The Brass Ring
Georgia has all the infrastructure necessary to continue for decades as a production powerhouse. The next and biggest step: Investment in original content creation.
Georgia continues to be a powerhouse for film and television production, rivaling all toher us locations outside of Hollywood and New York City. And we're growing substantially, thanks to tax incentives for projects that shoot and, now, that complete post-production in state. Studios continue to open up around Atlanta and Savannah. Artistic and technical talent continues to populate the local industry, whether native to Georgia or relocating from elsewhere.
Investment for the booming production business, however, still flows primarily from New York or L.A., Georgia’s investment class has made some moves into infrastructure, studios being the prime example, but they are yet to make meaningful investment in content creation. Some sharp, local minds are out there, trying to educate investors about the risk and potentially high rewards from investing in original content.
“We haven’t reached a self-sustaining industry yet,” reminds Peter Stathopoulos, a partner with the consulting firm Bennett Thrasher who specializes in advising entertainment companies on production incentives. “It's still heavily dependent on the film credit. If we can fill in some of the gaps of the industry here besides production than, yes, it might become self-sustaining. We're not going to have a vertically integrated entertainment industry until some of these pieces fill in.”
One of those gaps is certainly in the area of equity and debt financing for film, television and other entertainment content creation. Georgia has become a popular place for production because of its lucrative tax breaks. That has led to the creation of an infrastructure to support all the film and television business coming to the state and an influx of people and companies serving the needs of both visiting and homegrown projects. But is this foundation strong enough to hold up the local industry if we no longer attract the outsiders?
"We have to expand outside of just producing films,
and we've got to create the content locally,”
“If Georgia really is going to be sustainable in the long term, we have to expand outside of just producing films, and we've got to create the content locally,” suggests Jim Andersen, AVP of commercial lending at Bank OZK. “In order to really curate that content locally, the general investment community needs to come here. The guys who put up the risk capital need to put it in film so that these guys are able to take their ideas and make something out of it.”
Or perhaps it could build from within, and there’s good reason why the local investment community has a vested interest already. “We have to figure out as a community, as a whole, how to protect the infrastructure that we've been investing a great deal in,” says Bernadette Boas of Ball of Fire Media. “There are a lot of people who are dependent on the tax incentives being there. If they ever go away, we will have a lot of empty buildings and a lot of people out of work. If we could keep them busy by getting local content created and financed and produced, we'll be protecting that infrastructure. When it comes to that cause, it's going to take local people. I just think it's a tragedy we don't have an entertainment investment community like we do with healthcare technology.”
Fortunately, there are a number of people who have already started pushing to fill in the gap. Solutions to the problem of Georgia’s film industry ecosystem range from the more traditional to the bold and ambitious, and it’s not going to take just one idea to crack the nut of in-state investment. The first step, understandably, involves education. Not just for the investors to better understand the film industry but also for the filmmakers to better understand finance.
"The idea is to educate and cultivate an indigenous population of producers and financiers that don't necessarily need to rely on the West Coast or New York to green-light, produce and ultimately distribute content,” says Don Mandrik, Managing Director of Georgia Production Finance. “The goal is to create and to build and be part of a community that can do that all from the great state of Georgia."
Educating isn’t just about providing information, however. All sides involved need to have an awareness, a familiarity even, of their counterparts’ involvement in this sort of investment. And for that to happen, both the producers and the investors together need either a translator or, better yet, the capability for multilingual communication.
“We speak different languages,” says Andersen. “The gap between traditional finance and film is that we are accustomed to speaking business talk; creatives are accustomed to speaking creative talk. Meshing those together can be difficult at times. Creatives don't want to give up control. Investors want control. How do you marry those two together?”
One preferred sort of mediating educator would be a veteran of the film industry who has a history with such deals. “There are a lot of producers who live here in Atlanta who have a lot of experience with making feature films or television,” Stathopoulos acknowledges. “Ideally, we would create some way for some of them to volunteer to educate the investment community on the soup to nuts of how do you go from a screenplay to a finished movie to money.”
For Boas, the key is to hold events throughout the year for both creatives and investors to learn the other half of the picture and eventually bring them all together. “We're taking a two-prong approach. The creators in town are not very well educated on the business side of things. They're not quite sure what to do. My mission is to get them that training.”
So far, she’s mostly worked with the creative side, consulting on what is needed to attract investors. Her next event, held this fall, is a workshop for the DeKalb Entertainment Commission specifically for productions with a financial package -- a budget, attachments, distribution, etc. During this annual expo, filmmakers can pitch their project, receive feedback and potentially win awards.
