What is a development deal?
Internet Filmmakers' FAQ
If you read the film industry trade press, from time to time you might see an announcement outlining that someone you may or may not have heard of has inked a 'development deal' with studio or major production company.
What this means is that the studio has provided the recipient with funding to develop one or more film projects, normally with a view that the studio will have first right of refusal on picking up a resulting project for production. Recipients are typically smaller production companies, but can also be individual producers or writers.
Developing film projects costs money. Rights need to be optioned, writers need to be paid, offices need to be maintained, and the phones and internet must stay on. Most production companies are run as very lean operations, but money for these activities still has to come from somewhere. Some companies are able to fund their development activities from the proceeds of previous productions, but this is not always possible. Firstly, it requires there to be previous productions; and secondly, those productions must actually be returning enough money to allow some to be channelled to development activities. Even successful production companies may make use of development funding to help smooth over their cashflow.
In the US, development deals are normally funded by the Studios or mini-majors. Elsewhere, development is most commonly funded through government-backed film agencies. Organisations such as the BFI (UK), CNC (France), and Telefilm (Canada) operate development finance schemes. A lucky few companies may be able to raise private equity to fund development, but this is extremely rare because development finance is the most risky of all film finance types. Typically, development finance is recovered from the film's budget when it goes into production. However, as the vast majority of films 'in development' never end up going before a camera, money spent in that phase is often unrecoverable.
Having development finance or a development deal is highly-desirable for almost all producers. But the nature and risk of this type of finance means, it's also one of the hardest to obtain.