The government is working to bolster private sector funding in Taiwan’s film and TV industry by strengthening communication between studios and lenders.
The buzz of excitement at Taipei City-based V.G. Films reached fever pitch in December 2017 as shooting commenced on its latest television series “Angry Bodhisattva.” Set in 1940s Taiwan, the show about a newlywed caught up in a murder investigation is the most ambitious ever attempted by the studio. It is also the most expensive. According to V.G. co-founder David Wu (吳子維), production of the series is funded primarily by loans from Taipei-headquartered First Bank, highlighting a growing willingness among local financial institutions to back cultural and creative projects. “This series wouldn’t have been possible without the support we’ve received from the banking sector,” he said.
For Wu, the more ready availability of funding marks a sea change for Taiwan’s film and TV production industry. Starting out in the business in the 1990s as an assistant to Chang Tso-chi (張作驥), the acclaimed director of such films as “The Best of Times” and “Thanatos, Drunk,” he learned firsthand about the difficulties of raising capital. “In those days, if you failed to secure government grants, you had virtually zero chance of making your movie.”
While the situation remains far from ideal today, with many filmmakers still relying on subsidies, the government has taken notable steps in recent years to make it easier for studios to acquire funding. Among the most significant was the establishment in April 2017 of the Office of Professional Assistance in Audiovisual Industry Investment and Financing under the Ministry of Culture (MOC). According to MOC Vice Minister Lee Lien-chuan (李連權), the new unit acts as a bridge between filmmakers and investors. “We want the financial sector to become more active in funding film and TV projects, so we set up this office with the aim of strengthening communication and understanding between the industries.”
Chen Chen-hsi (陳臣璽), manager of the Small and Medium Enterprise Banking Department under First Bank’s Corporate Banking Business Administration Division, said that private sector lenders are typically quite hesitant to back film ventures due to difficulties in evaluating the potential demand and profitability of projects. Another factor is the often lengthy period between loan approval and repayment, he added.
“The MOC office can ease these concerns by providing independent analysis,” Chen said. “Also, as a government-administered third party, it can facilitate coordination between lenders and studios in the event of problems, such as when a half-finished project faces risk of closure.”
Growing access to funding and investment is boosting the quality and quantity of domestically produced movies and TV shows. (Photo by Chin Hung-hao)
Credit Guarantees
An important initial regulatory move to ease private sector financing difficulties for film and TV productions came in 2004 with changes to the submissions process for Taiwan’s Small and Medium Enterprise Credit Guarantee Fund. Overseen by the Ministry of Economic Affairs (MOEA), the fund supports new business development through the provision of partial guarantees for lenders. Prior to the rule modifications, all submissions had to come through financial institutions, in essence requiring applicants to first secure loan approval. This made it difficult for startups and unorthodox ventures to get the guarantees.
Under the 2004 changes, projects in innovation-based and cultural and creative industries are allowed to apply directly to the fund. If approved, they can present the credit guarantees to financial institutions, significantly improving their prospects of securing loans.
The impact of these rule changes on the funding models for local films became apparent following the release of box office smash “Cape No. 7” in 2008. The domestically produced work was partially financed through two NT$7.5 million (US$250,000) loans from First Bank and Taiwan Business Bank, respectively, after the film’s director, Wei Te-sheng (魏德聖), secured an 80 percent credit guarantee from the MOEA fund.
With an overall budget of about NT$50 million (US$1.67 million), the romantic drama became the top-grossing locally produced film of all time at the Taiwan box office, earning more than NT$530 million (US$17.67 million). The scale of this success raised eyebrows across the country’s banking and venture capital sectors, encouraging financiers to give film and TV projects more careful consideration, according to First Bank.
Public-Private Investment
In 2011, the MOC also moved to bolster funding for the film and TV industry through the establishment of a public-private sector investment framework. Under the program, the ministry screens and approves joint investments proposed by local venture capital firms. The government’s contributions come from the National Development Fund (NDF) under the Cabinet-level National Development Council, which has earmarked a total of NT$10 billion (US$333 million) for the initiative over a decade. Initially through the program, the NDF typically provided up to half of the total proposed investment. In 2016, the rules were altered to allow the fund to supply up to 75 percent of the overall amount.
“Cultural and creative products like movies are quite unique in that they can generate very appealing returns if they resonate with audiences,” said Hemingway Chiu (邱明慧), senior vice president of CTBC Venture Capital Co. The investment arm of Taipei-based CTBC Financial Holding Co. started eyeing cultural projects in 2010, with a particular focus on cinema. Many of the 17 movies it has invested in to date were backed in partnership with the NDF.
Organized annually in November, the Golden Horse Film Project Promotion, part of Taiwan’s largest movie festival and awards show, facilitates communication and matchmaking between filmmakers and investors. (Photo courtesy of Taipei Golden Horse Film Festival Executive Committee)
Among the projects that CTBC Venture Capital has co-sponsored with the fund is “Step Back to Glory,” a 2013 movie inspired by the true story of a high school tug-of-war squad from Taipei that achieved success in international competitions. Five percent of the profits from the hit film were donated to the real-life team to subsidize its trip to the 2013 World Games in Colombia.
CTBC Venture Capital and the NDF also jointly invested in Mandarin Vision Co., a film production company established in 2012 that co-produced the “The Great Buddha+.” The dark comedy picked up five honors at the 2017 Golden Horse Awards, Taiwan’s equivalent of the Oscars.
Bridging the Divide
For production studios, early loans or investment are often essential for the realization of a project like a TV series, even when the work has been ordered by a major broadcaster or distributor. Such was the case with “Angry Bodhisattva.” Wu of V.G. Films said that while the show is commissioned and fully funded by Public Television Service (PTS), he would not have been able to make it without securing loans from First Bank totaling NT$14.7 million (US$490,000), equivalent to about 60 percent of the show’s budget. “Most of the money from PTS won’t arrive until we finish shooting,” he explained. “However, about 90 percent of the production costs have to be paid by that point.”
As part of its efforts to increase the availability of loans and venture capital funding for studios, the MOC is working to bolster awareness in the banking sector of the financial challenges faced by independent production studios, including the typically long gap between the commencement of a project and returns on investment. In 2017, the ministry commissioned two workshops in Taipei aimed at fostering exchanges between professionals from the two sides. The first of these was staged in May by the Taiwan Academy of Banking and Finance and featured tours of a film studio and TV station for financial services industry representatives. The second was held in November by the Taiwan Venture Capital Association and included an introduction to investing in film and TV projects.
While these forums lasted just a few days each, the MOC’s recently formed Office of Professional Assistance in Audiovisual Industry Investment and Financing offers similar services year-round. “The unit played a big role in enhancing mutual understanding between my company and First Bank when I sought financing for ‘Angry Bodhisattva,’” Wu said. “It also helped put me in touch with possible investors who I’d otherwise never have met.”
The office has some 130 consultants available to help production studios with issues like financing, legal affairs, marketing and screenwriting. These experts can provide advice in areas ranging from drafting business plans and applying for bank loans to fine-tuning scripts to make them more commercially viable. To date, the consultants have provided services to more than 70 individuals and production houses.
With efforts to connect Taiwan’s financial and filmmaking worlds gathering momentum, MOC Vice Minister Lee said he has high hopes for the creative industry. “Increased access to funding will boost the quantity and quality of local film and TV productions as well as foster talent creation and retention,” he said. “In view of the measures being taken to spur lending and investment, the future of this sector looks very bright.”
Write to Oscar Chung at mhchung@mofa.gov.tw