Juliane Schulze is Senior Partner and Consultant at peacefulfish, a strategic consulting firm providing business services to the audiovisual industries which is based in Berlin. She specialises in creating financing solutions, fund models and innovative financial instruments for the film and digital content industry.

Which are the main factors affecting the way the films are financed today?
There are several factors. The national and regional funds are getting limited. The territorialisation criteria impose producers to spend the money in the country, making more difficult co-productions. On the other side tax credit criteria are expensive in terms of cash flow. Many regional and public funds work as equity funds. We see that banks look mostly at large deals. Producers need a more “neutral” gap financing.

What are the main changes in distribution finance?
There is a strong competition to theatre release from the new comers: Internet and VOD platforms. The producers receive less MG in distribution and sales. We assist to the decrease of TV advertising efficiency and a strong interest in local TV programmes. Consequently there are less MG from broadcasters. At the same time there is lack of sustainable business models in non linear distribution. At the moment the only existing business model is revenue sharing. This aspect limits the development of cross media distribution strategies. There is clearly the need for commercial money to ensure circulation of audiovisual products.

What are the main changes in corporate finance?
There are very few private investors. The private investors are mainly interested in developing slates of projects. These changes of paradigm create needs for new financing sources. The equity investment offers an alternative source of finance for producers.

The companies interested in investing in the media sector are generally companies working in new technology and wishing to link technology and content: film, animation, TV, mobile, music, video games, digital distribution, interactive services. This particular set of companies is called Mediatech. According to the EVCA Yearbook 2007 these companies invested €700m into the European media market.

Technology companies are interested in investing in the media sector as we assist to a global growth of the sector. By 2012 the media sector in Western Europe should reach $633b with and average annual growth of 5,5%.

Peacefulfish together with Cineuropa.org realised a study on private funds in Europe. How many funds did you identified?
We identified 6 sources of equity money for the film industry:
- 20 specialised funds
- 20 tax-based funds
- 15 commercial banks
- 15 venture capital
- 1 Business Angel Network
- private investors which are difficult to track and that are mostly working through tax funds

What is the role of specialised funds?
Film Funds are mostly gap financing or equity investment for projects. The tax based funds are specific content industry and only exists for films in countries like France (Sofica) or Belgium (tax shelter). UK developed a specific type of business: the accounting principles (GAAP) funds and enterprise investment scheme (EIS) funds.

What is the role of commercial banks?
Content companies develop intangible assets which are difficult to evaluate and works mostly on a project base. Hence, most commercial banks are reluctant in providing credit facilities to such companies. In a few European countries though, a small group of commercial banks have a department dedicated to evaluating requests for cash flow facilities and corporate loans from content companies. These banks are mostly focussing on film.

What role can the business angel networks play?
The BANs (Business Angel Networks) are mostly investing on regional level. They look at industries they know. Business Angels invest in companies, not in a single project. They are interested in tax benefits, as they are people paying taxes in a certain place.

How venture capital funds are getting involved in film finance?
The venture capitals are investing at internationally level. These funds are mostly interested in larger deals - more than €5 millions - and wants big Return on Investments (ROI). The target is generally no less than 20% ROI per year. The limit of venture capitals is that they want to invest in companies and take shares. Venture capitals do not invest in projects.

The main investments are done in ICT and mobile technologies and cannot be considered as real partners for audiovisual producers.

What are the trends you see in the near future?
The public incentives will continue to be very important for producers to secure private funding. National funds are less interested to put the money as a grant. The subsidy is used as a leverage to work with private equity. Most specialised film funds are consequences of tax schemes in different countries.

The tendency is nevertheless a decrease in tax based schemes for investors. There is a lack of public funding. There is a clear disconnection between entrepreneurs and financiers which leads to a lack of interest from the banks.

Together with Cineuropa.org you realised a questionnaire addressed to European producers. What were the results of this questionnaire?
We discovered that there are some opportunities for private investment. Some of the people who answered used private investments. There are many advantages: more money and more creative freedom, faster cash, faster access to the market and bigger, more commercially competitive films.

The dangers of Private Investment are that profits go to the investors not to the producers. If private investment will develop, there could be too many films released and clutter the market. Using private investments may have as a consequence that financial criteria may override artistic criteria. Here there is a clear danger for arthouse films.

What are the main problems of putting together producers and private investors?
Probably the main problem is that producers and investors have different expectations. Producers need project financing, money to develop their film, secure distribution deals, find local subsidies, secure the rights… The investor is looking for something different: slates of projects, business ideas, company financing, return on investment, strategic partnerships, best production deals, selling shares with upside and a balanced risk profile.

The public authorities have some questions about their role. Public funds are initiator and facilitators of public/private finance partnerships. They try to limit market failure by creating the right environment and enable meetings between producers and investors.

The private investors are really working on matching others investments. Investors want to share the risk with other investors. They are looking to cash financers more than, let’s say, a studio deal. On the other side each investors wants to have the best terms and it is very difficult to make everybody happy.

Working with private money is questioning the problem of recoupment and exit. The main objective of the investors is to exit the investment they made in the company or in the project. Most of the time private investors want to be last money in, first money out.