2009 IFP Independent Filmmaker Conference (Part Two)

This is a continuation of WinGateFilms’ review of the “Making Your First Feature” programs at the 2009 IFP Independent Filmmaker Conference. “The Times: They Are A Changin’” panel consisted of Kenneth Woo (founder of Massify), Ted Hope (Truly Free Film, co-founder of Good Machine), Christine Vachon (founder of Killer Films), and Lance Weiler (founder of The Workbook Project), moderated by Brandon Harris (Filmmaker magazine). The theme of this panel was the changing nature of independent feature film development.

Traditionally, working strategies to secure funding indie films included foreign sales based financing based on the attachment of name actors, government funding for arts, and equity financing by friends and family of the filmmaker. Formerly, European broadcast tv sales financing was a viable option. European government financial incentives are increasingly available to feature filmmakers, though often with requirements maximizing use of that country’s nationals in above and below the line cast and crew positions. 

Weiler started The Workbook Project three years ago, inspired by the open software model, to promote the democritization of the tools of filmmaking and the building of community. He has sought to pursue solutions to the problems of fractured audiences and distribution outlets, to discover how to share audiences and how to bring creators together, while espousing transparency with regard to process.

Similarly, Woo set up Massify to serve as an online production network to help meet the greater demand for storytelling by providing a space for diverse professionals to meet and collaborate on project development. Vachon at Killer Films has teamed up with Massify for online filmmaking contests.

Prolific producer, Ted Hope discussed the emerging model of “crowd funding” for indie film projects. He recommended starting by building a base of about 5,000 followers as a prerequisite, and opined that although there are not yet many success stories, this fundraising strategy is on the rise as a way to raise 6 figure budget funds for the right projects.

According to Hope, this is an exciting time for short filmmaking, not so much for the possibility of monetizing short form content, but because the production of 4 to 5 quality shorts can help a filmmaker bridge one’s audience to one’s feature projects. Neill Blomkamp had previously only shot commercials and a couple short films before he teamed up with Peter Jackson to expand his 6-minute short film, “Alive In Joburg” into a $30 million feature, “District 9.” 

The panel agreed that the current market for actors makes it easier to attract name talent as many actors are not working or commanding the same high quotes.  

Michael
WinGateFilms
www.wingatefilms.com

2009 IFP Independent Filmmaker Conference (Part One)

On September 20, 2009, WinGateFilms attended the 2009 IFP Independent Filmmaker Conference series of programs entitled: “Making Your First Feature” in New York City at the Fashion Institute of Technology.

The first panel, “Show & Sell: Positioning Your Film for Festivals and Buyers” was co-moderated by Heather Winters and Peter Kujawski with panelists Jeff Hill (public relations), Alex Orlovsky (producer), Tom Quinn (producer/distributor), and Cynthia Schwartz (public relations).

Orlovsky emphasized that independent filmmakers need to think about how your film is going to be sold. Today, you need to be prepared to self-distribute, as your ultimate goal is to be able to make another movie. Schwartz suggested trying to collect interns to help with your self-distribution strategy. Schwartz and Quinn both agreed that it is extremely hard now to sell American indie films without any stars. Even getting press is not enough to sell a film in this market.

Hill recommended starting a film website and film marketing plan from Day One. You need to identify: what is the selling point of your film? Hill advised not to put a lot of downloadable content on your website, because a potential distributor may not like it. An exit plan following a festival run is a must; think that you are soliciting an audience of buyers.

To give a sense of the bleakness from a film sellers’ perspective, Quinn indicated that out of the 140 or so available films at the Toronto Int’l Film Festival this year, for example, Magnolia Pictures might only consider maybe 10%, and might only acquire 1%. He suggested that rather than being a small fish at Sundance, that it might be preferable to be a big fish at South by South West or Seattle Int’l Film Festival.

