Bankrolling Asia’s ambitions

In a region that is fast proving to be a media financing haven, The Weinstein Company’s US$285 million fund, Crosby Capital Partners’ US$100 million A3 International Film Fund, and RGM’s S$80 million (US$55.8 million) film fund are just some of the financial resources available to bankroll the production of Asia’s next big film or TV show.

The fourth edition of the Media Financing Forum (MFF) held during the Asia Media Festival 2007 in Singapore last November brought forth international financiers and media practitioners’ bullish expectations of the Asian film and TV industry. Attended by 200 international film and TV creatives, the forum’s keynote addresses and panel discussions shed light on trends and developments in key investment and risks aspects of film and TV programmes production.

Among market trends discussed, Ashok Amritraj, chairman and CEO of Hyde Park Entertainment highlighted that financiers are now looking to invest in slates rather than a single production. US-based veteran producer Edward R. Pressman whose credits include features Badlands and Wall Street, focused on emerging markets outside of America and cited a study which predicted the Asian film industry to surpass the US industry by 2025. Other panel discussions centered on challenges faced by the regional industry in content development, production, distribution and financing.

Aside from the invaluable information and insights shared, MFF 2007 also marked the debut of a new fund for filmmakers in Asia made available by Upside Down Entertainment (UDE), a film financing and production jointventure between Singapore’s Upside Down Media Group and US-based multi-Emmy nominee Quixotic Media Group.

On the funds offered, Quixotic Media Group’s founder and executive producer Mark Byers was unequivocal about UDE’s intent to invest in Asia. “The talent pool in Asia is world-class on both sides of the camera. The only thing holding them back from reaching the global audience they deserve has been an international story structure and the funding. Our intent is to bring both – not just for our own projects, but also to local filmmakers across the region,” exhorted Byers.

Offering both debt and equity financing models, UDE targets to introduce mature and proven development and financing structures to Asia’s filmmakers and to work with them to tap on available stories and talent in Asia for the international market.

“Depending on the requirements of the producers and the strength of the projects, we may provide up to 80% of financing,” explained Chan Gin Kai, executive producer at UDE. UDE is working with investors and corporate financiers from US, Canada and UK, and is developing relationships with Asian financiers.

Echoing Amritraj’s views at MFF, Chan elaborated, “We prefer to develop a slate with producers over one-off projects as the former offers advantages like diversification of risks, economies of scale and stronger negotiation power with cast, crew, suppliers and distributors.”

While UDE is open to any type of project that “makes commercial sense”, it does not fund arthouse films. “We prefer features of commercially viable genres like action, thrillers, adventure and comedy. We are open to TV programs, documentaries and new media content of less mainstream genres as well, so long as they make commercial sense, and preferably if they are packaged in a slate with commercial feature films,” he continued.

As a start, UDE is already involved in a US$4 million romantic comedy Accidental Love, and a US$6 million action thriller Sky Pirate in Singapore; as well as US$12 million sci-fi flick Siege of Hong Kong in Hong Kong. While all three films are in pre-production stages, UDE has proceeded to negotiate other financing deals with producers from Singapore, Australia, Thailand, Philippines, Hong Kong and China.

UDE will executive produce all projects it finances to protect the financiers’ interest, but will leave the producers to take charge of the production. “Filmmakers can rest assure that most financiers and investors are involved not because they love to interfere, but because they want to protect their investments. This is good for the filmmakers too as it means more profits for them,” Chan mused.

“We’ve noticed that Asian filmmakers are capable of producing great stories, but many tend to get over philosophical or develop plots that are too meandering or complex, and may need help in pacing and structuring the story. In a film that lasts only 90 – 120 minutes, we need to keep plots simple but impactful,” he advised.

While track records count for a lot especially for filmmakers looking to finance bigger films or slates, UDE is prepared to fund firsttimers. “While most debutants like to show their passion and dreams, he is more likely toimpress if the package is prepared with the financier in mind,” he said. “Convince the financier why the film will be a box-office hit and why it will reap returns. A great script, strong artwork, good industry research, and when possible, attached stars, are some of the materials that will impress financiers,” he added.

