Soda Pictures - Art House Distribution in the UK

Soda Pictures has been a distributer of art house, independent and world cinema for the past 13 years. Founded in 2002 by Eve Gabereau and Ed Fletcher the company has been steadily growing, putting itself firmly on the map of the UK’s indie scene.

I had the pleasure of chatting to International Sales Executive Kevin Chan yesterday, who took the time to explain what Soda is all about. First of all I was of course curious to hear how the company chooses which films to add to their catalogue. Soda has an international network of contacts with sales agents, the primary way through which they get their films. They also go to markets at festivals and sometimes buy films directly from the producer, although this is less common as Kevin tells me.

One film they picked up straight form British producer Michael Elliot is the winner of the 2014 BIFA award for Best Achievement in Production, The Goob (2014, dir. Guy Myhill), set to be released later this month.

While their impressive catalogue of nearly 300 titles includes many films from across the world, Soda has a keen interest in supporting local UK talent and helping first-time directors such as Myhill make their first feature film. “Both our managing directors Eve and Ed are really passionate about independent film and will go a long way to support it here in the UK”, Kevin tells me. For The Goob Soda paired up with iFeatures, Creative England’s low budget feature programme supported by the BFI, BBC and Skillset.

Soda Pictures are currently also on board as UK distributer for Craig Robert’s directorial debut Just Jim, currently in pre production. While it has so far been unusual for Soda to get involved with films in pre-production, paying pre-sales fees to producers, this is something that the company is hoping to be more involved in over the next few years. “We as a company are keen to help and shape projects we believe in and are passionate about,” Kevin assures me. This is further underlined by the newly founded sister company Soda Film + Art, which, in cooperation with Soda Pictures, will act as a creative agency overseeing all phases of production with a focus on art-films.

In terms of financing, Soda Pictures pays for all films it buys out of its own cash reserve. When it comes to the cost of releasing the film, i.e. marketing the film to its potential audience, Soda has applied for public funding on a number of occasions. In the case of the BFI (fig. I) they have received a total of approximately £600k in funding mainly for breakout and P&A support. They also regularly cooperate with partners such as the National Gallery and the Telegraph.

- fig. I. Source: BFI. BFI funding for Soda Pictures between 2011 and 2015 - 

Talking to Kevin was rather inspiring. I got the feeling that he and his colleagues really care about the films they are marketing and that they don't shy away from challenging their audiences every now and then. Writing this blog, I have been thinking about how to find audiences for films more and more recently and its good to know that there are people out there that specialise in bringing interesting, fresh, diverse and challenging films to audiences across the UK.

Joana Smith from DNA Films Explains How Her Company Funds Films

Two films that are making headlines at the moment are Ex Machina (2015, dir. Alex Garland), which had its UK release this January, and Far From the Madding Crowd (2014, dir. Thomas Vinterberg) released this month.

Both films were produced by DNA Films, one of the UK’s biggest and most prolific independent production companies. In mid February I had the pleasure to talk to Joanne Smith who runs DNA’s business affairs.

As always my first question was “how do you finance your productions?” Jo’s answer was that “we operate slightly different from a wholly independent producer. What we like to do, is be close to the distributer, because you can engage with them from the get go (…) and also then you can access a better distribution model.”

In order to understand what exactly she means by this, we need to look at DNA’s history. In 1999 DNA was one of three successful applicants to a one-off lottery funded scheme that brought them £29m with the condition, that the money could only be spent on production costs. By bringing in co-producers and utilising the tax credit system this initial fund stretched to an impressive £115m worth of money that DNA was able to spend on production.