She admits that it’s been a slow process so far. “The question people ask is, so how much money have you raised for people? And I will say to anybody: that has not happened to date. Again, we're still continuing to search for those individuals with money that are willing to write the checks,” she explains.
Still, she’s confident in her strategy and has seen progress in the relationships made through her efforts. “There are tons of people who have gotten people connected, gotten people attached to their projects, gotten people brought onto their projects in a producer role or in some other capacity. It's been very successful in making those connections and networks."
“This business is all about relationships,” agrees Kendall McKnight, Chairman and CEO of the firm KEG-Financial. “I think what I've found is we have to expand outside of just producing films, and we've got to create the content locally," Jim Andersen lot of people, the production companies and producers here, like to work with someone they can talk to, meet with. If you go out of state and try to find somebody, you won't have that close relationship. It's mostly just phone calls and emails. You don't have a chance to build that close relationship.”
As for the potential investors in town, "There are a lot of deep pockets that come to me talking about how they'd love to be involved in film,” Boas adds. “They just don't know anything about it. Or they don't know about how to vet out a film project opportunity as easily as healthcare technology or something else. As much as I'm like, ‘Well, it's the same -- the same due diligence,’ for whatever reason they just find it very different and confusing."
Another deterrent is supposedly the wait for a return on investment. “The reason people don't do it is the life cycle of taking a project from start to finish and then getting it out and hoping it makes money is so long,” Boas claims. “And I'm like, ‘Then you've never invested in healthcare technology.’ They always complain, ‘Well, there's no product with a film.’ There's a script and there's a pitch and a deck and a budget, and those are all the things that any other industry, product or service is going to pitch to somebody with money, So if we can open up that dialogue on a consistent basis, we could be building up a pool of folks with money and then maybe attract other folks, even companies, wanting to put money into the community and build out a production industry here.”
But film finance is also thought to be too risky, and for some investors there’s a good reason for that. "There are a couple of heavy hitters in the angel investor community who share their devastating story of the one time they invested 10-15 years ago and lost all their money,” Boas reveals. “We have that to overcome."
"The guy who gets burned is going to be 10 times more vocal about his film experience than the guy who didn't get burned,”
And going further, there’s trepidation on all sides to make sure that doesn’t happen, because more bad experiences will further deter investors. “The guy who gets burned is going to be 10 times more vocal about his film experience than the guy who didn't get burned,” Mandrik explains. “To [their] entire world of people, they say, ‘Don't do it!. I got burned. I got screwed.’ But are they to blame a little bit, because they didn't do what they were supposed to do? Absolutely.”
The local money community needs to become more comfortable with film financing. “No one is going to care about protecting the infrastructure in Georgia unless they live in Georgia. When it comes to that cause, it's going to take local people,” Boas states. “But trust me, Georgia creatives are not sitting around waiting on Atlanta money to be made visible. They're going where they can find the money.”
And that might mean an exodus of talent, because there’s just not much lending or equity funding available in Georgia for independent productions. “If I'm a young filmmaker and I live in Atlanta and I can't raise money where I live, in my community, I have to go to New York or London or somewhere else,” Stathopoulos explains, “but it's unlikely as a young filmmaker that I'm ever going to get financing for my project. Obviously if you're a really experienced producer and have a track record in this business, then yes, you can go to New York or LA and other places to raise money, but if you're an up and coming filmmaker, young writer/producer/director in Atlanta, it just makes it hard for you to get much content made because you're not going to have access to capital sources outside of Georgia.”
Andersen proposes there need to be more intermediaries. “Where somebody can translate the needs of the filmmakers with the needs of the bank and put together business plans for the filmmakers,” he says, “and then also be able to pitch those to the banks and be able to speak the bank's language.”
McKnight is one consultant who acts as a go-between, though he sees more help needed on the creative side. “The investors are looking at things from a business standpoint,” he says. “‘How am I going to make my money back and make some money?’ It has to make good business sense for the investor. The creators of the project are looking to create a wonderful experience for the audience to come see their movie. They're looking at it from a creative sense. A lot of times I have to be the mediator and decide: is this product that you want to put out there going to make good business sense?”
One area that McKnight stresses in his education of creatives is the need to budget for print and advertising financing. "That is what makes a film,” he claims. “If you don't have a great budget for picking an account to have P&A financing, it won't make a difference if you have an A-list cast or a great script. I've seen people have ok scripts but they had great P&A financing and the film did well, and that's what you're going to need to get people to come back and invest more on your projects."
