Project finance

How can Project Finance help your studio?

Project Finance can be beneficial as it provides a cornerstone of the finance plan for your game, which apart from being valuable in itself, may help you to unlock other finance, as third party investors may be incentivised to invest if they can see that you already have a project financier willing to invest on the basis that the game has commercial potential.

Project financiers would typically allow your studio to retain the IP in your game (although note the third bullet point below under What information and security will you need to provide to the project financier? Below).

What are the fees/costs associated with Project Finance?

The project financier usually charges a fee from the budget of the game and/or a premium on its finance which is payable from the game’s revenues. Typically there are also legal fees involved with obtaining Project Finance, and the project financier will usually expect its legal fees to be paid for from the budget of the game. In certain instances, the project financier may also request a revenue share from the game. You should take advice on any deal proposed by a project financier, as there is usually room for negotiation of the financial terms.

How easy is it to find Project Finance?

Project Finance is long-established and a very important source of finance in the feature film and television industries, but less so for the video games industry. However, there are financiers out there that are open to considering games projects.

In order to secure Project Finance, you will likely need to demonstrate the strong commercial potential of the project (e.g. through sales forecasts, your track record, examples of previous similar successful projects and any other relevant factors).

What information and security will you need to provide to the project financier?

If a project financier agrees to provide finance, its requirements will vary, but typically it would need:

• you to set up a special purpose vehicle so that the game assets are ring-fenced in that vehicle;

• extensive information about the budget, finance, production schedule, marketing plans and all other aspects of the production and exploitation of the game;

• to take security (in the form of a charge or similar) over the game assets, which means that if you fail to complete the game or are otherwise in material breach of your obligations, it would be able to take ownership of the game IP and assets (in practice this is rare); and

• its funding (plus any premium) to be recouped in full before your studio or any other financiers begin to receive any revenues from the game i.e. the project financier is normally repaid in first position.

As the requirements of project financiers can be complicated, it is important to seek legal advice.

Where can I find out more?

Feel free to contact Mark Phillips or Kostya Lobov for further information about Project Finance.