What is a Strike Price in Film?
Whenever a film is working its way through the production process a completion guarantee is produced guaranteeing that the film will be finished and delivered within the defined scope of time and budget. The purpose of a producer securing the completion bond guarantee is to provide proof to the financiers or the bank that the production will be completed provided the strike price is made available to the producer. But what is a strike price in film, and what does it mean?
What is a Strike Price?
The strike price represents the cost of production that the completion guarantor believes will be required. In order to finalize and deliver the film project.
In establishing the strike price, the guarantor will compute the total budgeted. With above the line expenses, below the line expenses, fringes and insurance costs.
The guarantor then estimates the total amount of interest and expected financing costs associated with any borrowed funds required to produce the film.
Additionally, they added in their fee for the completion guarantee. As well as an contingency allowance. Together, all of these costs make up the “strike price.”
Why is the Strike Price Important?
The strike price is important! Because it represents the amount that must be made available to the production company or producer. Either by the bank or financier.
In order to ensure production of the film and delivery within the estimated time. And within the estimated budget.
Strike price is the amount that must be made available to guarantee production. Once strike price is established, the completion bond guaranty is produced.
Which provides reassurance to film financiers and to the banks that:
- Production and delivery of the film will occur within budget. And within the estimated timeline provided within the production schedule that is approved by the bank or financier.
- The film will be delivered by the completion guarantor. In accordance with pre-approved production schedules. Advancing the required funds in excess of the pre-approved budget that is required to achieve this task.
- Should film production be abandoned, all funds invested into the film by the bank or financiers will be paid back by the completion guarantor.
In Summary
The strike price makes up a baseline estimate of the funds that will be required for the production to be completed, on schedule and within the predefined budget that was approved to begin with.
So, what is a strike price? It’s a production price that is estimated based on a number of variables including both above the line and below the line costs, insurance costs, interest, and financing fees.
As well as a 10% contingency allowance (or some other percentage if the standard 10% is not made available). The strike price represents the amount of funds that are to be made available to the producer in order to produce, and deliver, the film project.
