LEADERS IN ENTERTAINMENT FINANCE
Our Mission…
Finance in Motion was established on February 7th, 2008 by Karinne Behr, an experienced film distribution and finance executive and CEO of Finance in Motion ( “FIM” ). Karinne acts as a film distribution and finance expert for producers.
We help independent producers determine the best financial structure suited for their film projects and help them understand the value of a film prior to going into production and evaluating its potential revenue and viability in an ever changing film Marketplace.
Film Finance Definition
Various Steps of Financing a Film:
You can finance the production of a film through a combination of the
following: Pre-sales, Tax schemes or grants, Debt finance, and Equity
finance
First part of phrase. Second part continued.
What are Pre-sales?
Pre-sales are, based on the script and cast, selling the right to distribute a film in different territories before the film is produced. This is the primary and most traditional means of film financing. Once the deal is made, the distributor will insist the producers deliver on certain elements of content and cast.
The reliance on pre-sales explains the film industry's dependence on movie stars, directors and/or certain film genres. Indeed, because actors and directors understand the importance of pre-sales and their own intrinsic contribution to the value of those pre-sales, they may ask for certain fees, which will vary according to their value on the world marketplace, and also for perks and a percentage of the gross profits.
Typically, upon signing a pre-sale contract, the buyer will pay a 20% deposit to the film's collection account (or bank) or Sales Agent which will be applied towards the production cost (i.e. the Budget of the film), with the balance (being 80%) due upon the film's delivery to the foreign sales agent (along with all the other necessary deliverable requirements.)
Usually a producer pre-sells foreign territories (in whole or part)
and/or North American windows/rights (i.e. theatrical, home video/DVD,
pay TV, free TV, etc.) so that the they can use the value of those contracts
as collateral for the production loan provided by a bank (or other senior
lender, such as a bridge lender which provides a financial bridge? to
the closing of the bank loan or other investment). The proceeds from
the bank loan will be applied towards the cost of production.
State Tax incentives
A number of governments run programs to subsidize the cost of producing films. Many State-based programs have been established to promote filming in the US and stimulate the economy of that State by creating jobs and spending there. States such as Louisiana, Georgia, Florida, South Carolina, Connecticut will provide a subsidy provided all or part of a film is filmed in that state. Government subsidies are often simple grants, where the government expects no financial return.
Debt Finance
In motion pictures, Gap/Supergap financing is a form of mezzanine debt financing where the producer wishes to complete their film finance package by procuring a loan that is secured against the film's unsold territories and rights. The foreign and domestic value of a film is usually ascertained by a Foreign Sales Company/Agent evaluating the complete package taking into account things such as quality of the script, genre, cast, director, producer, as well as whether it has theatrical distribution in the US from a major film studio or not. All of this is taken into consideration and applied against the historical and current market tastes, trends, and needs of each foreign territory of country. Based on experience, knowledge of the market place and statistical data a value is put on the film. With experienced industry professionals, such as the Finance in Motion team, comes a very high degree of accuracy and predictability.
True to its mezzanine nature, in the pecking order of recoupment of investment, generally gap (or super gap) loans are subordinate to (i.e. recoup after) the senior/bank production loan, but in turn, the gap/super gap loan will be senior to (i.e. recoup before) equity financiers.
A gap loan becomes a super gap loan when it extends beyond 10-15% of 100% of the production loan required to shoot the film (or in other words, when the percentage of the gap required to complete the film's financing package becomes greater than a bank is willing to bear, which is traditionally 10-15%, but can sometime be a flat dollar threshold like USD$1,000,000.)
Gap/Super gap lending fees and interest charged are higher than those
of a regular bank since the Gap lenders will subordinate to the Senior
Bank/Production lender and therefore will bear a higher risk, but at
the same time, it's not unlike buying a house: nobody pays 100% of the
purchase price with cash; they pay about 20% in cash and borrow the
rest. Super gap financing works by the same principal: put down 20-30%
cash/equity and borrow the rest.
Equity Lenders
Since August 2004, over $10 billion in capital has been committed to co-finance films, albeit largely studio films. While some of this capital came in the form of debt, a significant portion is equity or an ownership position in film.
over the last eight years, a boom in the private equity and hedge fund industries has suddenly made film an extremely attractive asset class for smart equity investors.
Across the industries firms are dealing with significantly more capital than they have had in the past and they are doing so in a much more competitive environment. As a result, firms have had to pay higher prices for deals in order to have sufficient deal flow. As capital continues to become available, private equity and hedge funds become commoditized. Recognizing this issue, investors proactively began to pursue industries that had historically not absorbed significant amounts of equity capital with the rationale that they might offer better opportunity. Film was initially thought to be an ideal target.
As is highlighted above, with little equity capital being committed in the past there were no private equity firms or hedge funds with deep roots in the industry. Furthermore, the film business is capital-intensive in nature, which bodes well for investors looking to deploy sizeable amounts of capital. One of the biggest concerns for funds going into new industries/markets is whether the investment potential of that industry is large enough to really support the effort. Firms do not want to commit to networking and learning a new industry if their investment would represent only a small percentage of their overall fund. The film industry has an almost limitless need for capital so there was a logical marriage from that perspective.
