Quick Guide to Movie P&A Financing

movie-reelsFilm financing is a complicated and wide-ranging topic. Production funding is already difficult to understand and obtain but even once the movie is on film and edited there are still more costs to consider. Finding distribution is the next step. The distribution process is just as complicated and cost-intensive as the production, requiring screening and negotiation and negotiating lease agreements.

Part of that distribution price includes P&A, prints and advertising. The average P&A budget runs about half the cost of production, sometimes even exceeding the halfway mark.

What is P&A?

Prints are the physical films used in the theaters. Each theater that plans to show the movie will need to have a copy, sometimes more if the movie will show on multiple screens. The bulky film and canisters are difficult to produce and expensive to ship especially when thousands of theaters are involved.

As expensive as the print process may be, advertising definitely eats up most of the cost. Every location that will be showing the movie will need to receive a piece of the promotional efforts. Advertising typically includes television, newspapers, online, and of course the ubiquitous in-theater posters. It’s difficult to generate interest in a movie without advertising but advertising is incredibly budget-intensive.

How P&A Financing Works

P&A costs easily run into the millions. The distributor often covers the price of P&A, recouping their cost from the gross profit generated by the film – they often take out these costs before the production can get their cut. Sometimes the production company will cover some of the P&A upfront so that they will be able to hit their profit point faster.

It gets even more complicated from there. Distributors are accountable to their investors, including P&A financers. The Panda Fund is one example, a company that provides print and advertising funds to help independent filmmakers and distributors get their movies to market. Because of the risk involved in P&A financing, so the financers often enlist the help of capital management professionals like Elliott Broidy of Broidy Capital Management.

Co-financing reduces risk by bringing hedge funds and private equity firms onboard but more stakeholders means more pressure. With so many levels of accountability, it’s no wonder that the industry is so careful about which films they choose to back.

Every year, dozens of movies backed by the biggest studios fail to make up for production costs let alone P&A. Prints and advertising does come at a baseline cost, meaning that a smaller production cost does not necessarily equate to a smaller P&A budget. A tiny micro-budget film may only cost $10,000 to produce, but simply transferring the print to film could easily range into the hundreds of thousands of dollars due to the technical expertise involved. Running a single round of television advertisements can add millions to the cost.

The world of movie financing is definitely an interesting place. If you have ever wondered how an otherwise basic movie could rack up such a huge price tag, it’s important to look beyond production alone. Every film package shipped, every financial advisor consulted, every movie poster printed and hung – P&A is an important investment that rivals that rivals production in terms of complexity, at least on the financial side of the coin.

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