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The film industry appears to have bounced back from COVID. Two years after the global pandemic nearly shut down the world, production is up-and-running worldwide and outpacing even the record levels of 2019.
But financing for independent productions has gotten more complicated, with COVID adding extra costs to already strained indie budgets. The lack of cheap, easily accessible pandemic insurance and the knock-on impact on completion bonds — which are increasingly difficult, or prohibitively expensive, for independent productions to secure — has added costs and risks, noted Nick Spicer of XYZ Films.
“The additional cost of insurance and a bond if you get one without an exclusion [can be] as low as an 8-10 percent [budget] increase up to 20 percent depending on the size of the budget, how the financing looks, where you’re shooting [and] if there’s a government backstop,” Spicer said during a virtual panel on how COVID has impacted independent production at the 2021 American Film Market. “There is a baseline no matter what just to follow the COVID guidelines and have a reasonable reserve in case something happens.”
In early 2020, during COVID’s first wave, the gaps in the insurance policies and completion bonds made the traditional indie financing models “impossible,” says Spicer, whose company shifted instead to shoots in countries where coronavirus risks were lower or places, like the U.K., that established government backstop programs to cover the productions risks the insurance companies wouldn’t. The company shot Tommy Wirkola’s comedy-horror The Trip, starring Noomi Rapace and Aksel Hennie, in low-incident nation Norway and went to Wales for Havoc, the Gareth Evans-helmed crime drama starring Tom Hardy, Timothy Olyphant and Forest Whitaker.
“We transitioned into more creative financing models leaning on equity, private lenders, bridge loans to get through production and parsing out the cash management to mitigate the actual cash risk,” said Spicer. “Financing became a lot more work-intensive than it was the year before.”
Things aren’t likely to get easier in the coming months, as the pandemic rumbles on and insurance companies remain wary of the film business.
“The insurance industry is not going to rebound from this quickly,” noted Peter Marshall of Epic Insurance Brokers, another speaker on the AFM panel about the impact of COVID, which he said have been “worse than asbestos was for the insurance industry.”
Steve Hays of film financing group 120dB Films, whose recent projects include Lansky with Harvey Keitel and Sam Worthington, said the extra risk has made investors more cautious, demanding more proof upfront that an indie film is viable. An “ideal project” these days would be one that has “at least a third of the budget … covered in equity, [is] filming in a jurisdiction that’s tax credit friendly and [has] at least two foreign-language presales made,” Hays noted. “Our sweet spot is in the $2-$10 million range and generally we’ll have presales that represent at least a quarter or a third of that.”
While production is returning in force worldwide, Spicer noted that the vast majority of projects currently shooting are studio and streamer-backed features and high-end TV series, projects that are scooping up actors and making them unavailable for indie projects.
“It’s never been harder to schedule actors than it is right now,” Spicer said. “So as an indie producer in the U.S., it is hard to get something up and running not just because of the difficulty of financing but also because you’re competing with much bigger players that are offering a lot more money to [to talent and crews] and huge competition especially in the production hubs.”
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