Orlovsky added that not many films are selling these days for 6 figures and only a tiny number are selling for 7 figures. He indicated that $100-220k fully delivered is probably the reasonable target ceiling for an American indie film sale.  

According to Quinn, Magnolia likes to see projects as early as possible, and makes more pre-festival film acquisitions than during the festival bustle. In considering optimal release strategy, independent filmmakers need to learn to draw the distinction between films that need a theatrical audience to be appreciated, and those that play fine on dvd at home.

Quinn recommended that the “best way to spend $50k in P&A money” would be to hire a good film publicist. Hill estimated a $5-10k per month cost, with sliding scale rates. Rates for hiring a publicist for Sundance were estimated between $10-15k. Schwartz indicated that public relations firms like to see films before festival acceptance, noting the importance of the screening slot. When shopping for a public relations firm, Winters advised the importance of finding out how many films the firm is taking to particular festivals.

Video-On-Demand (VOD) is an emerging outlet as a national audience portal. Quinn identified a “damn good title” as the most important pitch element, noting that the title is the way the film is going to appear on a VOD menu. One strategy to consider is to pitch your idea on twitter, and see how people react.

Michael
WinGateFilms
www.wingatefilms.com

DIY Days Indie Film Conference – Philadelphia

On August 1, 2009, WinGateFilms attended DIY Days, a free day-long independent filmmaking conference at the University of the Arts in Philadelphia. Founded by Lance Weiler (The Workbook Project), DIY Days events have also been held in LA, NY, SF, Boston and London.

Weiler’s intent is to foster a community of open creativity, similar to the way open source software nourished the explosion of software applications built on the base of freely available code. The conference included not only live physical attendance on-site, but also streaming online video feeds.

Keynote speaker, Douglas Rushkoff analogized the changing model of storytelling to the video gaming experience. Gamers begin by playing the game within the given parameters of the game rules, branch out to using cheat codes to modify the gaming experience, perhaps so far as to develop mods to the game world, and ultimately to program games.

Rushkoff argued that the evolution of new media and the democratization of interactive tools of creativity promotes decentralized value creation. In his view, the three main jobs for artists in the new environment involve participatory call and response interaction with the audience, tool creation (e.g., “dungeon mastering”), and the creation of safe spaces to promote creativity.

Scott Kirsner (author of “Fans, Friends & Followers”) spoke about the power of participation, recommended filmmakers “be where your audience is,” and stressed the importance of building an audience database. Kirsner mentioned that there appears to be a direct relation between blogs and point of purchase sales; better sales results have been reported from mention on high traffic blogs than from traditional media exposure.

Michael
WinGateFilms
www.wingatefilms

2009 Philadelphia Film Market – PA Film Production Tax Incentives

This is a continuation of WinGateFilms’ weblog review of panel discussions at the inaugural Philadelphia Film Market on June 23, 2009. Representatives from Entertainment Partners, Marco Cordova and Richard Guay joined with Sharon Pinkenson, Executive Director, Greater Philadelphia Film Office and Christine Peluso, Tax Credits LLC to discuss film production tax incentives. Entertainment Partners, one of the major film production payroll services, also produces the widely used Movie Magic Budgeting and Scheduling professional film production software programs.

According to the April 2009 MPAA report (based on 2007 data), the film industry accounted for 2.5 million American jobs, with an average production position salary of $74,700. Further, the film industry generated over $40 billion in US gross wages, over $38 billion in US vendor payments, $13 billion in income and sales taxes, and a $13.6 billion trade surplus. In this day of decline of US manufacturing jobs, the film business remains a dominant American export industry.

In May, 2009, Economic Research Associates completed a study of the economic impact of the Pennsylvania Film Production Tax Incentive Program for the 2007-2008 fiscal year. For the year studied, the PA film industry generated gross revenue of $524.6 million, creating over 3,950 new jobs, paying $146.4 million in wages, and $62.7 million in state and local taxes, for a net fiscal gain of over $4.5 million.

