The NZFC in partnership with SPADA were pleased to support Carthew Neal and David White to attend the Entrepreneurial Producing for the Creative Industries course held at the National Film & Television School, United Kingdom. The course covered film, TV, music, publishing, live, gaming & online industries and was sponsored by Ingenious Investments and Lee & Thompson Legal. It was championed by Sir Richard Branson and led by film producer Chris Auty and ran between February and November 2013.
We'd like to thank both Carthew and David for making themselves available to share their experience at workshops on their return. You can read their reports on the pages linked to below.
Here is Carthew's final report.
3 March 2014
SWITCHING FROM A PROJECT-BY-PROJECT MODEL TO BUILDING A BUSINESS OF VALUE
I have worked in publicly funded TV for fifteen years. I have produced an environmental series that formatted globally and a comedy series that has been piloted by the ABC in the US. So while being in NZ I have had a very outward looking approach to my work. I have also worked as a music manager, theatre and transmedia producer – and want to produce films.
I wanted to go to the course as I felt relying on public money for funding was not sustainable and wanted to broaden my knowledge about raising private finance. I also wanted to learn about how to take advantage of the current technological changes to create new business models.
I discovered the film industry has been structured to deliver the most dismal financial position for the producer and creatives. However compared to the TV industry there is the chance to iterate and experiment with the business models faster.
Here are five major things I learnt over the year:
The best creative businesses are made up of teams.
From choosing projects through to packaging, developing, selling, budgeting, HR and PR producing covers a wide range of skills and we can’t be good at all of them. It’s also a tough, long road that can be lonely. The best creative business successes have come from groups of people who bring a range of skills and shared vision. NZ budgets may have stopped us doing this to date, however by specialising our role on more projects we can be more prolific and increase our income.
Success stories of creative businesses built on partnership include these three big UK indie film companies run by producing partners: Working Title, Vertigo Films and See Saw.
Matchbox Pictures is an Australian production company that was formed to take advantage of Screen Australia’s Business Development Grant. It was made up of five experienced producers who were all dissatisfied working project-by-project; often with long gaps between projects. Once they joined forces to build a company of value NBCU saw the potential in their partnership and have since bought them up. They now have two offices and large staff and funded overhead.
Working in partnership means you need to know your strengths and acknowledge your weaknesses. Here is a simple exercise we learnt and I now use often to check in with my skills and the people I want to work with:
Choose a colour/skill below that you are strongest in. You probably can do all of these things but if you could only choose one colour which would it be?
Red – Systems & Efficiency.
Green – Ideas.
Yellow – People.
Blue – Goals.
Then look at your partners, what colour are they best in? Who else do you need in your team?
To date, Film and TV has generally been working in a “top down” business model. However this is changing. Technology is allowing production of teaser reels or minimum viable products to be made before any significant financial investment. At the other end of production – we need our concepts to cross many platforms, which requires collaborators who have different skills and audiences.
To develop and extend our reach, individual producers and businesses have to collaborate and often share their time and skills without payment. This is going to be reflected in the types of deals and arrangements we have with each other.
The new forms could be; profit share, licensing or marketing to create cross-pollination of audiences e.g. if you like this, you’ll like that.
We are also going to need simpler deals to work faster to keep up with our audience.
During last year I built a minimum viable product for an online collaboration calculator for groups of creatives. It's designed to encourage discussion and work out the ownership of shares in projects at an early stage before funding. Here is the first iteration: www.collaborationcalculator.com.
Part of this new collaborative way of working includes being open and sharing the outcomes of our projects. We’re in the Wild West right now, no one knows what will or won’t work and the more we can share our experiences the faster we can move as a group to find the next thing that will work for audiences. Every win for New Zealand is a win for all of us so it’s worth being a little more congenial. Here is a link to some sharing of web series outcomes from last year.
3. The Abundance of Money
"Raising finance for a film isn’t nearly as difficult as first packaging a film that appeals to financiers and the market.” Is a line that stayed in my head from NFTS director Nik Powell (who started Virgin Records with Richard Branson and set up Palace Productions and Scala Productions). It’s a subtle difference but it helped me focus on being clear what a buyer wants and leveraging that when developing films. You would be surprised at what this is sometimes; tax liabilities that needs to spent by a certain date, the need to focus on government priorities e.g. WW1 history.
We are going to have to look at more diverse funding sources for all out creative industries. If someone with money has had a meeting with you to discuss a project, they obviously want to get something out of it too. What is it? Here are the different funding options we covered and what they seemed to be looking for (obviously it's worth drilling down even deeper for every person you come across):
Private Finance – They just want a return on their investment. So you need to imagine you are selling tea towels or something else as equally mundane. Has it got the elements to create a success and can you provide examples of previous similar stories to mitigate the risks?
VCs – They are buying into you as much as your project, and will usually want take-over control. They want late teens (e.g. 17%) return on investment in 3-5 years. If they are managing a fund, they expect one project in ten will pay back the fund, so you need to show you can scale and provide high returns.
Media Investors like Ingenious Investments have invested in creative projects that are expensive upfront and hold no value until realized so they can claim these costs offsetting tax. Rules have tightened around this however it’s still a focus for their investors.
SEIS/EIS schemes in UK – Tax incentives for people with high net worth are designed to loosen up money and spend on innovation. They can claim income tax, capital gains tax, losses and won’t incur capital gains tax on their investment if your project succeeds.
JVs– Joint Ventures to keep larger organisations at the front of the market. Investing in a smaller more innovative company will give them insight in how they can change their bigger business.
