Introduction ix
Evolution of the Major Studios 17
The History of Independent Film 39
The African Queen 49
The Production Code of 1930 57
Getting the Public to See Your Movie 63
Learn to Become a Producer 69
Prepare to Meet Your Investor 77
Managing Investor Attitudes 93
Basic Accounting Terms 99
Preparing Budgets 105
Hollywood Accounting 121
What Makes a Great Movie? 129
Isolating Investment Risk (LLCs) 135
What Makes a Great Business Plan? 141
Financing Alternatives 157
Film Distribution 165
Film Tax Incentives 171
“The Internet Threat” 185
Summary 193
Let’s assume that you have a great script, know many people in the film industry and still can’t your project off the ground. What can you do about it? What’s stopping you from going to the next level?
If you are like most aspiring moviemakers, you have produced your promos/trailers, worked the film festival circuit, attended film finance conferences and talked to anyone who will listen to you -- and many people have shown a tremendous amount of interest. Yet, they do not want to put their own money into your film or do not want to open the door to people who might be willing to put money into your project.
Independent moviemakers do not fail because they make bad movies, they fail because either they run out of money during the film production process or they fail to raise enough money to cover their costs to appropriately and affectively market their movie. In either case, the independent moviemaker fails to develop a long-term strategy, which allows him to make movies as a life-long career.
Excerpt
Let’s assume that you have a great script, know many people in the film industry, and still can’t your project off the ground. What can you do about it? What’s stopping you from going to the next level?
If you are like most aspiring moviemakers, you have produced your promos/trailers, worked the film festival circuit, attended film finance conferences and talked to anyone who will listen to you -- and many people have shown a tremendous amount of interest. Yet, they do not want to put their own money into your film or do not want to open the door to people who might be willing to put money into your project.
When I started financing independent films, I relied on moviemakers to present me with terms and conditions, which I could not validate in the market. As a result, I did not know if the deal was good or not. In many cases, I did not get good deals. In fact, I lost a lot of money.
To date I have financed several independent films and one dinner theater. None of them has made a lot of money. Do I consider that a failure? Absolutely not. My dad always told me, “You’ll have more losers in life than winners.” However, to stay in business, your winners have to cover the losses from your losers. As a result, I am able to continue financing films, and still hope to hit the jackpot.
Independent moviemakers do not fail because they make bad movies; they fail because either they run out of money during the film production process or they fail to raise enough money to cover their costs to market their movie appropriately and effectively. In either case, the independent moviemaker fails to develop a long-term strategy that allows him to make movies as a life-long career.
Think of a homebuilder who builds a house with his own money, but fails to convince a bank to provide him with a construction or home equity loan. Even if he completes the house, he may not have enough money to furnish it. Even if the homebuilder has enough money to furnish the house, he may not have enough money to properly market the property. And, on top of that, even if he has the money to market his well-crafted, beautifully designed 5-bedroom luxury home, he may not be able to find a buyer willing to pay his price. A similar situation faces all independent moviemakers.
Many people think that they have what it takes to make a movie. From early childhood, we are enchanted by the idea of making movies. We sat in front of the TV as a kid, went to the movies, and watched cartoons. Many of us dream about making movies, but we fail to make our dreams a reality. For the few of us who dare to make a movie, we fail to learn how to do it sensibly and with a coherent strategy.
Many independent moviemakers focus on loglines, story summaries, plots, action, dialogue and surprise elements. They focus on their once-in-a-lifetime script, and peddle it as a unique creation without thinking about how much it will cost or generate at the box office, DVD store and on the Internet. They rarely focus on the post-production costs, let alone the marketing costs (the true hurdle for a film’s financial success). In short, the independent moviemaker underestimates the true cost of making the film. On top of that, they rarely talk intelligently to investors, because the independent moviemaker does not learn the unique terms and language used by sophisticated investors.
Many independent filmmakers spend an inordinate amount of time lining up talent and actors with high name recognition. In the process, the filmmaker loses track of the financial side of the equation and never hooks the investors. In fact, many movies do not get made, because the screenwriter and/or producer tries to attach actors who need to see the money first, while investors will simply not put up the money unless the actor is available and committed to the project. This most ubiquitous and hated Catch-22 afflicts the majority of independent films.
Does every independent moviemaker have to think like a Wall Street banker? The answer is “no.” However, if the moviemaker wants to make movies year after year after year, he/she must build a reputation of profitability. Success does not come from hitting home runs; it comes from hitting singles each and every time one goes to bat.
