The film industry may still be synonymous with Hollywood, but FilmHedge would like to change where films are financed. The two-sided investment marketplace, based in Atlanta, is seeing an uptick in deal flow since the platform launched last year.
The company is aimed at large-cap hedge fund investors looking to diversify their portfolios with media financing and producers looking to fund their productions. FilmHedge doesn’t make its money in equity which is a draw for financiers, instead, the company takes a portion of the 10 to 25 percent interest on loans generated on the platform.
“Film as an asset class has a perceived risk and the risk comes from there being no recourse with equity investing,” Jon Gosier, FilmHedge founder and CEO told The Plug. “Many [investors] have been burned in the past having put a few million into a film that never returned a dime.”
The platform mitigates risk through an ai-enabled credit rating system that assigns loans a certain level of risk based on a borrower’s profile
Loans can be collateralized by things like producers by having distribution commitments with platforms like Netflix or a network like HBO. Investors can use traditional means of collateral like net worth and corporate agreements.
“Our marketing is to the borrower because that’s who needs loans, but our product was ultimately built for hedge funds, institutional investors, private equity financiers, and others who want exposure to media in a more reliable and secure than what they’re used to doing,” Gosier said.
Through the platform, producers can finance up to $1 million for a single film and access a line of credit up to $5 million to finance a project. These finance caps are projected to grow as FilmHedge, which has $2 million in venture backing, scales.
Losses for several industries mounted last year at the onset of the pandemic, and the film industry is set for a long, slow recovery. Revenue from the global box office market shrank 72 percent last year to $12 billion compared to 2019.
“In the traditional model, most of the movies are going to lose money and maybe one of them pays for investors’ losses, we’re not in that business at all, we’re in the debt business.”
Under FilmHedges’ risk-mitigating model financiers have a more viable route to back films in the current financially lean times.
“If I had my way I’d use [FilmHedge] for everything,” William Lowery and Brigade Media Capital founder told The Plug. “The criteria for a producer is very high and most aren’t going to have it, but if they do FilmHedge is the easiest, cleanest and most efficient way. Not everyone can play with FilmHedge, you have to have collateral and most producers don’t.”
Lowery’s career in film financing has spanned more than 15 years and includes working with Beverly Hills-based William Morris Agency (WME). He met Gosier a few months ago and used the platform to facilitate partial funding for an upcoming film called Seriously Red in collaboration with country singer Dolly Parton’s financial team.
Gosier isn’t at liberty to disclose all the films and shows FilmHedge has had a hand in financing but says funds have been secured for films featuring A-list actors and productions premiering on Netflix and Hulu.
“In traditional financing, there’s a lot of kissing the right butts in the right rooms and networking involved and in Hollywood clearly a lot of relationships,” Lowery said. “The ethos of FilmHedge is to try and provide an opportunity for people that don’t have those relationships to get the movies funded.”
There’s increasingly an opportunity for connected filmmakers too. Jess Carrera, cofounder of Dollhouse, an Australia-based film production company, is the producer for Seriously Red and brought the idea to the platform for Lowery to partially finance.
To date, the platform has facilitated $700,000 in film financing. That figure represents partial financing across four films and TV shows in 2020. Gosier says that the company has already exceeded this amount in revenue and is confident that loans will scale. He has set a goal to finance 15 projects by Q2 of 2022.
A long-term goal is to bring more financial decision-making to the South.
“It was important that this company be based in Atlanta, which is one of the largest film production markets in the world because of the tax credits,” Gosier said. “The decision-making isn’t happening in Atlanta. It happens where the people with money are, in L.A., N.Y., it’s important that for Atlanta’s ecosystem that a hopefully major finance player is based here.”