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Film Financing In Nigeria Opportunities And Challenges

Dayo Ogunyemi
Dayo Ogunyemi

Presentation on Nigerian Film Industry at the World Intellectual Property Organization (WIPO). Delivered in Geneva, 2009.

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FILM FINANCING IN NIGERIA: OPPORTUNITIES AND CHALLENGES prepared for the INFORMATION MEETING ON INTELLECTUAL PROPERTY FINANCING organized by the World Intellectual Property Organization (WIPO) Geneva, Switzerland March 10, 2009 Dayo Ogunyemi 234 Media Partners +234.803.390.9988 +1.917.309.8278 dayo.ogunyemi@gmail.com
FILM? IN AFRICA? WHY FILM FINANCE IS IMPORTANT Arguably, movies currently constitute Africas most valuable intellectual property products; The movie industry, driven primarily by Nigerias Nollywood, is the most active and valuable part of the internal knowledge economy in Africa today; Movie industry growth vastly outpaces that of the publishing, music, and software industries; It is therefore critical to Africas economic growth that its formal financial sector is able to engage productively with the movie industry. 1
MEET NOLLYWOOD, NIGERIAS FILM INDUSTRY Nollywood is 3rd largest film industry in the world, after Hollywood and Bollywood; In just over a decade and a half, Nollywood has grown from nothing to annual revenues estimated in the $200 - $300 million range; Nollywood was developed by filmmakers adopting disruptive technologies digital filming and editing equipment. Innovation has paid off while global movie industry is looking to digital film as its future, Nollywood is entirely based on it; Basic model is small-budget (typically under $150,000), quick turnaround (typically shooting schedule between 20 and 30 days), high volume. In recent years, growing attention to technical and aesthetic quality; Huge and growing global fan-base, with well-established star system for talent; Inspiration for small-budget digital movie making elsewhere on the continent Riverwood (Kenya), Gollywood (Ghana). 2
GLOBAL MOVIE INDUSTRY STRUCTURE The top three movie producing countries in the world by output are: The United States - Hollywood India - Bollywood Nigeria - Nollywood Globally, the movie industry typically has three main revenue prongs: Theatrical Exhibition Home Video Broadcast/Ancillary Of the three top movie industries, only Nollywood is wholly dependent on home video, which is sold through a semi-formal wholesale distribution network This structural difference have profound consequences for formal third-party finance for film in Nigeria 3
COMPARISON OF REVENUE SOURCES Hollywood Bollywood Nollywood Home Video Home Video as % of total as % of total Ancillary Theater as revs revs (broadcast, % of total 98% 50% etc.) as % of total revs revs 17% Home Video as % Theater as % Other of total Ancillary Other Ancillary (broadcast, of total revs 16% revs Theater as 4% (broadcast, etc.) as % of 17% % of total etc.) as % of revs total revs total revs 2% 9% Other 0% Hollywood Bollywood Nollywood 4
HOLLYWOOD vs. NOLLYWOOD: INDUSTRY STRUCTURE United States Nigeria Major dominated studio No major studios built system large corporate around production producers and distributors Major distributors (known like Universal, Sony as marketers) who operate Historically, active system a semi-formal wholesale of independent producers network Well-defined revenue Large numbers of picture consisting of independent/individual domestic and international filmmakers exhibition, home video, Revenue picture almost pay TV, free-to-air entirely dependent on broadcast windows domestic home video sales
HOLLYWOOD vs. NOLLYWOOD: FILM FINANCING United States Nigeria Major studios initiated and Marketer (distributor) initiated financed and financed Independent productions: Independent producers: Equity financing Pick-up (Marketer buys Pre-sales completed movie in its entirety) Production loans (non-recourse, Equity financing (self, friends & IP and contracts as collateral) family) Negative pick-up (major buys Personal loans (recourse, IP not some or all rights to completed accepted as contracts) movie) Reducing risk: Completion Guarantee Errors & Omission Insurance
ELEMENTS FOR SUCCESSFUL FILM FINANCE Establish clear chain of title - adequate documentation of permissions and ownership for all of the intellectual property rights underlying a movie as well as key contractual relationships Efficacious registries for recording ownership and/or security interests in the completed movie equity investors and debt providers need to be able to establish their claims to the economic value that a movie represents, even though it is an intangible asset. 7
KEYS TO IMPROVING NOLLYWOODS ACCESS TO FINANCE Developing and formalizing multiple revenue streams exhibition, home video distribution, broadcast Establishing chain of title documentation of ownership and contractual rights Enabling the recording of security interests and transfers of rights through registries linked to IP ownership database Increasing industry awareness and understanding on the part of financial institutions Introducing risk-reducing financial instruments 8