In 2003 DNA embarked on an official and exclusive partnership with Fox Searchlight Pictures, while the Britt Peter Rice was President of Production. DNA came on board as an independent producer, kicking off the successful relationship with the horror genre hit 28 Days Later (2002, dir. Danny Boyle). They went on to make a total of 9 films with the US studio, sharing the production costs (max. $15m in total, as per Searchlight’s house rules) 50/50 and benefiting from the studio’s vast distribution network. This partnership in essence made DNA a semi-independent producer, but had major benefits for the company. As Jo puts it: “If you can access that (distribution power), it can become very lucrative. Whereas with the independent model, where you are selling territories for a price, it becomes more sporadic in its distribution, it’s less connected.” On the other hand, by working with indies, the studio cuts the financial risk for itself in half. Should the film flop, they only lose half of the total cost of production while the other 50% percent are covered by the co-production partner, DNA.

But the partnership with Fox Searchlight Pictures wasn’t just beneficial for DNA in financial terms. DNA also learnt a great deal form the Americans. “We can't be arrogant here and not try to understand how they (the Americans) work, how they understand the business. It far exceeds our understanding. So having a partner that says ‘you raise the bar, you raise the bar and you raise the bar again’ – that rigor was always really important to us, both in our deal-making and our deal-making with talent.”

The exclusive partnership with Fox Searchlight ended in 2008, but DNA has maintained a close and healthy relationship. So now they are free to pursue projects either with different major distributers, such as Ex Machina, distributed by Universal, or continue their partnership with Searchlight, as is the case with Far from the Madding Crowd.

6 Essential Film Financing Terms

Recoupment

Recoupment is what every producer hopes for after making a film. It’s when the various parties involved in funding a film start earning money back through royalties, revenue from distribution deals etc. Typically, and especially so in the indie world, the producer will be the last in line when it comes to recoupment, after all other recoupment agreements have been satisfied. 

Finance and Investment- what’s the Difference?
It is often assumed that finance and investment are essentially the same. This is, however, not true. Financiers, typically banks, will give the producers a loan in return for legally binding securities against the production’s assets. This is usually enshrined in the SPV set up for a film. Generally financiers will be first in line when it comes to recoupment. Once the financier has been paid the agreed sum and interest, he loses all ties with the production.
An investor, on the other hand, operates on a different basis. He or she will usually only recoup once the financier has been repaid. The investment, also referred to as equity money, allows the investor to recoup before the producer of the film starts to receive any net profits. Once the break even point has been reached and the producer starts to make a profit, the investor will sit alongside with the producer becoming a co-owner of the film and benefitting from any revenue it might generate in perpetuity.


Gap Finance

If a film has a financing structure in place but is missing a certain amount of funds to start production, gap finance, usually provided by a bank or professional film funder against the security of unsold international distribution rights, is often a solution. This could for example be spent on services that can be reclaimed against a tax credit system. In term of recoupment a gap loan will be repaid before equity money (see investment) and the producer’s profit. Gap finance can be arranged typically for 5-35% of a production’s budget. If it extends to somewhere above 10-15%, it is usually referred to as a super-gap loan.


Public-Private Funding
The pubic-private funding model, as used for example by Screen Yorkshire, is intended not to warp commercial mechanisms in the free market. Money coming from a public-private investor can only be put towards a project if it is invested to the exact same terms to which a private investor has already agreed to fund the film. The amount of public-private money cannot be higher than that of the private funds.


Special Purpose Vehicle
A Special Purpose Vehicle, or SPV, is a company set up as a one off venture through which to run the production of one particular film. It means that all the parties involved in funding and financing the film are dealing with a “clean slate” partner that doesn’t have a bad credit history, pre-existing debts or obligations to other parties, not involved in the production.


Completion Bond
A completion bond is a type of legal insurance, which forces the producer to finish a film based on an agreed script, budget and often cast and deliver it to the distributer. Thus the producer triggers the release of the minimum distribution guarantees that he receives from the distributer. These funds are then used to repay loans and investments in the project. Should a producer fail to complete a project, the company that provides the completion bond theoretically has the right to take over the production, including the right to replace any cast and crew they see fit. This will only ever happen in extreme circumstances, as the bond company knows that this will have potentially disastrous effects on the creative value of the film.

