Finance in the Cloud

As with any type of business endeavour, money plays an important role in the production process. Defining budgets and then tracking actual costs as they happen are two important components of this process, but what’s most important (aside perhaps from how much the production ultimately ends up making) is getting money with which to fund the production in the first place.

Often financing works in tandem with budgeting. Preparing a production with an all-star cast will likely require greater funding (though one would hope that it would likewise lead to greater revenue) and a large budget as a result. On the other hand, not being able to secure the desired level of funding would mean cutting back on the budget, possibly dropping some above-the-line items and potentially compromising the overall production value as a result.

Figure 9.1 Traditional Financing for Productions

Even in the 2010s, the main possible avenues of financing remain unchanged: having a film or television studio bear most of the financial responsibility is probably the most obvious choice, as well as getting private investment or pursuing advertising opportunities such as product placement. For more modest budgets, various grants or personal finance might suffice.

That said, the Cloud does bring with it some new potential avenues to funding productions. Crowdfunding (which will be discussed in greater detail in chapter 16) allows for a large amount of money to be raised through a high number of people each contributing a small amount. This has been used to great success on several notable productions, such as Anomalisa (2015) and Veronica Mars (2014).

Borrowing money is cheaper thanks to the Cloud. “Peer-to-peer lending” is a replacement to more traditional financial loans, such as you might get from a bank for example. With a peer-to-peer loan, such as offered by Prosper (prosper.com) or Lending Club (lendingclub.com), individuals loan money to each other (typically on unsecured terms), with the service acting as an agent for the transaction. The lender collects a higher return than they would typically get from a savings account (around 5%–10% depending on the estimated risk), and the borrower has a lower amount to repay than they would with a loan from a bank (around 5%–30% depending on the service used and terms of the loan). Naturally the service itself takes a percentage of each loan.

Clearly this can be extremely beneficial to those seeking to borrow money (if perhaps a little less so for people looking for opportunities to make some money), but there are some caveats that might make it inappropriate for fully funding a production. First of all, the amounts that are loaned are typically quite small, so it seems unlikely you’d be able to borrow seven-figure sums of money, for instance. Additionally, it is expected that repayments are made regularly and across a specific time period. This might not be suitable for many production types, which would not see any revenue until a period of time after the production has actually completed.

Figure 9.2 Peer-to-Peer Loans

That said, this is a relatively new area with lots of possibility for growth, and it may be that in time we will see new low-interest lending models based on peer-to-peer finance that are better suited to the needs of different productions.

Box 9.1 Movie Production Incentives and the Cloud

Movie Production Incentives are some form of financial reimbursement or compensation, in the form of a grant or tax rebate, for example, that is given by a local government (or state in the US) to a production meeting certain criteria, to encourage production to take place there. For example, shooting in Canada rather than in the US through the Canada Film Capital scheme (canadafilmcapital.com) can result in tax credits on labour costs, potentially saving the production a significant amount of money compared to shooting elsewhere.

It’s interesting to note that although the Cloud doesn’t directly have any bearing on such incentives, what it does do is remove many of the barriers to taking advantage of such schemes. For example, when deciding where a shoot needs to happen, productions making heavy use of the Cloud will not need to be as concerned with things like IT support and infrastructure and can make use of numerous services to stay in touch with people elsewhere.

The peer-to-peer model also has another financial application. For exchange of currency, such as when needing to transfer money to someone in another country, cutting out banks and exchanging dollars for Euros directly with someone else first is more cost-effective (and in many cases, faster) for both parties. Services such as Midpoint (midpoint.com) act as a broker in this regard, with both parties sending their money to the service, which calculates the exchange rate, takes a commission of around 0.5%, and then forwards the amount in the new currency on.

UK-based WeSwap (weswap.com) extends this idea to the exchange of currency for people going abroad. Through a similar system to that of Midpoint, people wishing to exchange currency are paired up, with the service receiving the money, taking a percentage (starting from 1% of the overall transaction, depending on how quickly you need it) and then providing a prepaid charge card credited with the new currency to both parties for use overseas.

Budgeting in the Cloud

In simple terms, production budgets represent the overall expected expenditure for a production. These are typically broken down into “above-the-line” (those incurred by high-level expenditures, such as the main talent, directors, producers, and screenwriters) and “below-the-line” (everything else) costs. On larger productions, different departments each draw up its own budget, which then feed into the overall budget.

Creating an accurate budget is an important precursor to securing the right amount of funding in many cases, but the reverse situation is equally important—productions have a fixed amount of money available to spend and must then work out the best way to spend it. Both scenarios require skill and experience in predicting real-world costs and being able to negotiate deals on different things, and even larger budgets can feel constraining when there’s an abundance of potential expenditures to consider as a result.

At the present time, there are no noteworthy Cloud-based services that cater specifically to budgeting productions, though it’s certainly possible to make use of something more generic, such as Google Sheets (sheets.google.com) during the budgeting process, which at least lends an aspect of collaboration to the mix (for more on Google Sheets, see chapter 10). However, many of the features of the Cloud mean this will likely change in the future. It’s possible to imagine a time where many of the contributing factors of line items in a budget, such as the rental cost of a specific lighting package per day, could be syndicated by rental companies into a specific budgeting system, allowing for the person creating the budget to easily compare costs between competing rental companies, or to see the estimated financial impact of adding an extra day of shooting, at the push of a button.

Moreover, as the prevalence of the Cloud grows and becomes more integral to different productions, tracking tools could feed directly into something of a “living” budget, which is recalculated as changes to the production take place, such as when a shot that was previously considered to require expensive visual effects is removed from the final cut. It would also be possible for production companies and studios to easily aggregate data from past productions, to get a more accurate picture of “real-world” costs for different things, such as shooting with a particular camera that has a low rental cost, but is more expensive in terms of post-production.

Accounting in the Cloud

Whether the budget on a production is realistic or not, there’s the need to actually track how money is being spent, as well as provide the same types of services as any company would, with regards to collecting and making payments. This, however, is an area that is very well-represented within the Cloud.

Intuit’s popular accounting package QuickBooks (quickbooks.intuit.com) recently switched from a traditional desktop-based application to a Cloud-based service (and subscription-based pricing model), touting amongst the benefits that it would allow accountants to work from anywhere and on almost any Internet-connected device, and that using the Cloud-based system required less data entry than its previous desktop one, as it would be able to connect to other services to download and categorise transactions and other data automatically.

When it comes to paying the crew, the Cloud can play an important role here too. Services such as Entertainment Partners’ Payroll Services (ep.com/home/paying-crew-and-talent/payroll-service) automate a great deal of paperwork and calculations for things like tax deduction and can make payments directly into people’s accounts. Services such as Gusto (gusto.com) aim to inject some personality into the process by generating paystubs that are more personalised and attractive.

The Cloud allows for other possibilities too. Many Cloud-based accounting systems have integrations with Cloud-based time-tracking systems (see chapter 7), making the collection of data about hours worked easier and more accurate. Services such as Activehours (activehours.com) allow employees to “cash out” their accrued earnings prior to their scheduled payday, by linking their bank account to the service and submitting a copy of their timesheets each time they want to cash out.

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