A presentation made for the Gauteng Film Commission on Film and Television Financing in South Africa and the world

1. Film and TV Financing Workshop
Presented by AAA Entertainment

2. Local Financing
Types of Financing
Film Financing vs. Television Financing
International Financing
Finance Plan and Budget

3. • Grants
• NFVF, KZNFC, GFC
• Rebates - Tax and Cash
• DTI - QSAPE, TPE
• Tax Incentives
• 12.O
• Equity
• IDC
• Debt Financing
• Gap and SuperGap
• IDC
• Pre-sales
• MNET, SABC, ETV
• MG’s
• Ster Kinekor, TMF
• Product placement and integration
• Agencies
• Crowd funding
• Indiegogo, Kickstarter, Thunderfund
local financing : types of financingcal

4. NFVF : development, production, distribution - Tier 1-3
documentary development - up to R150k
feature documentary production - up to R350k
short documentary production - up to R200k
feature development - up to R200k
feature production - up to R1,3M
short film development - up to R100k
short film production - up to R200k
TV format development - up to R200k
Marketing and Distribution up to R250k
KZNFC : development, production, distribution (modelled on NFVF)
GFC : development, production, distribution
No fixed amounts. depending on annual budget between R100k & R1.5M
grants

5. Cash Rebate (Tax Credits not applicable to South Africa)
DTI - Guidelines can change any time
Emerging Black Filmmakers Incentive - no CAP
50% of QSAPE up to R6M & 25% thereafter
QSAPE < R1M
Local and Co-Production - no CAP
35% of QSAPE up to R6M & 25% thereafter
QSAPE < R2.5M
International - CAP R50M
20% of QSAPE & 22,5% post QSAPE > R1.5M & 25% post QSAPE > R3M
QSAPE R12M
QSAPE has to be 75% to TPE. Producer/Line Producer must expend according to guidelines to get
rebate. Last milestone can be withheld and production invoiced for non-qualifying expenditure
rebates - tax rebates and cash rebates

6. SARS 12.0 Tax incentive
Previously 24F
Investor must purchase exploitation rights (equity) and not give a loan or credit
Gives investor option to do one of two
1. Declare film as a loss 2 years after completion and write off net loss of investment against tax
bill that tax year
Part of investment that can be written off is relative to investors tax bracket and tax bill in
that year
Any revenue accrued will come off the net loss
2. Declare film as a profit and get tax exemption on the profits of the film or series
If the film was declared as a net loss prior to going into profit, the investor will be taxed on
the profits thereafter
tax incentives

7. IDC
Requirements rough guideline
Pre-sales preferable
Sales projections from reputable sales or distribution company
Another equity investor alongside them preferable
Qualify for BFI, local or co-production DTI incentive
Equity to be recouped in first position, unless GAP financing is in place
After 100% recoupment, profit share usually 1 to 1 with investment portion
Maximum investment is 49% of the budget
MNET
Flexible recoupment position
After 100% recoupment, profit share usually 1 to 1 with investment portion
Usually alongside license fee in a ratio of 1 to 4
Private Investors - as per agreement reached
equity investors

8. Gap
Gap financing is when you get a loan against the unsold territories to close the gap in financing
Gap is junior in recoupment only to a senior bank loan that is not equity
Gap is senior to all equity loans
Gap is generally 10-15% of the budget required
Gap loans generally charge higher interest than a straight bank loan
Super Gap
Super Gap is when the Gap loan goes over the 10-15% mark
Super Gap charge substantially higher interest due to the increased risk
IDC does Mezzanine financing (Gap and Super Gap)
No traditional banks in South Africa are currently doing any Mezzanine financing
International banks usually have special devisions for this that employ executive producers or producer
gap and super gap (mezzanine financing)

9. Pre-Sales
A pre-sale is the sale of specific rights in regards to territory, platform and period, on the script
and package of the film, to be collected on delivery of the film if done according to contract
requirements
A pre-sale is a contract between a buyer and the producers that can be used to get loans
against
A pre-sale can also be paid out in milestones during production like with MNET or up 20%
deposit on the full resale amount
Minimum Guarantee (MG)
A minimum guarantee is similar to a pre-sale, except that once the buyer or distributor has
recouped the MG amount from the sales and distribution revenue in their territory and
platform(s), additional revenue thereafter will be subject to an agreed distribution commission
and the balance paid to the producer or rights holder
pre-sales and minimum guarantees (MGs)

