Today's guest post is from attorney Steven Beer. We look forward to many more posts from Steven on this very subject: Filmmaker Empowerment. Producing independent films requires a broad skill set, including a keen eye for material, masterful team management skills, a facility with numbers, and an understanding of the marketplace. There is only one thing more difficult than producing and making a great independent film: securing a modest return on one’s investment in an independent film.
Why do so many prospective investors (beyond friends and family) roll their eyes when they are asked to invest in independent films? One business manager swears that, generally speaking, independent filmmakers and producers are not capable business people. He believes that they are so focused on making the film that they tend to overlook many key business elements. In support of this assertion, he cited the cursory nature of most business plans, the modest returns typically offered for a risky investment, and the failure to fully establish reliable marketing and distribution plans.
The business manager raised some very good points. The reality is that many producers need to re-think the standard business models for independent films. Let’s begin with the typical business plan, which often contains rehashed discussions about the marketplace and includes outdated success stories like “Slingblade,” “Blair Witch Project,” “Little Miss Sunshine,” and “My Big fat Greek Wedding.” All of these projects were produced many years ago and distributed in a vastly different marketplace. These were all exceptional projects and not necessarily representative of the independent film marketplace, past or present.
An additional question: why do most business proposals today concentrate on the prospect of an “all rights” deal with a hefty minimum guarantee and substantial P&A commitment? By and large, that ship left port several years ago and should be sold as scrap metal for smaller, more efficient vessels that are customizable and scaleable.
We recently participated in the Tribeca Film Festival All Access program. As part of the program, we reviewed business development materials from more than a dozen projects and discussed them with their producers. We were surprised that very few of the business summaries discussed alternative distribution strategies where the producers retain control of all facets of the marketing, promotion, and distribution of their films. Most of the projects discussed the traditional distribution model, which relies on the prospect of a festival bidding war between distributors. Given the overwhelming number of films in recent years where investors did not recoup their principal and the decreasing number of distributers buying films, it is probably time to address the financial realities of today’s marketplace.
Perhaps the best place to start is with production budgets, which tend to be overly generous and based on factors that speak to another distribution economy. For a variety of reasons, the costs of producing a quality independent film have reduced dramatically. Producers would be advised to scrutinize every line item and justify all below and above the line expenses. For instance, do you really need to pay the talent more than the SAG minimums? Will the presence of a particular actor materially increase the value of a film in the international marketplace? In responding to these questions, seek out reliable and timely market sources to confirm tangible value.
We are encouraged when working with filmmakers and producers who understand that reduced budgets accelerate recoupment for a film’s investors. Happy investors participate in additional projects and attract others to invest.
The lesson learned is that we need to evaluate all aspects of the business in order to stay afloat in a challenging marketplace. There are other considerations to discuss. We will address them in this space on a regular basis and encourage you to join in the conversation.
Steven C. Beer is a shareholder in the international entertainment practice of Greenberg Traurig’s New York office. Steven has served as counsel to numerous award-winning writers, directors and producers, as well as industry-leading film production, film finance and film distribution companies.