Industry experts bemoaned the global decline in completion bond companies at a financing seminar during Pusan’s Asian Film Market, observing that only one or two companies remain to bond independent films.
US entertainment lawyer Howard Frumes urged local producers to adopt more sophisticated methods of film financing beyond the Asian system of equity and angel investors – such as pre-sales and gap financing – both of which require a completion bond to be in place. But at the same time, he acknowledged that many bond companies have left the business.
“It’s easy to blame the entertainment industry when the economy goes bad,” said Frumes who has worked on several Asian productions including Hero and Red Cliff. “It’s not essential to most insurance companies, so when business goes bad they decide to cut the entertainment division.
“So we’re now in position where we only have two companies – IFG, which mostly does big, studio-related pictures, and Film Finances, which does everything else. So it’s a problem if Film Finances doesn’t want to bond your film.”
Frumes added that there are some smaller bond companies in Canada and Australia, but none in Asia despite the fact that budgets are increasing across the region. Local productions that used a bond such as Hero and Red Cliff worked with insurers based in the US and Australia.
He added that some big strides have been made in the region – such as Standard Chartered Bank opening an Asian entertainment division in 2006 to lend to local productions. But a complete financing system is still not in place.
Frumes suggested that Western companies, Asian governments and Asian insurers should address the issue as “this is something that is needed for the future”.
His message raised questions from the audience as Asia’s more casual, equity-based methods of film financingseem to be weathering the global financial crisis better than the West’s debt-based systems. However, Distribution Workshop chief Nansun Shi argued that Asia really needs both systems:
“Any healthy, developed industry should have this in place. It’s a more sophisticated way of raising money than calling on a rich uncle or aunt. Of course, it’s also good to have the flexibility of doing deals with a handshake. But we should have both options – there’s no reason why they can’t co-exist.”
Japanese producer Satoru Iseki, whose recent production Rainfall was the first Japanese film to use gap finance and a completion bond, agreed that the Asian system works for smaller, local films: “But if we want to make films that travel, then we need things like bonds and insurance, and to secure the chain-of-title on our films.”
Shi agreed that legal issues are often overlooked in Asia: “One of the problems we have in Asia is that there is still little recognition of intellectual property rights. People might think about the film itself, but forget about the many other types of rights, like the sequel or the remake rights.”
Frumes added that it’s inevitable that emerging markets will eventually tighten up their copyright regimes. “Markets like China, Russia and India are becoming part of the system – there’s too much money being made locally to allow that to be wiped out by piracy.”
The seminar was part of a financing and co-production conference organised by the Producers Guild of Korea (PGK) and held during the Asian Film Market (Oct 11-14).