Queensland is a northern state of Australia that is nicknamed the ‘Sunshine State’, due to its warm weather and tropical positioning. The region is surrounded by warm ocean waters and features the world-renowned Great Barrier Reef.

The new James Cameron film, Sanctum, joins the growing list of international productions being filmed in Queensland. For the filming of Sanctum, the water tank facility at Warner Roadshow Studios on the Gold Coast will be utilised. This is the largest of its kind in the Southern Hemisphere.

At the moment, there are over $52 million of Queensland Government supported film and television being shot in Queensland. Last year, production expenditures were approximately $160 million. This is a very good figure, considering that the world was in the throes of the Global Financial Crisis in 2009.

The British reality TV series ‘I’m a Celebrity, Get Me Out of Here’ was recently shot at locations around the Gold Coast and Stradbroke Island. Meanwhile, the major international production ‘The Chronicles of Narnia: Voyage of the Dawn Treader’ wrapped production at the end of last year.

Part of the Baz Luhrmann epic ‘Australia’ was shot in Queensland. Apart from the generous government incentives on offer, one of the main reasons for filming occurring in Queensland is the natural beauty of the Whitsundays (location of the Great Barrier Reef). Much of this region is characterised by turquoise water, palm trees and pristine white beaches.

For more information on shooting a film or TV production in Australia or the Asia-Pacific in general, please email me at ggoodsell@navitaslegal.com or call +61 (0) 488 139 921.

There is no doubt that the quality of a filmmaker’s script is a paramount consideration in order for an indie division to consider the script, as well as validation from a trusted professional, such as an attorney or another reputable talent agent.

It is also important for a film to already have at least one key attachment already committed to the film, such as a reputable director or actor. Filmmakers also have to have produced a short for their project.

How do indie filmmakers attract A-list talent to their film? A pay-or-play offer is definitely required. This is where private funding or a foreign sales agent is used to back financial offers to stars.

Lets start by saying that if you’re thought is to finance the film yourself, this is a darn near impossible task. There are not enough payday loans in the world to finance the distribution of a film, especially an indie film, never mind paying the actors, camera personnel, etc.

How much do agencies receive for packaging? They will usually charge a percentage on commissionable elements (writers, directors etc who are clients) – this is around the 10% mark, as well as charging a packaging fee if the film was financed with the assistance of the agency. Packaging fees are often in the vicinity of two percent of the budget of the project, with a floor.

Agencies will often distribute films domestically, as well as placing the films with foreign sales agents. The sales fee charge is a percentage of the sales price and is usually about 10 percent.

Naturally, indie divisions are also concerned with ancillaries flowing from the films, such as sequels, TV applications, stage adaptations, and game and mobile content.

A similar “packaging” system operates with TV.

Packaging fees can be much more lucrative for an agency than straight commissions from clients because fees include participation in the back-end. An agency will usually receive a percentage of the license fee of the show payable when an episode is produced, a percentage of the budget of the show, which is recoupable when the show is in a net profit position and a double figure percentage of the back-end, when the show is syndicated.

The great thing about this model is that studios pay the packaging fees – which are built into the cost of the show. Studios are often happy to pay these fees because agencies often put multiple elements together and act as a development executive.

Gene is a talent agent and lawyer. He has a law degree with honours, and a business degree. He is a member of the Beverly Hills Bar Association.

Two months ago, I wrote an article entitled “The Rise of Asian Cinema”. I’m revisiting this area again for a number of reasons. Most notably, one of my clients may be shooting a film in China, and also, it is becoming more and more apparent that entertainment generated revenue levels are stagnating in the US and new frontiers must be explored (especially China and India).

The China Film Co-Production Corporation is a production company and distributor. It is a subsidiary of the omnipotent China Film Group Corporation, which is the largest and most influential state-run film enterprise in China. It was founded in 1979 and has established trade relations with more than 50 countries including the US, Britain, Japan and Germany.

There is a good reason why my client wishes to shoot his movie in China and why it is vital for US producers to begin exploring possibilities in China, if they haven’t already. The cost of shooting a film/TV show etc in China is significantly lower than in the US, which obviously equates to increased affordability and increased profit. In addition to this, the quality and professionalism of entertainment-related services is very high. The China Film Co-production Corporation website states:

“China’s massive geographical coverage such as river basins, valleys, mountain ranges, deserts, grasslands and forests, provide vast choices for filming locations … In addition, abundant labor resources and other materials are available at a low cost for the construction of filming sites, manufacture of props and costumes, and filming of majestic scenes”.

