FILM? IN AFRICA?

WHY FILM FINANCE IS IMPORTANT

 Arguably, movies currently constitute Africa’s most valuable
intellectual property products;

 The movie industry, driven primarily by Nigeria’s 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 Africa’s economic growth that its formal

financial sector is able to engage productively with the movie
industry.

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…MEET NOLLYWOOD, NIGERIA’S 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).

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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

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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

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HOLLYWOOD vs. NOLLYWOOD: INDUSTRY STRUCTURE
United States
 “Major” dominated studio
system – large corporate
producers and distributors
like Universal, Sony
 Historically, active system
of independent producers
 Well-defined revenue
picture consisting of
domestic and international
exhibition, home video,
pay TV, free-to-air
broadcast windows
Nigeria
 No major studios built
around production
 Major distributors (known
as marketers) who operate
a semi-formal wholesale
network
 Large numbers of
independent/individual
filmmakers
 Revenue picture almost
entirely dependent on
domestic home video sales
HOLLYWOOD vs. NOLLYWOOD: FILM FINANCING
United States
 Major studios initiated and
financed
 Independent productions:
  Equity financing
  Pre-sales
  Production loans (non-recourse,
IP and contracts as collateral)
  Negative pick-up (major buys
some or all rights to completed
movie)
 Reducing risk:
  Completion Guarantee
  Errors & Omission Insurance
Nigeria
 Marketer (distributor) initiated
and financed
 Independent producers:
  Pick-up (Marketer buys
completed movie in its entirety)
  Equity financing (self, friends &
family)
  Personal loans (recourse, IP not
accepted as contracts)
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.

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KEYS TO IMPROVING NOLLYWOOD’S 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