Latest update April 1st, 2015 6:34 PM
China is Building Completion Bond
Producer Luo Yan and Maarten Melchior, Fintage House North America Consultation Officer. Photo credit: SIFF.
The Chinese film industry should adopt the completion bond model, thus spoke the panel at the forum of Completion Bond - Film Financial Products’ Local Application during the 17th Shanghai International Film Festival.
Completion bond has been a common practice in international film productions to control budget and risk. In this forum, some producers signed completion bond agreements with investors to make two films: BEIJING HOLIDAY and TRACE MEMORY, in order to test the waters of completion bond in China.
The Hong Kong director Stanley Tong said many investors are confident in the film industry development and willing to invest, so there is a large number of potential funds, yet they are doubtful about their investments due to a lack of knowledge in film-making. So the bond company can act as a bridge and guide between producers and investors.
As early as in 1998, the filmmaker LUO Yan used completion bond to produce films in Hollywood. She said at that time she was asked to provide the bond first when borrowing money from the bank.
“The completion bond company had a strict standard so I needed to think carefully and operate strategically based on the industrial procedure. It required us to do a rather detailed budget plan. During the filming, we got some problems and two weeks’ shooting turned out useless. But under the company’s supervision, we finally finished the project on time and within the budget,” said Luo.
The bond is a tool to produce films on time and on budget, said Robert Sidor, a London Business Executive of Film Finance Inc, the largest global completion bond company, which also shows the latest software to show how it works to supervise the budget and agenda.
The completion bond is expected to spread in China. Tong said, China has gained much growth in the film industry but its production system still needs to be further regulated. It urgently needs an industry standard in film production while completion bond is a necessary step to achieve this.
On average, out of ten local films that had theatrical release in China, 1 can be a blockbuster, 2 might make even, while 7 will lose money. Investors lose money without knowing the specific reasons. The application of completion bond is supposed to change such a situation.
Sidor said completion bond will be helpful for the Chinese films going global. Moreover, the rapid growth of China’s film industry in recent years has attracted more and more capital but its financial management still needs major improvement, while the bond can promote the industrial standardization and upgrade.
The application of completion bond in China can protect the investors’ money and improve industry transparency. More importantly, it can offer more opportunities to young directors. HE Xiaoqiu, founding partner and Vice President of SOVA Capital, explained that big names like FENG Xiaogang and ZHANG Yimou do not worry about film financing, but younger filmmakers will need completion bond to raise funds.
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