R.I.P. IdeasTap

Today young creatives across the UK received some sad news. This morning founder and director of IdeasTap Peter De Haan announced that the free online hub for fledging artists will be shutting its doors for good on 2^nd June 2015. In a letter he sent out to the platform’s members this morning he said:

“Despite our success, to-date IdeasTap has been primarily funded by my charitable trust. Our efforts to secure government or corporate support have failed – and my charitable trust, which was set up in 1999 to improve the quality of life for people and communities in the UK, will soon run out of money. The result, regrettably, is that IdeasTap will close three months from now.”

Since its launch in December 2008 the platform has had a great impact on young people hoping to carve out a career in the cultural industry and has gathered a considerable following “with just shy of 200,000 members across the UK today and millions of people visiting our website every year. We’ve given away more than £2.3m in funding and mentoring to our members and 62,000 people have benefited from opportunities we’ve created”, so De Haan.

Proof that IdeasTap has become an important tool for many came just half an hour after De Haan sent out his letter in the form of an online petition being launched on the campaigning website change.org.

It's understandable why many are worried to see IdeasTap closing down. It is another step along the road of cutting corners in cultural education and arts funding, not only for filmmakers but performers, painters, poets, composers – the list goes on and on. De Haan expresses his concern about this trend when he writes:

“After six years, the picture for the arts is still gloomy. Further funding cuts are coming. The cost of higher education is now dauntingly high. The recent Warwick Report suggests that the arts are not catered for by government agencies, and that arts education is steadily being marginalised – despite the huge value the creative industries offer the UK, both culturally and financially. I hope they wake up, and soon.”

This opinion is shared by Vikki Heywood, fellow of the Royal Society of Arts and chair of the commission that put together the Warwick Report mentioned by De Haan. In the report’s foreword she voices her concern as follows:

“The key message from this report is that the government and the Cultural and Creative Industries need to take a united and coherent approach that guarantees equal access for everyone to a rich cultural education and the opportunity to live a creative life. There are barriers and inequalities in Britain today that prevent this from being a universal human right. This is bad for business and bad for society.”

So what does this mean for young filmmakers? Speaking in relative terms and on a purely financial level, the loss might not seem too big. In its seven year history IdeasTap only distributed £2.4m, which seems insignificant in comparison to the approx. £30m the BFI has to offer every year. But to only look at the money would be missing the point. IdeasTap was an organisation that specifically supported young people who might be lacking experience but with the necessary élan to bring their creative vision to the screen. Only recently a friend of mine was supported with £4000 to have his script for a short film developed and then, with the help of a budding director chosen by IdeasTap, made into a film. He told me that "Ideastap has given me much more than £4000, however. It has given me the opportunity to realise a new film project, have access to industry professionals, attend additional, useful workshops and network with up-and-coming talent. I am sadden that others will now not have the same opportunity." This is the kind of support the creative industry needs if it wants to stay fresh and bring forth big names and innovation in the future. And with IdeasTap about to kick the bucket the cultural landscape as a whole will surely be the worse for wear in years to come.

If you agree, sign the petition I mentioned earlier and hope for the best. Until then there is nothing more to be said than “R.I.P. IdeasTap, you will be missed!”

Rebecca O'Brien on Independent Producing - Part II

“The producer doesn’t have a direct relationship with the market. We don’t take the takings form the cinema and use them to make another film and I think that’s a big economic flaw in all this.”

The major issue for Rebecca when it comes to the distribution of profits made by a film, is that the bulk of the income goes to the exhibitioners and the distributers, which are heavily monopolised and often integrated into the studio system. Take for example the Odeon & UCI Cinema Group owned by the Terra Firma investment group: Out of the UK’s nearly 4000 screens this one exhibitioner alone owns 2236 (Sept ’14), making it the biggest player in the UK. The rest of the market is dominated by Reel Cinemas Ltd. and Vue cinema.