Is there a way to ensure the profitability of a movie? Yes. However, you have to line up all of the pre-production, production and marketing elements before you start filming.
Let’s meet the first-time indie filmmaker. She is young, ambitious and just out of one of the top LA or NY film schools. She has tremendous energy, enthusiasm and a bottomless reservoir of out-of-the-box creativity. She surrounds herself with other creative types yearning to make a breakout film. Instead of trying to hit singles and get on base, she goes for the home run and fails her investors. In other words, the indie filmmaker, and her investors, tried to hit the jackpot in Vegas, win the Powerball lottery, or cash in on an exploding penny stock.
Now meet the first-time accountant. He is young, aloof and graduated from a university with an advanced accounting degree. He has discipline and expert knowledge in accounting, taxes, budgeting and finance. He hangs out with other accounting professionals and shuns the limelight. Secretly, however, he admires the life of the moviemaker, but does not have the courage (or financial wherewithal) to pursue the life of an artist.
What would happen if an indie filmmaker could combine the best parts of these two worlds? What if one could be creative, yet follow the rules of business discipline? Do you think this combination would guarantee financial success year after year after year?
Take a hard look at any other industry (e.g., banking, aircraft manufacturing, waste management, solar). They predict profitability through accurate forecasting and budgeting, and seek to find wholesalers and distributors to sell their products to retail stores and end-users. The problem with indie filmmakers is that they focus too much on the “show” and not enough on the “business.” Similarly, if a toy manufacturer created a new toy at a cost that the public would not or could not afford, he would be out of business in a heartbeat.
To make profitable movies, one has to learn more about accounting, taxes, finance, and budgeting, for without them, a filmmaker will never be able to develop a long-term record of producing profitable pictures. And with success comes greater and greater amounts of capital, which brings more and more wealth.
In recent years, many independent films should not have been made. When the stock market, real estate markets and government securities became less and less attractive to qualified investors, financially astute people put a lot of money into poorly made and poorly conceived films, in a vain hope to make up for their other losses. Having produced an oversupply of mediocre movies, it is no wonder that indie filmmakers face indifference, if not outright hostility, from potential investors.
If you plan to court a seasoned and savvy movie investor, you better be damn sure that he is going to review your business plan and movie script against a series of guidelines to determine if your movie can be made and sold for a profit. If the investor is going to provide financing without any form of security other than a promise of success, he is going to do everything possible to ensure the probability of a profit.
When I first started to invest in independent films, there were very few books, articles and seminars on the subject. Lawyers accustomed to making six-figure fees on studio-based projects wrote most of the books, so the level of germane information was scant. There were no courses to explain how to manufacture a movie using accounting rules and financial budgets. Of course, there was plenty of literature on acting, auditioning, filmmaking techniques and the like, but that didn’t help me, as a businessperson, judge the potential profitability of a film project.
As an indie film investor, I learned early on that there were only two ways to make money in independent films: 1) generate revenues by looking at alternative uses of the film and 2) reduce production/distribution costs by outsourcing certain key elements.
In fact, most investors never invest in a second film because they had such a negative experience with their first one. Sadly, for the few investors that made money in their first few films, they lose their money after a while because they eventually make bad decisions. Their emotions and ego take over and start to override good solid business judgment and decision-making.
Although it sounds simple, I am quite surprised by the number of independent filmmakers who fail to get their projects produced. You would think that even a novice filmmaker would research the necessary business requirements of making a film before shooting.
I truly believe that any competent moviemaker can make a profitable film. In order to do so, one has to learn the basic rules of movie accounting, taxes, finance and budgeting, and get a committed buyer with cash to market and distribute the film. For without these disciplines, only luck will save you.
As a service to the indie film community, I do not charge for my time. As long as you continue to learn, I will help you. If I think you have a profitable project I will either invest in the project or let my friends know about it. My contact information is located at http://showbizmanagementadvisors.com.
Good luck and I hope to see your movie on the big screen.
Professional Reviews
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"Wonderful book for the first-time or experienced filmmaker who is looking for the money"
"Excellent"
"There is no legal crap in this book. Just good old common sense."
"Heard Jeffrey speak many times at Film Finance Conferences and Festivals. He puts his own money into projects that he believes in and walks the talk. Doesn't get better than that."
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