How does funding movies work?

[Traab]

Ok, this came up recently from something I read earlier. Basically, it was mentioned that monty python and the holy grail was paid for by british rock groups, George Harrison covered the cost of Life of Brian himself. But what I wondered was, how do you make a profit off doing this? Do you agree to fund it in exchange for a cut of the profits? Is it treated like a bank loan where it gets paid back with interest? In fact, does anyone know exactly how it all breaks down in payments? I mean, we see the big numbers, "This movie cost 140 million to make, and brought in 600 million at the box office." But how is that money divided, and how does that effect if its a success or not?

I imagine the cast and crew generally get paid their flat rate which is a part of the cost to make, so success or failure, they get their paycheck, but after that, is every dollar made past the cost of funding the film and its advertisement and distribution just going straight into the pockets of the people/company that paid for it? Like, did george harrison get to reap the cash payoff of life of brian for years? Or did he get a specific amount back and thats it?

[Starbuck_II]

The way to fund a movie:
1.government grants;
2.tax incentives and shelters;
3.private equity and hedge funds
4.debt finance; and
5.equity finance.

Then there is something like Kickstarter, etc.

These can be percentages. So if you give them money, they give you a figure every time it is played.
But a example one is: A negative pickup deal is a contract entered into by an independent producer and a movie studio wherein the studio agrees to purchase the movie from the producer at a given date and for a fixed sum. Until then, the financing is up to the producer, who must pay any additional costs if the film goes over-budget.

But yes, they can be actual loans. In motion pictures, gap/supergap financing is a form of mezzanine debt financing where the producer wishes to complete their film finance package by procuring a loan that is secured against the film's unsold territories and rights.

Another is product placement:
In the film Minority Report, Lexus, Bulgari and American Express reportedly paid a combined $20 million for product placement, a record-high .
Product placement may also take the form of in-kind contributions to the film, such as free cars or computers (as props or for the production's use).


George Harrison gets rewarded with being in the film. So he was more the original kickstarter, so he didn't get directly paid, I believe.

[DeadpanSal]

So you go to a bunch of prospective backers and promise each one of them 50% of the profits, gathering more and more money, into the millions, then you find a script - the perfect script, find a place, cast the best person for the job, and on opening night, you hope for the best!

[Rogar Demonblud]

I think you mean the worst.

For those who don't know, Master of Aeons is referencing the movie The Producers by Mel Brooks (one of the earliest examples in media of crowdsourcing, btw).

[Grinner]

I imagine the cast and crew generally get paid their flat rate which is a part of the cost to make, so success or failure, they get their paycheck, but after that, is every dollar made past the cost of funding the film and its advertisement and distribution just going straight into the pockets of the people/company that paid for it?

You might think so, but when you start digging into the details of filmmaking, it becomes increasingly apparent that filmmaking is never so straightforward. In fact, as finance- and legality-ridden as it is, it's a wonder anyone can call it an art.

There are actor's guilds, right? For example, the SAG-AFTRA provides easy access to cast, but using that guild entails signing on to a rather draconian set of policies and procedures, which regulate everything from how much and in what manner cast is paid to when and in what order cast and crew break for meals. Accordingly, the legal agreements required for guild actors often stipulate ongoing royalties. So to answer your question, it depends on the contract.

[Keltest]

Reading cracked I see...

[Kislath]

I wish that we could buy "stock" in a movie. I suppose we can buy stock in a movie studio company, but I'd rather be able to plonk my money down on specific film.

Just imagine how rich you'd be today if, back in 1976, you had been able to invest 1000 bucks in some silly little kid's movie called Star Wars.

Think about how many more movies would get made if the fans were able to pay for making them.

[Thinker]

I wish that we could buy "stock" in a movie. I suppose we can buy stock in a movie studio company, but I'd rather be able to plonk my money down on specific film.

Just imagine how rich you'd be today if, back in 1976, you had been able to invest 1000 bucks in some silly little kid's movie called Star Wars.

Think about how many more movies would get made if the fans were able to pay for making them.

I'm sure you could do something like that. Create an investment group and write the bylaws so that payout from funding a movie is proportional to the investment in a movie (if you invest $1 in a $100 film, you get 1% of the company's profits from the film). Collect money from investors and fund a movie with the contract stipulating ownership of the movie rights (likely divided between your company and any other investors/creators). You could probably create a Kickstarter-like website or app that would promote that.

[Rogar Demonblud]

Gross profit or net profit? If net, what expenses are calculated before or after that determination?

[snowblizz]

Gross profit or net profit? If net, what expenses are calculated before or after that determination?

To quote Hailey from a non-online comic. "Gross. Net is for suckers".


Iron Sky 2 was trying to do something like this. Though I believe the backers got stuff not shares. Seeign as the whole thing would fall under masses of liability if you tried to sell shares of a movie.

[tomandtish]

Gross profit or net profit? If net, what expenses are calculated before or after that determination?

Pretty much by definition, net profit would be after ALL expenses related to the cost of making the movie were taken out. One exception would be advertising from a major production studio, since they keep an entirely separate advertising budget for the year, so advertising is not technically considered part of the production cost of their movies. That's why $200 million dollar movies may get relatively little advertising if they decide it's not going to do well and $50 million dollar movies may get more thrown at it then it cost to make the movie.

To quote Hailey from a non-online comic. "Gross. Net is for suckers".

Very much this, at least when dealing with the major studios. Because then you are dealing with "Hollywood Accounting". The short version is that you'll see 4-5 studio names attached to any film. They will create a series of high-interest loans through each other and only pay back the interest only. These end up being restructured and refinanced such that the movie never goes into the black as far as repaying the loans is concerned. $977 million world-wide and HP and The Order of the Phoenix LOST $167 million because of the way the financing was worked. It's also why David Prowse (who accepted net points) has never received any profits from Return of the Jedi. Technically it has not yet made a profit.

[Rogar Demonblud]

Actually, no. Net is defined by the tax laws, to a large extent, because that's your taxable income. So several things you'd think should be deducted from gross to get net aren't, because deducting them after net allows you to get tax credits.

Which is yet more Hollywood Accounting, which probably breaks commandments in several religions simultaneously.