Angel investors – Support creative talent/interesting experiences because they love access to this world or want to give back after making their own money. They are often self-made people and can add more than cash by acting as valuable advisors to young start-ups.
Private cultural funds like: Sundance Film Fund, Women Make Movies, funding bodies for Jewish filmmakers etc. – i.e. Soft Money
Government bodies – Are looking for cultural outcomes and success stories to report to central government.
Crowd funding – not only does this raise funds, it creates personal investment in your project and a crowd of people who will help you promote it.
4. Global Niches
With an excess of content available; Ted Hope says over 50,000 films are being produced a year. This abundance means there is a move away from a hit driven market, allowing customers to choose and watch anything they want.
Niche audience doesn’t mean a small audience if you can reach a Global Niche. Content is no longer the only King. Context sits right beside it and growing your audience is just as important (more about Context and Audiences in my next point).
When considering projects - look for inbuilt international audiences that are going to be easy to access and promote the project to. This will short cut the process of audience building. We also need to allow money for audience building in our budgets and strategise this from the conception.
And we need to consider our audience size when setting budgets. We should be looking for profit or at least break even in all our projects like every other business. Gardening with the Soul shows us that low budget production can still draw a big audience.
I’m going to be looking for NZ stories that can translate across territories and access targeted international audiences.
5. IP is no longer enough
With piracy rife across all creative industries retail sale of IP is losing its value. However there is value in building and monetising audiences who like the IP. The music industry has seen this change the most dramatically with music sales diminishing and other income (live and merch) increasing – once dominant retail stores like HMV, didn’t move with the audience and have now closed.
The great thing about having an audience is that they can be monetised again and again. So it’s worth looking at how you can extend the experience of a film they like beyond one 2hr experience. How can they be drawn in and be involved in the story world leading up to and after watching the film?
We’ve also seen through crowd funding that customers are prepared to pay different amounts of money for the same content. So it’s important to make sure you have exclusive products and experiences available for the customers who really love the content. These guys are called “whale customers” – you only need a few of them but they need to feel really special.
We need to focus on building our audiences from green light. Don’t be afraid of sharing elements or the essence of your film early with the audience. Create a discussion around the themes. Find existing audiences who are interested in them. Be prepared to iterate and chase the audience online focusing on what they like/want. This all costs money and time, and social media is no longer ‘free’ so again this makes looking for partners essential.
What will hold an audience is feeling personally connected to the content. Providing opportunities for them to create as well as be entertained is also important. Here is an innovative trailer experience made for “Spike Island” as an example. They created a Manc app where you record yourself dancing and then this is added to the trailer that you upload to YouTube. They will share it and then their friends are more likely to watch because it’s their mate being an idiot. Check it out here: http://www.moonshinemedia.co.uk/portfolio/dance-like-a-manc/
Pottermore.com is an example of holding people in a story world after they have loved a book and a film. Inside this website fans of Harry Potter can enjoy the characters, stories, locations and spend money. JK Rowling licensed aspects of the story world to Sony to create a game. This income was used to create the website by her. Fans can stay in the world as long as long as they like and there are many ways to spend money. JK and her agents were, and are, smart. They also created a Book of Spells game with Sony that is based around a book in the story world. JK also held back e-book rights when they signed their original publishing deal, as at the time the publisher did not have a use for them. So they exclusively launched the latest book from their site cutting out all retailers.
A final note about this: Facebook, Amazon, and YouTube are all great audience hubs but they do not provide you direct access to your audience; you are not able to get into their inbox. Try to have a direct connection with your audience. Get emails and communicate this way. And ensure that licensing contracts give you access to your audience data if not contacts e.g. make sure TV contracts allow you access to ratings info, and VOD contracts give you details of those who watched your film, live audience details. This information is incredibly valuable and needs to be managed carefully.
That’s the end of my top five. The big shift for me over the year was wising up to creating a business that looks to make profit like any other, rather than just taking an overhead fee. NZ is small so private finance can’t support expensive content on its own, hence our government funding model, however this can lead to living in a cotton-wool environment. But by working together, developing and testing audiences and aiming for global niches we can make sure our creative ideas, and the people who come up with them, can succeed creatively and financially.
PS I wanted to share a few links/tools that could be useful:
The BFI have been experimenting with VOD and Day and Date releases. They have provided examples (in an open way) online here. http://www.bfi.org.uk/film-industry/lottery-funding-distribution/insight-reports-case-studies-audience-research/new-models-awards-insight-reports
There is more and more software that is making it easier for small companies to act like corporates. Screen Advantage is one of them made by Film Financier/Producer Gareth Wiley. It’s a film financing software is an example of new software that can make a film finance plan and waterfall agreement. It's $164/year, which is much cheaper than using experienced producers with dodgy spreadsheets, or accountants and lawyers who would charge much more for the same service. http://www.screenadvantage.com
The Tribeca New Media Fund in NYC has interesting transmedia examples in its sandbox http://sandbox.tribecafilminstitute.org/ and Canada has one of the only new media funds interested in co-production, the Bell Fund http://bellfund.ca/
Thanks to the New Zealand Film Commission and SPADA for their assistance in supporting me on this course. Also thanks to Chris Auty, Nik Powell, NFTS and Ingenious for leading by example and using soft money to develop the course. Thanks also to Dominique Green and Rob Watson for their connections and time setting up our guest speakers, and the rest of the course participants!
Please get in touch on @carthew