This leaves independents stuck between a rock and a hard place. On the one hand they are very dependant on distributors and exhibitors – the first because they have a specific skill set and network that will get the film to the right exhibitors and will often provide a substantial part of the production budget through pre-sales financing, the latter because they control the infrastructure needed to bring the finished film to the audience. On the other hand both distributers and major exhibitors are keen to back only projects that will be commercially successful. But as Rebecca puts it “you never know how well a film is going to do. It’s really not a scientific measurement at all. Hollywood keeps on proving that no one knows anything – that’s why they keep on churning out franchises, because they daren’t risk making new stuff.”

When I asked her how this problem might be solved for future generations of independent producers, she suggested that it “would be really good, if there would be some direct relationship between the means of distribution and production.” So what Rebecca would like to see in the future is a portion of box office revenue to go into a pot that gets distributed back directly to a film’s producers proportionally to the success of the film. This would have two effects. Firstly it would give independent producers more freedom to keep trying out new interesting ideas without having to convince exhibitors and distributers that the film definitely will be a financial success, driving innovation and new talent. Secondly it would help decrease the dependency on public funding that is often, and to an extent rightly, criticised as warping the free market principle of demand and supply.

This idea isn’t really new at all, as Rebecca points out. Between 1950 and 1985 there used to be a system in place in the UK called the Eady Levy that set aside 5% of all UK box office revenue to be pooled. 50% of this money would go straight back to the exhibitors, as a kind of discount. The other 50% would be distributed directly to UK producers proportionate to how well their films had done at the box office. The money came with the condition that it had to be spent on further UK productions. To determine what counted as a “British Film” and could thus be financed using money from the Eady Levy, a set of rules was put in place not un-similar to the cultural test used by the BFI today.

To simply reinstate this old law won’t be the solution to all the problems faced in the world of indie film funding, not to mention the resistance the exhibition sector would put up against the idea. But perhaps it could be the basis for some serious though about change. While calling for more mainstream commercial successes is understandable on the one hand, we need to also have the courage to fail every so often. There is no absolute recipe for success and original filmmaking will always stay a high-risk business. But if we resort to simply recycling successful blueprints over and over again audiences will get bored and turn away eventually.

Rebecca O'Brien on Independent Producing - Part I

This week I had the chance to chat with one of the UK’s most established and well-respected independent producers. Rebecca O’Brien has been making films for over 25 years and has been at the forefront of blockbusters such as the 1997 film Bean, produced as a transatlantic coproduction between Working Title (UK), Tiger Aspect Productions (UK) and Polygram Filmed Entertainment (US). First and foremost, however, she is known as a producer for small, independent films, most of which (12) she has done together with renowned British directing icon Ken Loach. Since 2002 she has been a producer for Sixteen Films, Ken Loach’s production company.

She explained to me that much has changed since she first started putting together funding models for feature films. Back in the day, “if you were doing a sort of low budget independent film, chances were that you would be able to get your money from one source. But there weren’t that many films being made.” Now that the technical side of filmmaking has become much cheaper and easier to access, however, there are an unprecedented number of films produced every year. One of the challenges for independent filmmakers of our time is finding professional distributers to get their film to its audience, which costs money. And this brings us straight to the main points we discussed throughout the interview: the relationship between the producer, the audience and the parties in between, i.e. the distributers and exhibitioners.

Rebecca was quick to point out that the public funding available in the UK is incredibly important to the independent filmmaking sector, the key players here being the BFI, BBC and Film4. The tax break system implemented by the government also plays a vital role for many independent producers. “So any film producing structure I put together will inevitably involve one or two of those (funding bodies) and certainly the tax credit, if the film is being made in the UK. The fact that a public funder has the trust in you to make a film means that it’s obviously worth making. I think that’s important.” The reason why Rebecca thinks this is significant is the audience. Because, although Rebecca makes small, provocative, politically uncomfortable films, she always has the audience in mind and wouldn’t pursue any project that she doesn’t think she could market. Or, to put it in her own words: “It’s got to make economic sense to make a film, even if you are Ken Loach. We certainly don’t make them for arts sake. We might make them for politics sake, but not for arts sake. There is absolutely no point in making a film if you don’t believe there is an audience for it.”