Down to the details, Chan said that a rough budget forecast and schedule usually suffice at the initial stage as these usually change after UDE provides its inputs. Apart from completion bonds that are necessary for the financiers, UDE also requires insurance to cover public liability and to protect the cast and crew. “Just one lawsuit for damage to somebody’s property, or a hefty medical claim can wipe out a big chunk of a production budget, so it is advisable to be adequately insured,” Chan quipped.

In addition, distribution deals do not need to be secured prior to the funding application, and UDE may prefer the production not to be tied to any distributor.

Sales estimates are also not compulsory. “Producers who are unfamiliar with the distribution scene may get themselves tied up with weak distributors and limit their potential to get returns,” said Chan. “If we’ve got a great product, distributors will be eager to distribute it, so we’re never worried about getting tied down with distributors at an early stage,” he continued.

Regionally, Chan sees an increasing number of Asian films especially ones helmed by big Hong Kong or Chinese names scaling up budgets. “Asian films used to be produced at smaller budgets ranging from US$500,000 - US$5 million. Now, it is quite common for productions to cross the US$30 - 60 million threshold,” observed Chan who sees the same trend catching on in India. He also believes the influx of Western money into Asian films has given Asian investors confidence to finance regional products. “It is ironic that it took Western financiers to convince Asian investors that they are sitting on a largely untapped source of strong stories and amazing filmmaking talents,” he concluded.

Also present at MFF was Lee Beasley, director and head of media & entertainment at Standard Chartered Bank (Hong Kong) who shared his views. “As such funds were not available in Asia previously, many have gone to Europe or the US to secure competitive bank financing. A key challenge is thus, to educate industry players on the availability of financing facilities closer to home,” observed Beasley.

An established media financier in Asia Pacific, Standard Chartered Bank (SCB) provides senior debt financing for film and TV projects throughout Asia. Regionally, producers and directors have typically sought pre-sales contract discounting and gap financing from the bank. Given the increasing international focus on the Asian market, Beasley expects regional financing demands to grow and SCB to expand its offerings to meet these needs.

While Beasley is unable to disclose details of the projects SCB is currently involved in, he revealed that the bank has financed productions in China, Hong Kong, Thailand, India, Singapore and Australia over the past year. These include high profile period films Curse of the Golden Flower (2006) by Zhang Yimou and Red Cliff by John Woo that is currently in production.

On SCB’s involvement in Woo’s Red Cliff for which the budget is “just south of US$80 million”, Beasley said, “This is probably an exception as it is hard to sustain many high-end productions in a market that is still growing and yet to mature. As the market matures, the likelihood is for the scene to include more high-end productions along with smaller pictures, especially if domestic demand can meet this growth.”

In terms of emerging trends, Beasley points to an increase in governmental support for film productions in Korea, Singapore, and most recently Hong Kong, which set up a HK$300 million (US$38.5 million) film fund in 2007. While film markets in China, Thailand and Singapore are growing with both indigenous and runaway productions, the Korean and Hong Kong markets look to be experiencing a downturn in local production, although the latter’s situation may improve given the new governmental support.

On how applicants can secure financing from SCB, Beasley explained, “We assess the creative aspect of a project including script, cast, crew and schedule, as well as the financial side of the deal in terms of budget, equity level, pre-sales and forecast sales.” Stressing the importance of commercial appeal, he asserted, “All of the projects that we finance must have commercial appeal and this has to be evidenced by pre-sales.”

According to Beasley, the track record of the filmmaker is just one of many factors that SCB assesses. “We will not discriminate against any producer or director, and will consider a first-timer on the basis that he has sufficient support and experience within the production team. However, I must stress that the commercial appeal of the project is important to the bank in this regard as it will drive our appetite to lend,” he elaborated.

While filmmakers retain creative control over the project, SCB will monitor the progress through monthly expense and progress reports. Both the completion bond and insurance are crucial elements as the completed film is the bank’s sole item of security for the loan to be repaid. Standard production insurance covering the production and public liability usually suffices.

As evidence for the commercial value of the film, SCB views distribution contracts and the distributor’s creditability as key assessment factors to finance a project. The bank is able to offer flexible solutions to clients and does not specify the contract amount that has to be secured prior to the application.

Finally, Beasley points to the fact that each sales agent has different strengths and edges for each type of movie. “The key is to select the most appropriate and suitable sales agent for your movie and this is where we can help in recommending agents. We work with sales agents in Hong Kong, Korea, Australia, Europe and the US,” he concluded