It sounds like the start of an indie film producer's worst nightmare: The U.S. stock market drops 4.3% in August. With fears of a double-dip recession and a vulnerable global marketplace looming, the fall festival circuit is just getting started.
But film executives, independent producers and financiers say they haven't noticed a significant impact on their business. In fact, some say that the current instability may actually help independent filmmakers.
Cockeyed optimism? Maybe not. Here's four reasons, plus three caveats, to be (cautiously) optimistic at the Toronto International Film Festival and beyond.
1. Bad times for normal investments make indie movies look good.
Wayfare Entertainment’s Ben Browning says an investor recently made this suggestion: Everything being so unstable works to the advantage of alternative assets like film.
“If there were tons of others places to put money that yielded 20% returns, film might not be that attractive an investment,” Browning says. “But right now it’s not the case, so that might change what risks investors are willing to undertake.”
2. Social media and technology are putting indie film in a good place.
Wall Street banker Rabinder Sira, an executive producer on Julia Loktev’s fall fest selection “The Loneliest Planet,” says he is undeterred and believes new technological developments—such as indie filmmakers being able to reach their audiences more directly with social media—will outweigh any economic unease.
“I think indie film is in an interesting space right now,” he says. “In theory, the current economic malaise should obviously make people think harder about making risky investments such as indie film. However, I truly believe we are on the cusp of a brave new world in indie film because production costs are plummeting and the talent pool is rising.”
3. Lower budgets put indie film below the line of fire...
Mike Ryan, a producer on the TIFF-bound Lauren Ambrose drama “Think of Me,” just wrapped production on his third feature this year “with multiple investors and they are all fine,” he says. However, he acknowledges that lower budgets have also lowered his investors' levels of “exposure” (the amount they’re investing).
Producer Jay Van Hoy (“The Loneliest Planet”) is closely watching Wall Street, but he has yet to feel the pinch. In fact, his company, Parts & Labor, was closing financing on a film going into production just as the stock market was crashing.
Because Van Hoy is dealing with individual investors and lower-budget films (under $1 million) being pieced together with equity partners and grants, he says, it’s all about maintaining “solid relationships with trustworthy, reliable investors that we can relate to creatively.”
“There's wealth in our economy,” he adds. “The money is there and it can be invested in independent films as long as we can project the risk.”
1. …as long as the European economy holds...
Still, Van Hoy believes that the worst may be yet to come if Europe’s economy collapses, with its closer reliance on government funding.
“If the sales and distribution companies are hurt by lack of bank financing or low demand in the exhibition marketplace, the Euro zone crisis could really create complications for independents over the next year,” he says.
Dependent on the European value and foreign bank financing of his films, Van Hoy adds, “if we can't get solid international sales estimates backed by gap or minimum guarantees in Europe, we'll have a difficult time providing assurances to our investors.”
“Right now,” he says, “I think that remains to be seen.”
2. …and your projects don't demand equity...
Matthew Street, executive director of Australia-based Omnilab Media, which is bringing the action film “Killer Elite” to Toronto, says equity investors are being more cautious about participating in film investments. “The majority of equity investors who have been historically willing to invest in film are impacted by the performance of international economies,” he says.
Dro Entertainment’s Peter J. Fruchtman, who put equity into “Black Swan” and helped finance “Machete” and “Everything Must Go,” has already noticed a slight shift away from equity financing and into more conservative investments. He spoke to a number of investors after Wall Street’s August collapse, and “the consensus,” he says, is “that in these difficult times, senior debt is the only true safe play.”
With senior debt being the least risky, and with the least amount of upside, Fruchtman hopes he and his investors will soon be able to return to straight equity and mezzanine financing.
3. …and TIFF buyers don't get scared.
Perhaps even more than the stock market, many will look to TIFF as an indication of where the business is heading. If independent films continue to find distributors in the number they did at Sundance, the “specialized” business could weather the current economic storms with little damage.
4. And even if things do go wrong, is that such a bad thing?
On the other hand, if equity financing shrinks and makes it harder to jumpstart indie film productions, there’s always the argument that it benefits the business as a whole.
“I’ve always been of the opinion that too many films get financed,” says Browning, “so it’s not really a terrible thing if there’s a retrenchment.”