All available in:
- A completion bond guarantees the on-time completion of a film project within the agreed budget.
- It is issued by Completion Guarantors and serves as security for investors.
- Complex contractual relationships between producers, guarantors and financiers are required.
- The risk reduction for investors is a key advantage of the completion bond.
- High costs (2-6% of the budget) can be a challenge.
- In the German film market, the completion bond is becoming increasingly important for international productions.
- Digitalization and streaming platforms are changing the requirements for this insurance mechanism.
A completion bond, also known as a completion guarantee, is an insurance policy used in film and media production to guarantee the completion of a project on time and within the agreed budget. This guarantee is issued by specialized insurance companies, known as completion guarantors, and serves as security for investors and financiers.
Legal classification
1. insurance law: special form of surety or guarantee insurance
2. contract law: complex contractual relationships between producer, guarantor and financiers
3. copyright: possible transfer of rights in the event of takeover by the guarantor
4. international law: often cross-border contracts for international co-productions
Functionality
1. risk analysis: thorough examination of the project by the Completion Guarantor
2. conclusion of contract: agreement between producer, guarantor and financiers
3. monitoring: continuous monitoring of the production process by the Guarantor
4. intervention: the guarantor can intervene in production in the event of problems
5. payout: In extreme cases, assumption of additional costs or repayment to investors
Application areas
1. feature film productions
2. high-budget TV series
3. elaborate documentaries
4. animated films
5. international co-productions
Advantages
1. risk reduction for investors and financiers
2. facilitation of project financing
3. professional project management and monitoring
4. potential cost savings through efficient risk management
5. enabling complex and high-risk productions
Disadvantages and challenges
1. costs: premiums can be substantial (typically 2-6% of the budget)
2. restriction of creative freedom: possible interventions by the guarantor
3. complexity: complex contract design and negotiations
4. time required: intensive due diligence processes prior to contract conclusion
5. dependency: potential loss of control in the event of problems
Special features of the German film market
1. less common than in Anglo-Saxon countries
2. increasing importance of international co-productions
3. interaction with German film funding systems
4. adaptation to German case law and contractual standards
Bonding process
1. preliminary assessment: initial assessment of the project and the producers
2. due diligence: detailed examination of script, budget, schedule and team
3. contract negotiation: determination of conditions and premiums
4. production monitoring: regular reports and checks
5. completion: release of the guarantee after successful completion
Current developments and trends
1. digitalization: adapting to new production and distribution technologies
2. streaming platforms: New requirements due to changed production models
3. COVID-19 pandemic: increased importance of insurance against production interruptions
4 Globalization: Increasing complexity in international co-productions
Legal and practical challenges
1. jurisdictional conflicts in international productions
2 Definition and delimitation of “force majeure” events
3. data protection aspects of production monitoring
4 Copyright issues in the event of takeover by the guarantor
Conclusion
The completion bond is an important instrument for minimizing risk in film and media production, which is used in particular for large and complex projects. It facilitates financing and offers security for investors, but also entails additional costs and potential restrictions. In Germany, the completion bond is becoming increasingly important, especially for international co-productions. The future of this instrument will be significantly influenced by the development of the global media landscape, new production and distribution models as well as legal and economic conditions.