Finally, a collective belief was formed within the film and investment communities that you could apply the portfolio theory? to films. Slate financing, for instance, is now commonly sliced into a variety of different branches allowing for a variety of different investors to participate. Deals have also involved larger slates providing greater diversification. This portfolio theory approach has helped private equity firms/hedge funds become more comfortable with film as an asset class. With fewer capital inflows, a large appetite for capital and frameworks for higher risk-adjusted returns, the film industry seemed ripe for increased attention from external capital sources.
Customary Senior Production lender requirements for the Producer/ Borrower prior to loan issuance
- Clean Title and Copyright Search.
- Legal review and approval of underlying rights and major talent agreements
- Secure essential element e.g. the lead actor or director
- Secure Director
- Budget approval
- Financing structure due diligence (to insure sure that the Budget of the film is sufficiently financed)
- Secure Sales Agent/Distributor to perform pre-sales/sales.
- Secure commitment from Bond Company.
- Establish Collection account.
- Sign agreements with Unions such as SAG, WGA, DGA, if applicable
- List of pre-sales copies of distribution agreements to be used as collateral by production lender
- Tax structure or incentive in place, if applicable.
- List of subordinated lender(s) if any.
People you can count on. Experience you can trust.
Karinne Behr - CEO & Managing Partner
Karinne
was born and raised in the South of France where she studied at E.S.A.R.C
(International Business School). She has been in the film Industry for
more than two decades starting her career in Los Angles 20 years ago
by working for a film production and distribution company. Passionate
about the industry, she quickly learned all facets of the business and
established strong ties with bankers, bond companies, high profile entertainment
attorneys, and filmmakers.
She was President of Bauer Martinez Studios for more than nine years where her accomplishments included negotiating more than 23 film loans, pre distribution agreements with foreign and domestic distributors, and running the day to day operation of the foreign sales unit.
In early 2008 she gave up her full time position as President of Bauer Martinez Studios and created Finance in Motion LLC to bring her expertise in film financing and production to independent filmmakers. In September of 2009, she joined Pangea Media Group as President of International Distribution where she was responsible for overseeing the International Sales of a more than a 1000 titles owned and produced by prestigious film companies such as Capitol Films, Think Film, Franchise, and Intermedia. A year later, she was offered the position of President of Sanborn Studios in Sarasota, Florida by successful Entrepreneur Ken Sanborn, who had successfully sold his company Gyrocam to Lockeed Martin.
Sanborn Studios has since expanded to a 30,000 SFT Studio facility in Sarasota and a corporate and aerial facility at the Sarasota airport to develop their own film and TV contents. Recently Sanborn Studios also announced a joint venture with the University of South Florida to start a Master’s Program with the concentration in the business of film and television. The program which will start in January 2012 is part of a larger plan to grow the film and TV industry in Florida.
Karinne has Executive produced the following films: The Steam Experiment Starring Val Kilmer; The Flock Starring Richard Gere and Claire Danes; I Could Never be Your Woman Starring Michelle Pfeiffer, Paul Rudd and Saoirse Ronan; The Groomsmen Starring Ed Burns, John Leguizamo, Matthew Lillard, Donald Logue, Jay Mohr and Brittany Murphy; Irish Jam Starring Eddie Griffin and Anna Friel; Land of the Blind Starring Ralph Fiennes and Donald Sutherland; Wake of Death Starring Jean-Claude Van Damme; Citizen verdict Starring Armand Assante, Jerry Springer and Roy Scheider; Modigliani Starring Andy Garcia; The Defender Starring Dolph Lundgren and Jerry Springer.
Karinne remains very involved in film distribution and film financing, and offers her expertise to filmmakers through her company Finance in Motion.
Karinne has been a speaker at many film finance panels, such as the
prestigious ATLAS International Film and TV Finance Summit in NYC.
Services
- Financial Evaluation of film project.
- Preparation of worldwide Sales estimates based on cast, film genre and Budget.
- Introduction to Entertainment banks. ( such as First California Bank, The Royal Bank of Scotland, Comerica... )
- Submission of full application to Entertainment banks to evaluate production financing possibilities.
- Full Evaluation of Financing Structure.
- Help in Negotiating Foreign Distributions agreements and Notice of Assignments if necessary.
- Introduction to Bridge Lenders.
- Introduction to Sales Agent / Distributor.
- Introduction to Bond Companies.
- Complete supervision of bank loan documentation until production loan closing.
- Partial financing of your project can be provided by Finance in Motion.
Entertainment Bank Services
- Will bring you the insight and assistance you need while dealing with foreign and domestic distributors during a bank loan closing. Saving your bank time and money by bringing you my 20 years expertise in the foreign sales and domestic market and having closed many film loans
- I am the liaison between your lawyer and the distributors, solving a lot of the issues before hand.
