Movie Print and Advertising (P&A), is this just all Smoke and Mirrors?
The world of film financing is a spiders web, so how does this actually work!
The world of movie financing is complex, to say the least; equity, debt, mezzanine, first in, last out, oh my god it just goes on and on!
It just seems so difficult to finance a movie, in truth people don't really want you to know how anything works in the film financing world — so it’s all about the smoke mirrors game, a place where you can hide movie losses with some creative accounting!
The key elements of Prints and Advertising (P&A) that a distributor must consider at this stage are;
The quantity and production of release prints and movie trailers.
Specialised films will often be released with fewer than 10 prints into key independent cinemas, with these prints subsequently ‘toured’ over a 6-month period to all parts of the United Kingdom.
On the other hand, commercial mainstream films will often open on over 200 prints, simultaneously screening in all major UK towns and cities.
Press materials, clips reels, images, press previews, screener tapes.
For the majority of movie releases, favourable press response is a key factor in developing the profile and desirability of a film.
Distributors consider both the quality and breadth of coverage, and this is often inscribed into the nature and scale of a press campaign.
The design and printing of posters and other promotional artwork.
The cinema poster — in the UK this means the standard 30" x 40" ‘quad’ format — is still the cornerstone of theatrical release campaigns.
Numerous recent examples indicate that the poster design is highly effective in ‘packaging’ the key attributes of a film for potential audiences.
Distributors will also consider other poster campaigns, ranging from Underground advertising, black cabs, flyers to billboards.
Advertising campaign — locations, advert size and frequency.
Advertising in magazines, national and local newspapers works in tandem with press editorial coverage to raise awareness of a release.
Press advertising campaign for specialised films will judiciously select publications and spaces close to relevant editorial for that specific medium.
For mainstream films, scale and high visibility is the key.
The cost of print advertising in the UK is comparatively high and is seen as making the distribution in the UK a riskier business than in most other countries.
In order to extend the reach of advertising and develop more effective communication with audiences at low cost, distributors are looking increasingly to ‘viral marketing’ — different forms of electronic word-of-mouth via the internet, email and mobile phones.
The Press campaign and contracting a PR agency
Many independent distributors, in particular, do not have press departments, and will consequently hire a press agency to run a pre-release campaign.
This is especially the case if the distributor brings over key talent for press interviews to support the movie release.
Arranging visit by talent from the film
The use of talent — usually the director and/or the lead actors — wins significant editorial coverage to support a movie release.
The volume of coverage can far outweigh the cost of talent visits.
Other preview screenings.
A distributor will consider the use of advance public screenings to create word-of-mouth and advance ‘buzz’ around a film the P&A applies when a theatrical motion picture is completed or is in the advanced stages of completion.
P&A financing is the key determinant to assuring a picture’s return on investment (ROI) and can run anywhere from 30% to 100% or more of a picture’s total production budget.
The P&A addresses a picture’s theatrical release along with its ancillary and subsidiary releases (e.g., Netflix, VOD, Cable, DVD/Blu-ray,), both domestic and international.
P&A financing is always “last in and first out” on the ROI (return on investment) for the movies waterfall.
It's important to carefully monitor the distribution process to ensure that residuals come back to the right parties.
The placement of P&A can sometimes allow a partial repayment to the film’s equity investors.
When financing the P&A it typically would expect a 20% coupon and a maximum of 12 months to repay the principal and coupon.
After the P&A recoupment, its also a good idea to incentivize the producers and the talent residual pool.
The film’s distributor will normally take 8–12% at the placement of the P&A contract, at which time the film is fairly well defined and the talent is in place; with, box office projections are much easier to forecast at such time.
Some P&A financing companies are capped at $30MM. (but this is subject to the individual financer), for that movie or TV project.
The P&A financing agreement typically also caps distributor reimbursable expenses at $300,000.
Minimum Guarantees cannot be paid out of the P&A financing. However, Guild residuals can be honoured as part of P&A financing structure.
You can sometimes split the distribution revenues between the financer and the Production Company and its investors on a 50/50 basis after the financer recoups their investment.
The financing of the P&A then allows the Production Company to “pre-sell” to foreign markets.
The domestic sales are tied to paying back the P&A. We discourage the pre-sale of domestic revenues, as it is a debt that subordinates all the investors and the residual pool.
Pre-sales are practically impossible to obtain without a firm commitment for P&A to be in place.
The financing of a movie is complex, so we are producing a series of podcast episodes and blogs to help demystify this area for independent film creators to move forward and create great movies and TV shows for years to come!
By Peter Moore
