Smash Music & Film Financing

Film Financing - Theatrical/DVD Distribution - Music - Production

Debt Financing

Debt Finance

Pre-sales is, based on the script and cast, selling the right to distribute a film in different territories before the film is produced. This is the often the primary means of film financing. Once the deal is made, the distributor will insist the producers deliver on certain elements of content and cast; if a material alteration is made, financing may collapse. In order to gain the "marquee names" essential for drawing in an international audience, distributors will often make suggestions. Pre-sale contracts with big name actors or directors will often (at the insistence of the buyer) have an "essential element" clause that allows the buyer to get out of the contract if the star or director falls out of the picture and a marquee equivalent can't be procured.

The reliance on pre-sales explains the film industry's dependence on bankable movie stars, directors and/or certain film genres (such as thrillers or horror). It is because of this importance in pre-selling a movie that actors and directors can ask for high fees, perks and a percentage of the back end profits.

Typically, upon signing a pre-sale contract, the buyer will pay a 20% deposit to the film's collection account (or bank), with the balance (80%) due upon the film's delivery to the foreign sales agent (along with all the necessary deliverable requirements.)

Usually a producer pre-sells foreign territories (in whole or part) and/or North American windows/rights (i.e. theatrical, home video/DVD, pay TV, free TV, etc.) so that the producer can use the value of those contracts as collateral for the production loan that a bank (senior lender) is providing to finance the production.

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