Industry Report: Produce - Co-Produce...
MIA asks: What are the realities and hopes for equity investment?
A panel discussed how equity investors can help finance high-budget productions, and cover development or gap expenses
The recent MIA panel entitled “Equity Investment: Dreams, Reality and Hopes. Where Is the Money the Sector Needs Today?” was moderated by Alexandra Lebret, managing director of the European Producers Club, who mentioned that the most important subject to tackle was how equity investors can meet the sector’s needs by providing real cash to finance high-budget productions, and cover development or gap expenses.
Italian producer Marco Chimenz (Cattleya) mentioned that some financing facilities do exist, but in the form of discounting costs, which is not the same as additional cash for the production, especially when bankroll cash is not easily accessible – not even for successful producers. Some financing groups choose to back productions based on sales estimates, which places their money at risk. The third option, which in many ways is a chimera, is for the financing body to come on board and decide to top up the financing that has been set up over the course of a production. This is much harder, as the producers need to take a step back. For example, in the case of ZeroZeroZero [+see also:
series profile], the team had to combine multiple commissioning bodies to generate enough trust in the production, plus a sales agent was required to secure the distribution outside of the confirmed territories in order to allow them to proceed. He also mentioned that DG Connect could be extremely helpful in financing large productions by filling the gaps and justifying the intervention of so many players.
Lebret added that the big question is whether the producers or the sales agents will take precedence when it comes to recouping an investment from equity sources, and who will receive the benefits of this financing. She also mentioned that the European Commission has announced the creation of an equity-investment tool with a budget of €400 million to support the market.
On this topic, the structure finance manager at the European Investment Fund (EIF) explained that the body works much like an intermediate financier, meaning that producers can’t access it per se, but the EIF will provide guarantees to financial intermediaries such as banks or equity to private-equity funds. The European Commission’s Media Invest initiative is not a fund as such; it’s a sum of money that can be combined with other financial resources and target a specific market, seeking out fund managers that are interested in taking that amount and creating new investment funds which will then provide equity to the audiovisual production and distribution world. In this way, the EIF can become a co-investor in private funds, typically equivalent to one-third of a fund. In the media domain, this could reach 50%, but the details will be firmed up by the end of the year. There will be an official call for expressions of interest and applications by next year, and some private-equity funds will be selected based on the EIF guidelines.
Nicolas Parpex, director of the Creative Industries Hub at French public investment bank BPI, mentioned that they offer the audiovisual sector loan guarantees, loans and financing of about €200 million per year, on top of consultancy and coaching. As an equity financier, it takes minority shares in French companies that grow quite significantly, without doing slate or project financing, and which need support with bargaining power when negotiating with streamers.
Antoine Bodet, executive director of Alliance Entreprendre, explained that it invests in company shares, which it later sells after an average of five years. As a partner for production companies, it intends to help the producers maintain their majority stakes, and develop and create new IPs, without being absorbed by groups. It also helps to leverage more money when needed, and Bodet believes that the EIF will be helpful when it comes to these investments. The most important aspect is for producers to have enough freedom in terms of time and cash to develop IPs and to present them to the streamers at the right time in order to keep most of their rights.
Finally, Elisa Alvares, founder of Jacaranda Consultants, which specialises in slate investments, said that what the EIF is trying to achieve is monumental for the European audiovisual industry, especially for the fast-growing new players, but the real trick will be to find suitable operators, either banks or regulating funds, that can receive the capital for the EIF, can find the matching funds, and then operate at the grass-roots level, with small or medium-sized production companies.
Regarding slate deals, a financier commits to providing capital in different shapes or forms, such as equity or mezzanine finance, over a certain period of time, usually two to four years, with the same partner – typically a distributor, a small studio or a producer. The partners then know that there is a given amount of money that they can spread over a range of various activities.
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