AFM Finance Conference
Highlights from today’s 1st AFM Finance Conference Panel: Producing Without a Completion Bond
Brad Krevoy, CEO, Motion Picture Corporation of America
Brian O’Shea, CEO, The Exchange
John Sloss, Founder, Cinetic Media
Jill Goldsmith, Co-Business Editor, Deadline
The current state of Insurance and Production?
Brian O’Shea: “It’s really been a standstill ever since COVID happened…We were in the midst of one production we had to stop …we moved the production from Eastern Europe to the UK, and found that there was more of a likelihood of finding a bond given that there were more insurance-backed opportunities there. It was all private investment, so they had to find a new investor and it was required that he had to have a bond so they were forced to move out of the UK…I was in the midst of trying to figure that issue out during the COVID process, and so I was out there trying to find investors that do non-COVID investment, or backed investment by bond…and it’s really difficult to find.”
Brad Krevoy: “What we decided to do is go full steam ahead on the basis that very few people would be able to take the risk to make more productions, and our thinking was ‘Okay, we’re going to make these movies and everybody will want them.’ What we didn’t fully figure out was that ad revenue was going to be a little bit lower, and that the studios were going to limit what they were going to release, but we still continued and still moved forward.”
“In that process, during that exploration, we discovered some very interesting things…We made seven movies and one TV series which we shot in three locations. One was Canada and they have it together. The US policy, when it comes to protecting all of us….it’s messy, it’s very messy and confusing. But in Canada, they make you do a two-week quarantine, and I mean it’s a severe quarantine…they track you! We were able to get Covid-insurance, $50K for a half a million worth of insurance…we bought a little bit of the insurance to reduce and hedge our risk a little bit. It does exist, they offer that product, but it’s very expensive”
“There were quite a few films made and still being made [during the pandemic] under previous policies still in effect that did not have a COVID exclusion. A company, particularly a broadcaster, will have a year-long insurance policy, so long as that policy is still in effect, it covers COVID.”
John Sloss: “It’s the films in the middle that are really challenged. The ones above $2M but below studio, I think have largely ground to a halt. When we talk about PRIA, we’re talking about sovereign subsidies…In England, they’ve got $500M from the government to subsidize production” “What it does is give an additional ability to attract production to your physical location, so if you’re willing to basically be the insurance company as a government, you can have a leg up certainly on the US but on a lot of other locations.”
“If you look at all the states in this country that subsidize with their tax fees and all of the soft money that we’ve come to rely on, a state covering COVID insurance risk is not so different from a state giving tax rebates, it’s an actuarial calculation. I would call upon the commissioners out there to give some serious consideration [to this] if they want to take advantage of this situation to draw a lot of production to where they are.”
Brad Krevoy: “By the time the governments, at least the in the US, get around to figuring this out, it will be too late because we’ll have a vaccine, hopefully.” “The level of development with scripts and writers is at an all time high right now…I think that’s a common theme.”
What will the Post COVID reality look like?
Brad Krevoy: “It will be the roaring twenty-ones! Content is going to come back strong, and it is going to be happy times, it is going to be fantastic for all of us….There’s going to be tremendous demand…The biggest hope of all for independents, that’s transformational, is going to be advertising-supported VOD. That is going to give life to us for many years, AVOD will be the ship we all ride on for a while”
How companies are Forging Forward and International Support
Brian O’Shea: “The German government is backing insurance relief up to a certain amount, and that is enough given the budget of a [certain] film, which is $10M, that they’re basically putting up…no more than 15-20% of the film budget for COVID insurance, and that is enough for film financers to move forward with the bond.”
John Sloss: “There’s no absolute normal prescription…there is no rehearsal for this period. We’re kind of figuring this out as we go along.”
Brian O’Shea: “We have done a number of films non-bonded with strategic investors in film. They need to move money…there’s a lot of money out there that is not being worked…there are some investment groups out there that are willing to take a risk and that have been successful, so there are specific investor groups that are taking opportunities on non-bonded films…but…they have to feel comfortable with the package in general.”
John Sloss: “You don’t always need a completion bond, but if you’re working through conventional finance channels where you’re not at the high risk edges of these arbitrageurs and if you’re working with commercial banks or you’re taking contracts from territorial buyers who have committed to pay on delivery of a completed film — if you’re taking those to a bank to borrow against it and fund your production, you really do need a bond.”
Brad Krevoy: “Sometimes in COVID, the most risky thing is not making to the post-production process. So what you might be able to do is get a bond for post at a normal price and you’re just hoping that every day of production goes the way you want it to so that you can still convert some of your contract into cash.”
What positive outcome of the pandemic could there be for independent product when COVID clears?
Brad Krevoy: “There’s a huge demand. You have all the new streaming services coming online. You have the AVOD coming online. All the mechanisms are aligned.”
John Sloss: “There’s only so much you can do at this moment but the consumption hours for content have exploded because everybody’s quarantined in their house, watching. It happens to coincide with the launch of all SVOD services that are going to be chasing Netflix. The real bottleneck here is in production, and when the pandemic passess…the bottleneck is going to open up….sowhat a smart person does is create the best possible source material they can right now…when production opens up again, people are going to be working 24 hours a day.”
What Content is Wanted?
John Sloss: “I think documentaries are going to fair well. They have not been as impacted. We’re all moving towards episodics…they’re doing that for scripted, doing that for docs, and I think that is a very fertile area to focus on in this moment.”
Brian O’Shea: “It’s about content, and people needing content…I’m meeting with a lot of broadcasters too, major broadcasters in Europe, and they are looking for content as well.”
Brad Krevoy: “Movies will reflect the culture, and that culture will have more uplifting, fun properties as opposed to dramatic projects. I think you’ll see a little bit of a shift with people wanting stories that make you laugh, that make you cry, or make you think. I don’t know how horror will fare as it’s not in my wheelhouse.”
John Sloss: “The most reliable genre is the New…something that has not been seen before. When we had Napoleon Dynamite, we saw about 500 scripts after that that were take offs on Napoleon Dynamite or tried to capture that vibe. It’s not necessarily within the realm of everyone to create something new and yes emotion is important and passion is important but it you have a chance at creating something no one has seen before that has the greatest chance.”
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