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‘Too much money- not enough film projects’

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Film
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Financier/executive producer James M. Vernon has an unusual problem in the Australian film industry: he says he has more money to invest than there are viable projects.

Vernon’s Media Funds Management (MFM) has co-financed a raft of films including Mark Lamprell’s Goddess, Fred Schepisi’s The Eye of the Storm, Simon Wincer’s The Cup, Stephan Elliott’s A Few Best Men and the soon-to-be-released Brian Trenchard-Smith-directed action thriller Absolute Deception.

Among the MFM co-funded films in post-production are the Spierig brothers’ supernatural thriller Predestination, Russell Scott’s 3D IMAX documentary Hidden Universe and Geoff Davis’ WW1 drama The Stolen.

The most recent project MFM co-funded was Trenchard-Smith’s action comedy Hard Drive, shot on the Gold Coast and starring John Cusack and Thomas Jane.

Typically MFM provides up to 100% of the producer offset, up to 100% on pre-sales and gap financing based on qualified sales agency sales estimates. The money comes from a number of investment sources including England’s Ingenious Media.

“We’re flexible and creative in assisting producers to structure the film’s finance plan to get their films across the line,” he said. “We like to think that we make things happen.”

So it’s perhaps surprising when he observes, “We have more money than we have projects.” Faced with a dearth of Australian projects, MFM is now co-funding films in New Zealand, the US and Canada.

Canadian films already co-funded are Forever Seventeen, directed by George Mendeluk and featuring Andrea Roth and Tierra Skovbye; Suddenly, directed by Uwe Boll, starring Ray Liotta, Dominic Purcell and Erin Karpluk; and Way of the Wicked, which stars Vinnie Jones and Christian Slater and is directed by Kevin Carraway.

Vernon would like to see more Australian producers take on bigger budget productions but sympathizes with the difficult task faced by most producers. “It’s tough out there, but you just have to keep knocking down those brick walls,” he said.

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3 Comments

  1. Whilst the title of this article is very enticing to all independent filmmakers out there (myself included), it’s worth noting that the services on offer here are very similar to that of a bank loan – inclusive of interest.

    When the producer offset was first announced its purpose was to encourage private investment into feature films, where instead of investing purely for a tax break, investors would be investing with the hope that the film they were investing in would make money. What would help ensure these films success would be that they would require a distribution deal in place – prior to receiving their provisional certificate, that the producer would use to show potential private investors that the government would pass on a rebate of 40% of the film’s qualifying budget. The catch is, most film’s require that 40% as part of their spend during production – so companies such as MFM will bankroll that portion of the budget, so long as you have all other financing in place.

    It’s a very low risk proposition – because as soon as the film is completed, the producer can lodge their form with the Government, receive their offset cheque, which they then pass on to MFM, or other money lender, with interest (usually pulled out of the money the private investors have kicked in as part of the budget).

    Now, I’m not saying that there is anything wrong with the services supplied by MFM. I think they are fine, and for any film with a provisional certificate to receive the producers offset, then I’d be hitting them up.

    The problem I have with the article is the title. The suggestion that there are not enough film projects to fund – well, that’s what is rather inaccurate.

    There are not enough films with provisional certificates – and I dare guess that even with a distribution deal in place, you may not get a look in with these guys, unless you have a healthy budget. The article even says this “we would like to see producers take on bigger budgets” – of course you would 10% return on a 40% investment on a film budget of $2mill is not a lot of money, and probably not worth looking at, 10% return on a 40% investment on a film budget of $20mill – now we’re talking!

    The problem with this is of course – how many Aussie films can you name that have done enough business to return money back to the production company in excess of $20mill? I wouldn’t want to be a private investor in that scenario.

    The difficulty facing production companies and filmmakers in this country today is that the handful of distribution companies deemed viable in the eyes of the producer’s offset scheme, hold all the cards – and they know it. Without a cinema distribution deal in place, you can’t get a provisional certificate – which means that trying to secure private financing without one, is extremely difficult, as tax break incentives are no longer an option for investors. This means that producers are making deals for very little, if any money up front with distributors, just to get a certificate – but in doing so, are potentially cutting themselves off of a much larger sale when the film is complete – and actually reducing their private investors chances of making money in the process.

    The landscape of distribution is changing – if you don’t believe me, there’s a recent video online where Steven Spielberg and George Lucas talk about how difficult they both found it to get their most recent film’s on cinema screens, because with all the superhero franchises and 3D spectaculars, there are few spots left. If these two guys struggle – what hope does that give the rest of us?

    Rather than post a sensationalist article such as this – I’d much rather see if lobby for changes in the legislation surrounding the Producer’s Offset. I’m not suggesting that every film get a certificate, but I think the limitation of a film needing a cinema distribution in place up front is becoming an ever increasing hurdle for producers. With so many avenues of distribution – especially the emergence of VOD, a more inclusive producer offset structure, that might benefit smaller budget productions, and therefore be potentially more viable as an investment for private investors – would be a very welcomed discussion.

    If I have said anything here that is incorrect – please let me know, I’m all ears.

    So if, what changes would you like to see with the way the producer’s offset is structured?

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  2. Vernon works at the upper end of budgets. The fact that he doesn’t have or can’t find enough projects to fund has more to do with the development process referring to “genre” (driven by screen agencies) the lack of diversity (driven by screen agencies), and most likely, on top of his business model, his own personal taste. Its interesting to note that three of the four Australian projects he has financed to date have been box office failures!!!. Its a self fulling prophecy that he can’t find projects because producers can’t find, distributors because they cant find exhibition in the dieing terrestrial model. It would be interesting to see what were happen if the QAPE came down to 100,000 or below and if non-linear distribution guarantees came into play. just as a start.!

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  3. Do away with the provisional certificate altogether! And following on from what Peter stated above; non-linear DGs are to be order of the day. In fact, DGs of any nature/size/scale is to be the ONLY consequential and/or pre-determining element in a producer/production company’s ‘trump card’ in securing government backed ‘tax incentives’. Such ‘tax incentives’ are to be MORE aligned with the ‘company tax percentages/regulations’ of Australia and NOT a percentage of 40% QAPE as it stands now! Perhaps, say 20-30% of your non-linear DG value can be the ‘tax rebate’ portion a producer/production company can expect back from the taxmen! This can be ‘dangled’ before a private investor pool more effectively! What say fellow suffering low budget media content producers??!!

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