Mandrik is another one of these intermediaries doing his part, and not just for building relationships and making promises for dreams come true. “In many cases, not intentionally, it's me talking them out of investing,” he says about consulting potential financial partners. “Because it's not satisfying their expectation. Nine times out of ten, the project probably wasn't what was pitched to them just in terms of viability. A lot of my time is educating people on the questions they should be asking and the information that they should be requesting.”
When the right fit does happen, though, a first wave of successes will really get the ball rolling. “What's best for investors is that if the first few investments are around experienced producers who have a good track record at knowing how to monetize their content,” says Stathopoulos. “There are ways to mitigate risk associated with feature film investments, and experienced producers know how to mitigate that risk.”
Stathopoulos sees promise in the amount of experienced creatives emigrating to Georgia who could be a part of that necessary first wave of success stories. “Producers moving here, writers moving here, showrunners moving here. Or at least living here part time. Buying condos here. I continue to see Atlanta becoming kind of a haven for creatives,” he says.
And on the other side, “There are folks here in Georgia who are taking a very hard look at this. Who will hopefully serve as tastemakers,” Mandrik assures. “Hey, those guys are doing it, there must be something to this. Hopefully, it just takes a handful of these bigger ticket investments to be made to where their advisor team then becomes part of the brain trust. Those guys travel in circles. If ‘John Smith’ is going to put a $10 million investment into the space, there's a good chance his friend, his neighbor, his country club buddy, his golf buddy, his church partner will. Those men and women are paying attention to what that guy is doing, and if that guy does it intelligently and experiences a return financially but also a great experience emotionally and spiritually, that will become the foundation of more financial partners coming to the table.”
Also on the intermediary front, Tyler Morehead and Cody Tellis are part of a newly formed team at Merrill Lynch that is also looking into film financing in Georgia, firstly by shedding light on what’s possible and what’s not possible and providing alternative, out of the box ideas. “In a nutshell, we can be both a financial planner and private bankers for these individual companies,” Morehead says of what they’re doing for people making films in the state. “We're finding new answers and solutions, daily. And as we work closer with industry in Georgia, we're discovering more and more ways that we can be an asset.”
What makes their team so strong as advisors is it’s made up of both sides of the equation. Morehead is a jeans-and-t-shirt kind of guy, a producer transplanted from Los Angeles with 25 years experience in the entertainment industry, while Tellis represents the suit-and-tie financial world. “We've been able to put our heads together and come up with some creative ways to tackle a lot of the obstacles that are there in the industry specifically in Georgia,” Morehead says of the team’s approach with local production companies. “We're just finding ways to get people to work around things that weren't traditionally known as being workaround- able.”
"In helping to build deal structure,” Tellis adds, “one of the things that we've found to be very helpful is to provide better alternatives rather than to just sit on money in a zero-interest or some sort of trust operation. Where there are a number of financially secure investments, and by that I mean a money market that's paying 2% as opposed to just sitting on cash that's doing nothing. We also have on our side here at Merrill our structured lending department where assets can be lent against and/or multiplied. We're going to interface on the bank level for the lending but we're also going to interface and be useful on the deal structure side with my legal background and tax planning perspective; we're going to be a lot more useful than a typical advisor."
"Working in LA, I didn't like seeing guys in suits. They were just intimidating to me."
Morehead understands that for the creatives, dealing with money people isn’t the most fun part of the process. “Working in LA, I didn't like seeing guys in suits,” he admits. “They were just intimidating to me.” Tellis acknowledges that artists and businesspeople do clash. “There's just a sense of inequality that goes with that sometimes,” he adds.
“So a big part of what we do is,” Tellis explains, “even if we don't ultimately close the deal or we're not the ultimate financier, is to help people understand what the right deal is that they should probably work with. And if that's not with us, that's not with us, but then at least we can get people pointed in the right direction to what's best for them in the hope of getting the deal done.”
Another option is to invest in more than a single independent project. There’s been suggestion of a film fund in Georgia that could spread the wealth around to a varied production slate. But even that might not appeal enough to potential partners, especially in the beginning. "I don't think a pure content fund is diversified enough,” argues John Adcox, the CEO of Gramarye Media. “I think it's got to touch other elements. So having the real estate component, having the distribution component -- distribution is first-money out, so obviously that's going to be very attractive to investors.”
