Financing The Independent Film ==> mediafinancing

As one of the leading movers and shakers in the international film financing business, Lewis Horwitz has a unique perspective on the changes that have taken place in the industry. Nazir Keshvani caught up with the ex-CEO of the Lewis Horwitz Organization at the Bangkok Film Market and talked about how these changes affect the filmmaker. Nazir Keshvani : You must love movies to be in the business this long? Lewis Horwitz : I love the entertainment business. I fi nd it creative and challenging …. I live vicariously through my clients. I wanted to be an actor when I was much younger, but my wife and I decided that we prefer to eat. So, one day, 30-odd years ago, an opportunity came my way, and I knew that’s how I would spend the rest of my life. At our offi ce, we have about 18 people, and every one of them loves the business. That’s one of the prerequisites. We stand together as a team, working to help our clients accomplish their goals. NK : What’s your advice to fi lmmakers who want to get into this business and do it the right way? LH : One of the most important things is persistence. You can’t expect to fi nd and develop a project and have it produced in 20 minutes. You spend years. And you have to learn the business. If you can go to fi lm school, that’s great. Or get a job in the business. Do anything you can to start networking, learn how fi lms are made and fi nanced. So many people want to make a film but don’t have any idea what they’re doing. Next you must fi nd a sales agent. You must go to professionals. They know what kind of fi lms sell, they know whether your fi lm will make it, who the buyers are and who the bankers are. Most importantly, you must get your name on a fi lm. Once you do that, the world changes for you. It doesn’t make any difference whether you make any money or not on that fi rst fi lm. NK : What about trying to make a good fi lm? Isn’t that important too? LH : So many producers don’t know what a good fi lm is. Try to make a commercial fi lm. When I was a kid, everything was done through the studios. They would occasionally make a fi lm even though it wasn’t commercial. Today, if you aren’t established yet, you better make commercial fi lms because otherwise you may never get the opportunity to make the fi lm you really want to make. And that’s why you have to be involved in the business – don’t focus on just what you like. Think about what your kids like, or your younger brother or sister likes, and that’s the kind of fi lm you make. The ones with recognisable actors!

NK : Do you prefer that when filmmakers come to you, they have all the elements in place? LH : Obviously we’d like that, but I think it’s important for them to talk to people fi rst. Generally they’ll have a sales agent in mind and they’ll ask us which one we think is better. We talk about what we need: chain of title, a certain type of presale, documentation and then they go out and get those things. We help them negotiate many of the transactions. For example, every bank has a document called a ‘Notice of Assignment and Acknowledgment’ that is utilised by the distributor to acknowledge the bank’s assignment. It’s a very onerous document. It sometimes takes a good deal of negotiation. So, we will enter into the negotiations and attempt to work out the details. We often talk to the bonding companies and help put that together. When you have investors and people involved with the copyright, there is a document called an ‘Intercreditor Agreement’ so that everyone knows where their place is. We usually act as agent to put that together too. (As if to underscore the point, Horwitz takes a call from a distributor. The charm is palpable as he chats away …) LH : (After hanging up…) That was a German distributor. We’re talking about some projects that we’re involved in that he wants to be involved with. NK : So, in a way, you’re really a resource for the fi lmmaker? LH : Yes. You know why? When I started out, I had this little company, and I found if I didn’t help put it together, the films didn’t get made. That’s the philosophy I’ve kept. I try to hire people that want to do that. Because if you hire entrepreneurial-type people, customers want to deal with them. NK : What about the fi lmmaker who wants to do a more ambitious film, something outside the mainstream of films. LH : I saw a beautiful fi lm the other day, a sweet, feel-good fi lm. But I don’t know if it was commercial. It wasn’t a kid’s fi lm, and adults might have enjoyed it – we’re not the ones that go to the theatre. So, is this a commercial fi lm? Well, the amount of money they need might be more than I want to lend. So my next step is to check if they have made any pre-sales. If they have, I’ll explore who they are and the distributor’s calibre. Now, that means a lot – so that I can explore distributing to other parts of the world. And then I’ll extrapolate. For example, if you can market to France and Japan, then you kind of run the gamut of the world. And if you can sell to Germany today, then the other territories will fall into place. On the other hand, if you’ve got South Africa and Australia covered and some other smaller territories, it’s not going to be meaningful. Or they may have Spain or Italy sold. Then we calculate the potential value of the other regions and it helps me decide if I want to pursue distributing this particular film. NK : There’s been a lot of talk about the demise of presales. What’s your point of view? LH : It impacts the banking business a great deal, because the building blocks of film financing are presales. So if there are less presales, it’s more diffi cult for the producer to get his fi lm made. Fortunately, fi lm producers are NK : So where does the fi nancing come from these days? LH: So, many of the films that would normally not get financed have been helped by the investment dollars from Germany, Canada, UK, Luxembourg, the Netherlands. Fortunately we have been busy. Though it’s been slower in the business because of consolidations, we’ve been very busy with larger transactions. NK : What f ilms are most successful now? LH : The low budget films of $1 – $2 million are very diffi cult to sell. You’re looking at $3 – $5 million as the new lowbudget level. Then at $12 -20 million, it’s workable. These are the two tiers that seem to work best. NK : Do smaller films stand a chance? LH : Film distributors need the larger movies as a locomotive for the smaller movies. A distributor I know says he makes more money on the smaller pictures, but needs the bigger pictures to pull them along. With the studios selling their pictures, the exhibitors aren’t just going to take a small fi lm from somebody, but they will, if they can also get the larger ones. By larger, I mean the $20 – $40 million range.
NK : Do you see a different kind of fi lm being made? LH : More like a different class of fi lm. The buyers are looking for theatrical quality fi lms. It doesn’t have to be a $50 million film, but it has to have those qualities that make it theatrical. It needs recognisable actors – more recognisable than in the past. Better production values and a better story with a real beginning, middle and end. One of the nice things that’s resulted is that we’ve been fi nancing a better class of fi lms. If that’s what the buyers want, that’s what the sellers look for. NK : Have you seen evidence of actors taking a pay cut to be in a fi lm they are passionate about? LH : Oh, yes! We financed a picture called United States of Leland with Kevin Spacey, who was also producing. It’s a very low budget but he loved it and just wanted to do it.
NK : Have you been surprised at the level of consolidation in this industry? LH : I wasn’t surprised. It happens all the time. I started in this business over 30 years ago and I’ve seen banks come and go. I knew that consolidation between producers and distributors was going to occur, because you can’t have a situation where television is cutting back and still support this number of companies. I truly believe that those companies that survive will be better off for it in a year and a half or so because of consolidation.