10. Income from product placement can be used to supplement the budget of a film, but is often not
considered an investment upfront by bonders and banks, until it has been banked
The Bond franchise is notable for its lucrative product placements deals, bringing in millions of dollars.
In the film Minority Report, Lexus, Bulgari and American Express reportedly paid a combined $20
million for product placement, a record-high amount.
Local films struggle to show the number of eyeballs that will see the product and an up front TV deal is
often more attractive to brands than the theatrical potential of a film
Television product placement is far more measurable, but broadcasters know this and deduct product
time on screen from the license fee
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). While no money changes hands, the films budget will
be lowered by the amount that would have otherwise been spent on such items.
Product placement and integration is often done by specialised agencies such as Mad Robot
Product integration requires the brands to be considered during script development e.g. main character
works at the Brand company
product placement and integration

11. Crowd Funding is essentially selling perks or pre-selling the film in a particular format e.g.
DVD in order to finance the budget
IndieGoGo (2nd largest)
US based crowd funding site : accepts SA bank accounts. Pays out a lesser
percentage if you don’t make your funding target
Kickstarter (biggest by funds raised annually)
US based crowd funding site : does not accept SA bank accounts. Does not pay
out if you don’t make your funding target
Thunda Fund (local)
SA based crowd funding site : accepts local bank accounts. Low traction on film
projects to date
crowd funding

12. • Grants
• Hubert Bals, World Cinema Fund, CNC, Blu Ice ; many more
www.filmdaily.tv
• Rebates - Tax and Cash
• Georgia, Utah, Canada etc
• Equity
• QED and many more
• Mezzanine and Gap
• Most international banks like HSBC, Wells Fargo etc
• Pre-sales
• XYZ, Lionsgate, Sierra Infinity etc
• MG’s
• Same as pre-sales
• Product placement and integration
• Agencies, Global Brands
• Negative Pick Up Deals
• Studios who will buy the film once completed and give contract
up front
international financing : types of financingcal

13. film financing
Soft money based (art house and documentaries)
These genres and formats generally do not make profits, at least that can be predicted to some degree, and therefor
should use as much soft money or non-recoupable investment as possible
The themes of these films usually have to speak to funds’ mandate or miss statement and are usually of a social issue
nature e.g. the Wound
Commercial based
Genre based
Genre includes Horror, Action, Fantasy and Sci Fi
Built in audience for this type of film and usually requires known director with good track record or proof of concept for
first timers
Cast based
Drama and other genres that will attract pre-sales based on cast and director
Attaching the talent before raising some finance is challenging but the actors guarantee investment once attached

14. television financing
AFP
Advertiser Funded Programming requires the brand or sponsor to pay for the entire production budget and the allocated
airtime on television. Brands require guarantee of minimum audience numbers
Commissions
Broadcaster pays for the full production budget and producers fees in exchange for ownership of the content produced
and has full editorial control
Co-Production
Broadcaster puts in a portion of the production budget and acts as a co-producer and according to the specific agreement
can recoup investment, share in profits and sell on rights. Broadcaster has equal editorial and creative control with
producer
Pre-sale
The broadcaster puts money up front to secure the exclusive or non-exclusive rights for their platform(s) for a given
territory
Pre-sales are higher than license fees and allow broadcaster some editorial and creative control
License
The license fee can secured as a pre-license and used to secure loss
License fees are lower than pre-sales usually and give broadcaster no editorial or creative control at all

15. finance plan and budget
Finance Plan outlines the investors with the amounts invested and percentage of budget
Finance Plan outlines the equity held by various investors and talent and crew
Finance Plan outlines the recoupment chart and the profit share after break even
Finance plan shows each investor you approach where they fit in and where the other money is coming
from at what conditions
Finance plan must include any interest and fees on the money raised to show a true net profit break even
Budget needs to match finance plan and each update as the other does
Budget needs to include any finance costs pertaining to production such as writing contracts, completion
bonds etc

16. ANY QUESTIONS