The Chinese Film Group received a major boost in 2008 when XFMedia, a leading Chinese media group, announced a strategic alliance with China Film Group. XFMedia has partnered with David U Lee, an expert in US-China co-productions, to establish new subsidiary Xinhua Media Entertainment as a full service film production and investment company based in Beijing, with a satellite office in LA.

Furthermore, according to statistics from the State Administration of Radio, Film and Television, between 2003 and 2008, the movie box office in China grew at a compound annual rate of approximately 38%. Compared to a mature and saturated market such as the US where annual box office revenues have fluctuated between US$9.2 and US$9.6 billion over the same five year period, Chinese box office revenue is projected to continue its rapid growth. This is because countries such as China are only beginning to develop a middle-class which has disposable income available to spend on entertainment. Furthermore, Nielsen have predicted that China will become the largest market for cinema after the US and Japan.

There are still institutions out there willing to invest in projects with the right ingredients, however, the number of high-net worth (HNW) individuals in the marketplace looking to invest has significantly diminished. HNW investors who used to dabble in the film business for the ‘novelty’ are now counting their pennies and are often reluctant to invest.  That said, there are some new investors to the film business who fall outside of the typical private equity models.

Where money was allotted to films prior to the onset of the GFC, the downturn has had a limited impact. This is because these films were capitalised well before the crash.

There are a number of key players and financing techniques used in the film industry.

The producer – puts the project together. The producer assembles the team and arranges finance.

The director – orchestrates the film’s creativity.

Film sales agent – sells the film to international distributors.

Film financing is an aspect of film production that occurs before pre-production and is concerned with determining the potential value of a proposed film.

The first port of call for financing should be the Government. Governments will often give grants or other incentives to film producers for conducting film or TV production in their country. This is known as ‘soft money’ because although there will be obligations attached to the financing, it is unlikely that the full amount will have to be repaid.

For example, the Australian Screen Production Incentive is the Australian Government’s primary mechanism of supporting film and television production. It provides tax incentives for film, TV and other screen production in Australia and is available in three streams: the Producer Offset, to encourage the production of Australian film and TV projects; the Location Offset, a 15 percent rebate which supports the production of large-budget film and TV projects shot in Australia; and the PDV Offset, a 15 percent rebate which supports work on post, digital and visual effects production in Australia.

Pre-selling involves selling a film to distributors globally (each area is known as a ‘territory’), prior to the film being completed. Although they are committed to buy, distributors won’t usually part with their money until the film is finished. This means that the producer will probably have to borrow money from a bank in the meantime, using the sales contracts as collateral. This is known as discounting the pre-sales.

In situations where the producers and director are passionate about their project, they may defer the payment of part of their fees. That is, instead of receiving their fees from funds raised to finance the film, they may agree for these fees to be paid out of future income.

A producer may also receive equity funding. In return for providing equity cash, the investor will require a share of any profit the film makes. The rule of thumb is that for every percentage point of the budget provided in equity, the producer should sacrifice between 0.5 percent and 0.75 percent of their profit. For example, if an investor contributes 40 percent of the film’s budget, the producer may be expected to give the investor 25 percent of the film’s profit.

Banks may fund a film, however, as film financing is high-risk, they will often require considerable collateral in return for funding. If a bank can be convinced that a film will make a considerable amount of money, it may provide finance. A bank will also usually insist that their loan is repaid with interest, an additional fee is paid, the bank is a first-ranking secured creditor, and has the right to discount the pre-sales. In film financing, this type of funding is known as ‘bank gap’ financing and depends on the bank’s faith in the sales agent to sell the territories at sufficiently high prices.

The order in which financiers are paid is substantially a legal/financial issue, is usually decided prior to any finance being committed, and is known as the ‘recoupment waterfall’.

Independent legal advice should always be obtained prior to accepting finance from any source. Financing is a complex area, fraught with risk. This is why it pays to engage an agent/manager who has a law degree and is preferably accredited by a law society/bar association.

Producers should also always exercise scepticism when dealing with financiers, especially those that are not well-known.  Ask companies for references and do some research before speaking to them.  Also, get your agent/manager to do their due diligence on them.