With more than 50% of the U.S. adult population at least half vaccinated and studios plotting start dates, visions of a return to normalcy abound. So what’s the prognosis for independent film, when insurers and bank lenders remain on the sidelines even as production perks up?
Mark Gill, CEO of Solstice Studios, said things are looking up and he’s hoping to stick to a September shooting date for Hypnotic, the Robert Rodriquez thriller with Ben Affleck. But right now, “You have trouble financing any size of movie except the small ones.”
“Mostly what we do is [in the range of] $40 million to $80 million that made it impossible for us to go into production. I had hoped it would ease up.”
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“As soon as the insurance is workable, it all snaps back,” Gill added, referring to Covid-19 insurance, which disappeared for new independent productions over a year ago. Specialty insurance is available but still too expensive at about 10% of budget – so that’s $7 million for a $70 million film.
“If you could guarantee a vaccination for everyone in your cast and crew, that would make a difference. If it’s a new production, our labor counsel and the U.S. EEOC says, you can make it a condition of employment. If someone decides they don’t want to take the job, that’s OK,” Gill said.
The CDC reported Sunday that about 140 million people, or 53.6% of adults, have received at least one dose of a Covid-19 vaccine. The pace is slowing, however, with about 2.75 million doses per day on average, down 19% from the peak of 3.38 million on April 13.
AGC Studios head of film Linda McDonough said that with the exception of places where Covid is under control, like Australia where AGC is doing Universe’s Most Wanted, “it feels like for the next six months things won’t change until data emerges from a post-vaccine world.”
AGC production budgets range anywhere from $5 million-$75 million. “For the lower end of that scale, we can write a check. For movies north of $15 million, we normally will require additional bank financing,” she said. She noted that AGC made Locked Down, Demonic and Queenpins during Covid but sees bigger projects remain on hold until 2022 when insurance is available and affordable.
Producers in other countries can access limited Covid-19 coverage from government programs, but in the U.S. they can’t, even though sets have a great safety record and there are reams of showbiz industry data on the virus’ impact that make risk analysis much easier.
At this point, no one really thinks Covid-19 will cause abandonment. said Nick Spicer, CEO of XYZ Films. Now it’s about delays, shutdowns and budget overages. Producers “are still trying to figure out how to get banks back,” he said.
Banks won’t lend for principal photography without a completion bond. A bond company can’t guarantee delivery without Covid-19 insurance. It’s a situation that has battered the indie film world since the virus was declared a pandemic in March 2020, with at least 400 productions falling away. Badly burned insurance companies — anticipating global losses of between $30 billion-$100 billion — aren’t eager to jump back in. Without them, Hollywood economics generally favor smaller-budget films financed through private equity or projects backed by deep-pocketed studios and streamers.
Is Help On The Way?
The American Coalition for Independent Content Production is trying to bridge the gap. The industry group has been pushing Capitol Hill for a $4.5 billion government fund for productions that launch before June 2022 that would cover Covid-related losses incurred through June 2023.
Called the Independent Film & Television Jumpstart Fund, it would pay out the lesser of 40% or $40 million of the ingoing direct cost budget for interruption and 85% or $85 million for abandonment. It asks a 1% of budget fee to participate and a deductible of $250,000, or 5% of any loss payout.
“This is a federal guarantee, not a handout,” said Alissa Miller of law firm Akin Gump, which is working with ACICP on the Hill. In other words, it’s a pot of money set aside for what seems like an increasingly less risky proposition. “Hopefully there won’t be much of a loss, ever,” she said.
ACICP was formed by independent production companies and completion bond firms and has joined other calls for relief. A joint letter to Senate majority and minority leaders earlier this year with MPA, IFTA, SAG-AFTRA, DGA, IATSE and others said “the need for federal assistance is urgent and intensifies by the day.”
In a video Roland Emmerich made after wrapping Moonfall, the biggest budget indie film in recent years, the director noted “the severe threat to the entertainment industry.” He urged lawmakers to “preserve one of this country’s strongest export sectors” by backing the Pandemic Risk Insurance Act. The sweeping legislation covering all industries, not just entertainment, was first introduced almost a year ago in the last Congress by New York Rep. Carolyn Maloney and would still need to be reintroduced in the current one.