Gramarye is an Atlanta-based cross-media startup looking to disrupt the Hollywood model by financing the development of their projects and other components of their mini movie studio as well as a publishing outlet and virtual reality production facility through a Security Token Offering, which has been likened to cryptocurrency but is more a kind of tradable digital share in the company and pays out dividends. It’s a fresh form of capital fundraising that is also fully regulated. “You have to disrupt from without,” Adcox says of what his company is doing. “And Georgia is probably the only place on the planet where we can do something of this scale and disrupt to this degree."
While this state is the best place for Gramarye, Adcox also believes that his company’s aim to produce universally appealing and therefore profitable original homegrown content will be the best for Georgia in the long run to balance against all the visiting productions. "Right now, Georgia is the Chinese factory where stuff gets outsourced for cheap labor and cheap cost of business,” he conveys. “The true winners are the ones who actually own the [intellectual property]. That's what we have to be. And that's what Gramarye is about.”
Having a method of de-risking original content is the strategy for Adcox. “Everybody's afraid of original content, because it doesn't have a known brand,” he says. “Our job is to make original content have a known brand and mitigate that risk of green-lighting. And then spreading that over other companies with their own revenue stream is great for the investors because it further mitigates their risk, and it also creates an ecosystem that's stronger than the sum of its parts."
Speaking of brands, another alternative involves product placement and brand integration. Chris DeBlasio’s Agency 850 is leading the charge on connecting content creators with businesses looking for a different sort of return. “It's a little bit different than traditional investing,” he states. “The people who I deal with are CEOs or business owners of a lot of major corporations to whom these are advertising dollars. I can be in pre-financing mode or I can be that last leg to finance a film to completion. We're connecting advertising dollars with some of the things that are shot out here."
DeBlasio points out that even a local brand can benefit from national and international attention. Just because a project aims for a broader reach, a Georgia-specific restaurant or shop will reap the rewards of the exposure on a regional level. Of course, it’s also especially beneficial to smaller productions looking for narrower distribution. “It's all relative,” he explains. “If somebody is shooting a local micro-budget film and they need a location that's a coffee shop, why not shoot it at the actual coffee shop, using their logos and showing that this place really does exist, come check it out. The amount of local traffic -- people go to that store just because that movie was shot there. On a local level it still can be done.”
The only real challenge is apparently getting the creatives aware of this kind of opportunity. “It's an eye opener. Filmmakers don't really think of this stuff,” DeBlasio acknowledges. “They're so focused on trying to go after the person with the money. Instead they can contract a company like ours where we already have advertisers on retainer. We can very easily plug those people in and create another revenue stream for the production or offset more costs. We're essentially bringing in free money.”
"You've got an advertiser willing to give you money, but they could turn your entire project into one giant commercial."
And while filmmakers could try to do this themselves, DeBlasio doesn’t recommend it, especially for anyone looking to steer clear of seeming like they’re selling out. “I know how to navigate those waters,” he confirms. “If you try doing it yourself, you've got an advertiser willing to give you money, but they could turn your entire project into one giant commercial. Which is going to take away from the entertainment value. We're the go-between, that arms length where you don't have to worry about it. We're the ones making sure that we get the advertiser the most bang for their buck without taking away from the integrity of the script.”
Why not just focus on the big brands and big movies? DeBlasio is passionate about the local industry and believes that’s where the future is for Georgia. "The studio stuff is great, it's feeding people. But let's focus a little bit of the energy on some of these smaller independent productions, because that's who your people are. That's your infrastructure. If Georgia is smart they're also going to find ways to keep the independents going here.”
And DeBlasio isn’t alone in being optimistically focused on Georgia. “I really do have a lot of hope for Atlanta,” Morehead professes. “I think that it's really set up well. Georgia is very well positioned for a major stake in this industry: the infrastructure is there; the creatives are there; the locations are there. What the leaders in Georgia have done is really strong.
The state just needs to continue to look at the big picture. "If the entertainment community here can come in and not only look at film as an art form but look at it as a business, that will be the game changer for Georgia because then they'll say, hey Georgia knows,” McKnight adds. “For film producers or production companies to know how to make great films that are profitable, with the tax credit, that makes more gravy on the dish. And that'll make Georgia stand out amongst other communities.”
So many others are hopeful that Georgia will reach the goal of self-sustainment, too. “I've never in my life met a group more passionate and more interested in the exact same outcome as the film industry in Georgia,” Andersen professes. “Everybody is trying to help one another. Everybody is committed to making Georgia the leader in this space. And it's really exciting. These people are extremely hard working and extremely passionate. I think it's going to be very exciting to see where Georgia is in the next 5-10 years. I think film's going to be here. I'm very confident in that. It's just going to take some time.”