Evening star., 1923-10-03
Financing MOVIES:
!. IS INTRICATE TASK
Big Concessions Demanded,
as Banks Fear Film Risks.
Loan Board Formed.
ny i. C. ROYLE.


Special Dispatch to The Star.
NEW YORK, October S.-The ma
jority of the producers engaged in
the fifth largest industry In the
United States are unable to obtain
the money for it's financia! needs from
the banks of the country. As a con-
sequence angels" are now being
given a course of intensive training
|. in the ramifications of the moving
picture business.
The movies. according to prominent
producers, now are in the situation
which in it's early stages was preva-
lent in automobile manufacture.
Banks, ignorant of the intricacies of
the industry and without intimate
check on its details and costs have
been unwilling in most instances to
loan money necessary TO finance the
production of pictures. This policy
has been strengthened by the cold
eye which the Federal Reserve Board
has turned on the rediScounting Of
movie paper.
Funds Prove Stumbling Bioek.
4 producer OF reputation, for exv
ample may have secured a moving
picture play, acquired an option on
the services of director, star and
supporting company, arranged for the
distribution of the finished picture
the payment of large sum by the
distributors on delivery of the com
pleted film and still be absolutely
unable to borrow cent from the
hanks for the expenses OF producing
u picture.
AS a consequence he is. forced to
seek an angel. as they are called
in theatrical parlance. to fnanet the
has demanded not only the producers
right eye in the matter of terms ana
security, but the latter has been
obliged TO make other concessions.
such as including some special player
in the cast or featuring some favor
lite of the angel"
New Way to Get Capital.
Tire history of the young moving
picture industry is full of instances
where producers were compelled to
make extraordinary concessions Tor
ready cash. Perhaps the most pron:i-
nent example, OF this GSnsgrnGs Gr,aS ThS
was compelled to give up 10 per cent
OF the rights OF that production to
secure $4,000 for filming IL.
AS Il result of these conditions. a
number of men experienced. In the
some of the most prominent pro-
ducers, have a moving picture finance
corporation called the Motion Picture
Capital Corporation. through which a
| producer whose reputation lis estab-
lisned may borrow money on ads-
Quate security for the production or
completion OF a picture on business
terms.
How Methodls Are Applied.
In making these leans chart pre-
pared along the limos Of those COM
piled in the insurance business indi..
eating possibilities of loss is used
and steps taken to protect the lender
against all possible contingencies.
The financing corporation, which is
headed by Frank r. Wilson, who ham
died the greater number of the liberty
loan drives for the Treasury Depart
ment, in most instances takes over a
portion of the loan itself and distributes
the remainder among a list Of bankers
and financiers who have become con-
yersant with the details OF motion-pic-
ture making and to whom this method
of investment appeals.
Many of these capitalists are menu
bers of the boards OF banks which, as
matter of policy. decline to touch mo-
picture loans. This list of investors
is being increased gradually, as the
operations of the financing corporation
have progressed and as the details of
the industry become better known. 1t
is not likely that participation in these
loans will be offered to the general pub
lie in the form of note issues, because
the fact that the loans usually are for
very short periods would tend to detract
from their attractiveness for ordinary
|Snvestors.
Big Concessions Demanded.
The cost Of obtaining ready cash even
under favorable circumstances is not
light at present. For example, one ma
tionally known producer this week hor-
rowed 100000 to complete two pictures
IN which two stars of wide popularity
are TO appear.
The collateral put up consisted of
ors. given to the producer in payment
Cor the state rights on the films the
producer will turn out this year. The
loan was from four to six months and
the compensation. including bonus and
the usual per cent, brought the cost to
the producer to Y per cent a MONTH.
Another loan of $4,000 for six months
cost $1,000 in compensation plus the
uSual 6 per cent. In another case where
the distributor has guaranteed return
OF 1O5s per cent of production costs
within year, a four-months' loan re-
uuired bonus which, added to the basic
interest rate Of per cent. brought the
cost to 2R per cent month. In still
a bonus of s12,5O0 in addition to the
u per cent and assignment of 3 II per
cent of the gross receipts until a sum
OF $4,000 was reached.
Insurance Also Heavy.
In practically every case the lenders
were protected by Lloyds against ex-
cess costs in making the film involved
due TO accident, sickness or death of
the director and leading members OF
the cast. These conditions do not apply
to some of the large producers, who con-
duct their own financing. Ii affects.
however some hundreds Of productions
annually, 1t is estimated that o00 large
pictures are filmed a year. or these
the producers who finance themselves
turn out about $50, experienced pro.
ducers of proven ability to forecast pub
and those taking a fiyer'r in the bust
ness, 450.