

“Overseas buyers are looking for quality, something special. That’s because they too are competing against Amazon and Netflix. That’s why (The Weinstein Company) have cut our output to 8-10 movies per year,” said Glasser.

“(Hollywood) studios want high quality, high impact mid- and low-budget movies, in addition to their tentpoles. So independents are competing directly with the studios. There is lots of overlap between studios, independents and digital platforms,” said CAA’s head of film finance Micah Green. “The good news is, if you (as an independent) are proactive in packaging quality projects you have lots of options.”

TSG’s Nestel said that international distributors need to learn some tricks from the digital players. “Foreign buyers are still reactive to the market. Netflix as a global buyer is looking forward to the stars of tomorrow. To survive, foreign buyers need to be proactive in terms of their talent choices,” he said.

Providing a useful summary for indies, Nestel said: “The pre-sales market is softer (than a few years ago.) You need to leverage (sales) with gap finance and then with mezzanine finance, that means more aggressive lending against unsold territories. There is less pre-sale and more leveraged debt. There has never been so much money available, but never so much emphasis on quality.”

“(Similarly,) the best equity financiers are probably not roaming the halls of the AFM looking for product,” said Green. “The best have grown into sophisticated movie companies such as Alcon or Annapurna.”

 

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