Japanese Indies Feel the Squeeze

Caught Between Blockbusters and Ultra-low Budget Fare, Mid-budget Filmmakers Get Creative with Financing

Financing films is rarely a straightforward business unless you've just come off an Academy Award win or a major box office success. Low- to mid-budget projects have always been the most challenging to finance - and that is truer than ever in the current climate in Japan. 

While the student film/shoestring-budget productions will struggle on with almost no resources as they have always done, and with TV station-backed blockbusters taking a larger share of ticket sales than ever, it is the independent films between those two categories that have really been feeling the squeeze. With a large number of these types of films still chasing a shrinking slice of box office pie, it's little wonder that investors can be reluctant to take a gamble on what is never a sure thing, even at the best of times. 

There is no shortage of money being raked in at the box office in Japan, the world's second-biggest film market by revenue. In 2009, its total take was 206 billion yen ($2.5 billion) -- with 117 billion yen of that going to domestic productions. (The total for this year is on course to be even higher, though big scores by 3D Hollywood blockbusters have been eating into domestic movie earnings.) In the domestic sector, the 34 top-grossing films, which took more than 1 billion yen each, cornered more than 70% of the annual box office, leaving the other 414 homegrown productions to scrap over the remainder. Of the 34 films that broke the billion-yen barrier, only four were not distributed by the big three: Toho, Toei or Shochiku. The gaps between the haves and the have-nots have never been wider.

Despite the difficulties, hundreds more films are made annually in Japan than actually make it into theaters. The vast majority of projects with any kind of scale are put together by production committees. These are usually led by TV stations, and can also include advertising agencies, publishing houses, talent agencies or other companies that are likely to benefit both directly and indirectly from the movie's success.

For lower-budget projects, smaller-scale production committees are sometimes put together, though the member companies may lack the kind of major commercial clout that makes the larger versions so effective. One of the films from last year's TIFF Tokyo Project Gathering, Wandering Home, was made by such a committee, consisting of producer Yamagami's own company, Siglo; VAP, a music and video distributor; and theatrical distributor Bitters End. The film, directed by Yoichi Higashi, is being screened at this year's TIFF and is scheduled for a December release in Japan. 

"Some projects are able to get investments from music companies or talent agencies who want their artist's music used in the film," explained TPG's director, Toshiyuki Hasegawa, "or of course MGs [minimum guarantees] from sales companies."

Film funds, for their part, have never had much success in Japan, and have now effectively disappeared from the industry. Public funding meanwhile has always been minimal, and with the current focus on reducing Japan's enormous national debt – equivalent to about 200% of its annual GDP – this is unlikely to increase, and could face further cuts. 

Filmmakers without studio backing are having to be more creative than ever in their fundraising methods, and in a more challenging environment than ever. 

Whereas the legal and tax structures of production committees have always been more like "gentlemen's agreements" than complicated financial entities, the same framework was more difficult to apply to smaller projects where investors were not actively involved in the planning, production and promotion of the film. 

The situation for investment vehicles involving private individuals has now been further complicated by stricter financial regulations following a series of corporate scandals and investor scams. In order to solicit money, a "qualified institutional investor" must be one of the partners – and it's a big ask to get financial professionals to effectively put their names and reputations at stake for something as potentially risky as a film project.

An example of the creativity now needed for independent filmmakers is Atsushi Ogata, writer-director of Wakiyaku Monogatari (Cast Me If You Can), who managed to tap individual investors, many of them working in Tokyo's financial world, to realize his project.

"In the autumn of 2008, prospects for fundraising looked rather grim," Ogata says. "With the economic collapse, it became almost impossible to solicit financial sponsorship of any kind from anywhere. However, I was determined not to let this project fall through the cracks, even if it required me to play the role of a producer in addition to writing and directing the film."

Helped by the expatriate connections of associate producer Engin Yenidunya, a Tokyo-based banker, as well as the Japanese corporate connections of their "qualified institutional investor," the project was able to get the funding needed to get underway. Producer Eriko Miyagawa also managed to get a grant from the Ministry of Culture, while Eric Nyari, a producer and associate of Yenidunya, provided post-production services and also raised funds.

The investment vehicle set up to fund the film was in the form of a TK (tokumei kumiai) - a kind of silent partnership. Investments in Wakiyaku Monogatari were sold in units of one million yen ($12,000) and through their various approaches, the filmmakers raised the approximately $1 million total budget, including the print and advertising.

"We kept the units fairly small, and investors came in for between one and six million yen. We've considered raising the unit size to 2.5 million yen for future projects, but that would narrow down our pool of potential investors considerably," Yenidunya says.

One of the investors for whom the strategy appealed is Miwa Seki, who's already committed to their next film.

"Wakiyaku was the first film I invested in, but I've already put a little money into the producers' next project too," says Seki, whose brother is a writer, producer and occasional film investor.

Another challenge is the lack of tax breaks for investors in Japan, which Yenidunya describes as, "not even close to those in America, where it can be written down 100% from day one. 

"Still, we don't want to bring in industry money for projects to ensure we can keep total creative control," Yenidunya says.

Nyari and Yenidunya run a weekly networking event in Tokyo called "Take Your Cut," where they try and match local filmmakers and talent with mostly foreign business executives and traders who are interested in investing in projects. 

The two, a banker and a former banker, have raised the funds for their next project, which is currently in production.

Directed by Iranian Amir Naderi, Cut is the story of a young Tokyo filmmaker who gets mixed up with yakuza gangsters while – appropriately enough – getting funds for his film.

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