ABOUT LEWIS HORWITZ Lewis Horwitz recently retired as chief executive offi cer of the California-based Lewis Horwitz Organization (LHO), a company he founded which is a leading lender to the independent film and television industry. He founded LHO nearly a quarter-century ago and built it into a Hollywood institution, inventing innovative methods that enabled many independent filmmakers and television producers to obtain funding for projects. Horwitz is a highly regarded banker and visionary who has helped hundreds of independent fi lmmakers achieve their dreams and, in so doing, enhanced the quality and diversity of movies that are distributed today. In short, he knows how to make fi lms happen. Recent fi lms that received funding through LHO include “My Big Fat Greek Weddingâ€Â and “Monster.â€Â The company also provided the seed money for “The Mary Tyler Moore Showâ€Â in the early 1970s. Earlier in his career, Horwitz devised financial solutions to help musicians get the financing needed to record their music and go on tour.
ABOUT THE COMPANY Lewis Horwitz Organization 1840 Century Park East Los Angeles, CA 90067 Tel : (310) 275-7171 Fax: (310) 275-8055 Lewis Horwitz Organization, the venerable lender specialising in financing motion pictures, is a division of Imperial Capital Bank, owned by San Diego-based ITLA Capital Corp. Type of business : Motion picture and television production loans. Type of finance : Long the most active lender to independents, averaging 30-35 pictures a year, Lewis Horwitz increased its services to include gap financing – loans made against a portion of a fi lm’s projected revenues not already covered by pre-sales. By end May, Horwitz said he had closed 10 loans involving gap fi nancing. With the new service, he expects to fi nance close to 50 fi lms this year. Loans have a $500,000 minimum; no maximum. On larger loans, Horwitz can arrange participation with a bank. “We lend against foreign pre-sales contracts based on our knowledge of the industry and our very large database. We can lend without fi nancial statements and without letters of credit,â€Â Horwitz says. How and when to approach for financing : “The time to talk finance is when a producer has a package together and a sales agent who’s ready, willing and able to license the film. At that point, we tell the producer what we require to draw up the documents for a loan, and determine if we want to approve it. We’ll also discuss contracts the sales agent is obtaining, and work with the sales agent to set up the smoothest transaction. If some of the foreign distributors are not familiar with our documents, we’ll call them up. We just did a deal where the German distributor was being diffi cult. We talked, we negotiated, and we were able to put it together. We might advise a client against a distributor whose credit background is not good, or against a type of contract that will cost them too much money in interest,â€Â Horwitz says.

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