When thinking about audiences, Rebecca’s horizon stretches further than her native England. One example she cites is the 2012 film The Angels’ Share (dir. Ken Loach). 2/3 of its UK box office was grossed in Scotland, due to its Scottish subject matter. In fact all of her recent films have had involvement of producers outside of the UK. And her international model, mainly based on cooperations with European companies, has paid off. If we take for example the box office figures (fig. I) of her most recent film Jimmy’s Hall (2014, dir. Ken Loach), it becomes clear that most of its revenue comes from abroad with France in the lead (£1m), Italy second (£764k) and the UK only in third place (£555k).

-fig. I: box office revenue for Jimmy's Hall in Europe, Sourec: boxofficemojo -

As already pointed out, Rebecca is a strong supporter of public funding for films. Having said this, however, she does have some interesting points to make about how the system could be adjusted to be fairer towards independent producers by regulating the connection between producers on the one hand and distributers and exhibitors on the other. So, if you’re interested in finding out what Rebecca’s suggestions are for a fairer funding landscape in the UK, stay tuned and be sure to read part two of this post.

New Gateway through "Big Wall of China" Opens for UK Producers

This week a new bilateral co-production deal was sealed between the UK and China, brokered by the BFI and the Film Bureau (China) as well as the China Film Co-production Corporation, that brought us such epics as Crouching Tiger, Hidden Dragon (2000, dir. Ang Lee) and Hero (2002, dir. Yimou Zhang). Its another step towards the goal of internationalising the UK film business, strengthening ties with emerging film markets and attracting more inward investment into the British film industry and can be seen as hard evidence for the change that politicians have been calling for over the past three years and which has been outlined in the BFI’s Wide Angle strategy.

British Culture Secretary Sajid Javid has welcomed the agreement, saying “It will pave the way for UK producers and their Chinese counterparts to share their creative expertise and make incredible films that will be enjoyed around the world.”

China now falls in line with Australia, Canada, France, India, Israel, Jamaica, Morocco, New Zealand, the Occupied Palestinian Territories and South Africa, all of which already have similar co-production treaties with the UK.

But what does this mean for producers from either the UK or China? Firstly they will be able to access public funding from the other country should they qualify. In the case of Chinese productions coming to the UK, this would mean passing the cultural test in order to access BFI Film Fund money for example. Another incentive now available to Chinese producers that pair up with a British co-producer is the possibility of benefitting from the British tax relief scheme, should their UK spendings make them eligible. In return, UK productions going to China will be eligible to profit from Chinese funding opportunities and, importantly, will be able to circumvent the limitations in place that allow no more than 34 foreign films to be shown in China each year. Seeing that China is the fastest growing film market in the world, this certainly is good news for some British producers looking to expand their audience.

There has been strong support for the new treaty coming from the President of the China Film Co-Production Corporation, Mial Xiaotian: “The signing of the Sino-UK Film Co-Production Treaty heralds the start of a new era in collaborative film production between the UK and China. I have reason to believe that it will open the way for broader cooperation between our respective film industries.”

One potential shadow side of this new agreement is that it will be more likely to benefit only films that appeal to Chinese as well as UK audiences. And we only need to look at the majority of Hollywood’s output to guess how that will be achieved. The finer cultural nuances of both China and the UK would most likely be lost to the audience from the other country and would have to be (excuse the pun) Iron(Man)ed out, leaving the film with only the most basic common denominators. That means more films about fast things, smashing up other things with a generic love story jammed somewhere in between – and all of that ideally somewhere in space. Culturally more intricate and local films already have a hard time getting the funding they need. If they have to increasingly compete with international co-productions that are trying to be the next Transformers francize, that isn’t going to get any easier.