Film Financing

20th Century Fox and other film companies are funded for their films by things such as government grants and tax schemes. Government grants is where government programs are made especially for the funding of films provided certain conditions are met, the UK Film Council provides funding for films being in the UK as long as certain conditions are met. US States such as New York, Oklahoma and New Mexico, will provide a subsidy provided all or part of a film is filmed in that state, for example; Die Hard 3 takes place in New York so the government may give them funding because it is such a popular film and could promote New York to viewers. Governments are willing to provide these subsidies because it will attract creative individuals to their territory and maybe influence them to work there and it can advertise that place internationally. Government subsidies are pure grants and the government expect no financial return. Another way of financing films is debt finance and there are a few types of debt finance, one of which is pre-sales. Pre-sales is when the film company get a script and cast together and if the script is good and the cast has a few big stars in it then companies will want to buy the rights to the film and to distribute it in different countries before it is produced. An example could be Toy Story 3 which was expected to get a massive amount of viewers because of how popular the previous two films were and how popular the franchise has become. This is done because then they will receive some of the profits the film makes if it successful. Debt finance can also mean television pre-sales which is selling the rights to broadcast the film on TV after the film has been made, sometimes it’s possible to be sold in advance so the money can be used on the film.

Another method of film financing is British Tax Shelters which means selling the same copyright again to a British company and a further $10 million could be raised, but UK law insists that part of the film is shot in Britain and that the production employs some British actors and crew, this could help attract creative film makers/producers to Britain and could lead to the creation of some good British films in the future. The final method of film financing is tax schemes which are basically schemes which are created to sell the enhanced tax deductions to rich people with large tax liabilities. In 2007 the United Kingdom government introduced the Producer's Tax Credit which results in a direct cash subsidy from the treasury to the film producer. These are the four most common methods for film financing and are probably all used by big film companies like 20th Century Fox.

There are a few other methods of film funding used by film companies that are not so common. One of these is product placement which means basically advertising a product within a film and getting paid by the company for advertising the product, a big example of this is the James Bond films and Aston Martin cars. James Bond is always seen driving an Aston Martin in the films and it advertises the car and makes it look good. Aston Martin pay the film companies to advertise their cars within the films. Another example is something like Coca Cola, a character in a film could be seen drinking Coke and promoting in by saying it’s tasty or something like that, Coca Cola would pay the film company to advertise Coke within the films. Another method is private equity finance, this is where producers pitch their film idea to a private investor and if they like the script, cast, locations etc and think it will make a lot of money, they will provide the funding for the film but the investors get a certain amount of the profits. It’s a lot like Dragons Den and the investors can make a good profit if the film is successful. Boston Financial Trust is an example of a company who make investments into film production. Companies like that have to be careful with investments though in case they invest in a film that is not successful and they do not receive more money than they spent.