PRIA is a complex undertaking that requires cooperation from a reluctant insurance industry and more bipartisan support than it appeared to have. The consensus is that it might be in time to help with future pandemics but not this one.
The Jumpstart Fund isn’t exactly sailing through a hectic and divided Congress either, but it is making progress, and the hope is it might be included in President Joe Biden’s infrastructure program. Biden also calls that the American Jobs Plan and, as ACICP points out, the film, television and streaming industries provide 2.5 million jobs across 50 states.
“The government is not giving us the attention, to flip the switch, to make production more active in the United States. If they did that, everybody would like to shoot here,” said Brian O’Shea, CEO of The Exchange.
To make films without Covid insurance, many independent producers turned to private equity financing, which is more expensive than banks. That generally is limited to shoots of 35 days or less and requires a contingency fee set aside to cover a one-week shutdown.
BondIt Media Capital, for instance, a provider of debt financing, payroll, post-production and other services, has become one of the industry’s go-to funders and according to CEO Matthew Helderman has financed and completed production on at least 30 feature and TV projects in the $8 million-$10 million range since last summer.
Other models include Millennium Media, which owns the Nu Boyana Film Studios in Sofia, Bulgaria, where it can tightly control costs and protocols. It has shot at least nine films there during the pandemic for itself and producers from Legendary to Lionsgate.
And Black Bear Pictures has its own financing arm so can also forge ahead. “Once we are comfortable with a project, we have the financing capacity internally. We don’t have to explain the risk or raise third-party capital,” said head of production and finance Michael Heimler. Memory, starring Liam Neeson, is currently shooting in Bulgaria and Black Bear is gearing up to start production on The Marsh King’s Daughter starring Daisy Ridley in Canada in June.
“What we are looking at right now is this incredible patchwork. Everybody is cobbling together a solution of one sort or another,” said Jean Prewitt, CEO of the Independent Film & Television Alliance, who lobbies for the industry. “The positive thing is that everybody’s working hard to find industry solutions. But as an industry, we have not stabilized yet. Nor is anyone aware of what stability is going to look like.”
Across The Pond & Over The Border
Meanwhile, the UK’s £500 million ($700 million) Film and TV Production Restart Scheme has jump-started at least 230 productions and supported 25,000 jobs and was recently extended for a third time through the end of the year. Producers pay a fee of 1% of production cost and there’s a total cap on claims per production of £5 million.
“The only thing stopping us getting back to work was insurance,” said John McVay, CEO of producer trade group PACT, an architect of the plan.
He believes claims have been minimal so far, which would make it a good deal for UK taxpayers. He said he didn’t know the number and the UK Department of Digital Culture, Media and Sport declined to quantify claims.
Without insurance, “Everyone is scared and focused on reducing exposure. I think that’s a bad outcome,” McVay said. “We wanted to do things with a hundred extras riding over a hill.”
PACT’s efforts in designing the scheme won it a Special Award at the 2021 Royal Television Society ceremony last month.
Separately, in a unique private partnership, U.K.-based Great Point Media has teamed up with insurer Oxford Risk Management to provide Covid-19 coverage, and with Reel Media to supply underlying production insurance, to film and TV projects they invest in.
It has the capacity to insure $400 million worth of production over the next 12 months – enough potentially for all of the 20-plus projects in Great Point’s pipeline. GPM CEO Jim Reeve said the coverage is available to productions “irrespective of nationality or geography.”
Peter Marshall, managing director at Dewitt Stern, who put the package together, said it’s provided quotes to three projects in the past week and expects to put them under coverage within the next two.
In Canada, a $50 million Covid-19 fund set aside last fall was recently raised to $100 million. It had more than 160 applications and as of late March only four claims “for very, very modest amounts,” said Reynolds Mastin, CEO of the Canadian Media Producers Association. It offers productions maximum compensation of $1.5 million (Canadian) for temporary interruption and $3 million for abandonment of the project.
Steven Guilbeault, Minister of Canadian Heritage, in announcing the latest extension noted that the rate of Covid-19 transmission on film and TV sets was about “one one-hundredth” of spread in the wider community.
Australia’s Temporary Interruption Fund has helped 20 productions complete principal photography. “No claims have been made to the fund – as of today’s date (April 21) no money has been paid out,” said Amy Burgess, a spokeswoman for Screen Australia.
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