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Film Financing In Nigeria Opportunities And Challenges

  • 1. FILM FINANCING IN NIGERIA: OPPORTUNITIES AND CHALLENGES prepared for the INFORMATION MEETING ON INTELLECTUAL PROPERTY FINANCING organized by the World Intellectual Property Organization (WIPO) Geneva, Switzerland March 10, 2009 Dayo Ogunyemi 234 Media Partners +234.803.390.9988 +1.917.309.8278 dayo.ogunyemi@gmail.com
  • 2. FILM? IN AFRICA? WHY FILM FINANCE IS IMPORTANT Arguably, movies currently constitute Africas most valuable intellectual property products; The movie industry, driven primarily by Nigerias Nollywood, is the most active and valuable part of the internal knowledge economy in Africa today; Movie industry growth vastly outpaces that of the publishing, music, and software industries; It is therefore critical to Africas economic growth that its formal financial sector is able to engage productively with the movie industry. 1
  • 3. MEET NOLLYWOOD, NIGERIAS FILM INDUSTRY Nollywood is 3rd largest film industry in the world, after Hollywood and Bollywood; In just over a decade and a half, Nollywood has grown from nothing to annual revenues estimated in the $200 - $300 million range; Nollywood was developed by filmmakers adopting disruptive technologies digital filming and editing equipment. Innovation has paid off while global movie industry is looking to digital film as its future, Nollywood is entirely based on it; Basic model is small-budget (typically under $150,000), quick turnaround (typically shooting schedule between 20 and 30 days), high volume. In recent years, growing attention to technical and aesthetic quality; Huge and growing global fan-base, with well-established star system for talent; Inspiration for small-budget digital movie making elsewhere on the continent Riverwood (Kenya), Gollywood (Ghana). 2
  • 4. GLOBAL MOVIE INDUSTRY STRUCTURE The top three movie producing countries in the world by output are: The United States - Hollywood India - Bollywood Nigeria - Nollywood Globally, the movie industry typically has three main revenue prongs: Theatrical Exhibition Home Video Broadcast/Ancillary Of the three top movie industries, only Nollywood is wholly dependent on home video, which is sold through a semi-formal wholesale distribution network This structural difference have profound consequences for formal third-party finance for film in Nigeria 3
  • 5. COMPARISON OF REVENUE SOURCES Hollywood Bollywood Nollywood Home Video Home Video as % of total as % of total Ancillary Theater as revs revs (broadcast, % of total 98% 50% etc.) as % of total revs revs 17% Home Video as % Theater as % Other of total Ancillary Other Ancillary (broadcast, of total revs 16% revs Theater as 4% (broadcast, etc.) as % of 17% % of total etc.) as % of revs total revs total revs 2% 9% Other 0% Hollywood Bollywood Nollywood 4
  • 6. HOLLYWOOD vs. NOLLYWOOD: INDUSTRY STRUCTURE United States Nigeria Major dominated studio No major studios built system large corporate around production producers and distributors Major distributors (known like Universal, Sony as marketers) who operate Historically, active system a semi-formal wholesale of independent producers network Well-defined revenue Large numbers of picture consisting of independent/individual domestic and international filmmakers exhibition, home video, Revenue picture almost pay TV, free-to-air entirely dependent on broadcast windows domestic home video sales
  • 7. HOLLYWOOD vs. NOLLYWOOD: FILM FINANCING United States Nigeria Major studios initiated and Marketer (distributor) initiated financed and financed Independent productions: Independent producers: Equity financing Pick-up (Marketer buys Pre-sales completed movie in its entirety) Production loans (non-recourse, Equity financing (self, friends & IP and contracts as collateral) family) Negative pick-up (major buys Personal loans (recourse, IP not some or all rights to completed accepted as contracts) movie) Reducing risk: Completion Guarantee Errors & Omission Insurance
  • 8. ELEMENTS FOR SUCCESSFUL FILM FINANCE Establish clear chain of title - adequate documentation of permissions and ownership for all of the intellectual property rights underlying a movie as well as key contractual relationships Efficacious registries for recording ownership and/or security interests in the completed movie equity investors and debt providers need to be able to establish their claims to the economic value that a movie represents, even though it is an intangible asset. 7
  • 9. KEYS TO IMPROVING NOLLYWOODS ACCESS TO FINANCE Developing and formalizing multiple revenue streams exhibition, home video distribution, broadcast Establishing chain of title documentation of ownership and contractual rights Enabling the recording of security interests and transfers of rights through registries linked to IP ownership database Increasing industry awareness and understanding on the part of financial institutions Introducing risk-reducing financial instruments 8