For the 2007-2008 and 2008-2009 fiscal years, Pennsylvania has provided a 25% film production tax incentive for qualified film and tv projects, including national tv commercials, that spend at least 60% of the budget on qualified PA expenses. The total amount available for tax credits in each year was $75 million.

At the time of this writing, the PA state budget for the 2009-2010 fiscal year has not been finalized, so it is unclear whether this economic development tax incentive program will continue, or even be funded at the same level as the past two years. As the PA film tax credit has been a significant boon to economic development in the Commonwealth, and has made PA oneof the most attractive locations for film production, it is hoped that this program will survive into the 2009-2010 PA state budget.

Michael
WinGateFilms
www.wingatefilms

2009 Philadelphia Film Market – Digital Distribution Panel

On June 23, 2009, WinGateFilms attended a Digital Distribution Panel at the inaugural Philadelphia Film Market held at Philadelphia Soundstages from June 22-28, 2009 in coordination with the 2^nd Philadelphia Independent Film Festival. Thomas Ashley, Invincible Pictures moderated the discussion with panelists Mike Nagle, Playboy TV Networks and Michael Butler, Independent Online Distribution Alliance (IODA).

Mike Nagle spoke about the emerging “tv anywhere” model for pay tv networks seeking to provide video content through existing cable outlets and online platforms. Dedicated boxes such as Slingbox (streaming tv service to mobile devices, such as blackberry and iPhone), Moxi (HD DVR) and Roku (Netflix Player) deliver HD video content outside normal cable channels. Coming from the adult market, Nagle noted the slim margins for adult material and emphasized the desirability of amateur product in that market. PlayboyTV relies heavily on reality themed content where “attainability” is a more desirable trait than fantasy sex.

Michael Butler expressed doubt that long form content (i.e., features) will ever be fully viable on mobile devices, unless possibly broken up into serialized segments. IODA’s business model is to charge a 20% distribution fee on the DVD wholesale price (about $7). Typical revenue split with a retailer varies from 30-50%. IODA serves as a delivery partner for content rights holders, not acquiring licensing rights for distribution, but connecting rights holders with distribution outlets.

Any successful film needs a “hook,” a compelling marketable aspect to make it commercially viable. For independent films, it is important to generate grass roots outreach campaigns to promote and/or market the film in order to fight for a good placement with an online retailer. However, if a large physical retailer sees that a film has already been available online, they view the film not as a new release, but as a significantly less valued catalog item.

Rentrak provides the leading tracking service for cable and online/mobile programming, as well as theatrical and television. Good sources for box office information include IndieWire and Box Office Mojo. The 120 million tv households in the United States are primarily served by four major cable outlets: Comcast, TimeWarner, Cable Communications, and Charter Communications. On Demand (VOD) distribution is much more attainable than traditional linear distribution/theatrical exhibition.

Michael
WinGateFilms
www.wingatefilms

Independent Film Finance & Distribution

On May 4, 2009, the New York chapter of the Institute for International Film Financing (IIFF) hosted a Town Hall Meeting addressing current issues relating to independent film finance and film distribution. This time the panel of experts included: longtime theatrical distributor Wendy Lidell (International Film Circuit, Inc.), independent documentary distributor Richard Lorber, (Lorber HT Digital), entertainment attorney Steven Beer (Greenberg Taurig), and online documentary distributor Andrew Mer (Snag Films), moderated by David Rosen.

Lidell opened her presentation by acknowledging that notwithstanding the technological shifts in the areas of production, distribution, and media PR, theatrical exhibition is still the best way to brand a film. Just like has been experienced in the music business, the old model is broken and everyone is searching to understand or build a new working model for independent film distribution. For example, Wayne Wang’s “Princess of Nebraska” eschewed theatrical distribution with a direct to digital release, even though it enjoyed the laurel of a New York Times review.

Noting that 15 years ago, 150 films were submitted to Sundance, last year the number was more like 9000, of which about 200 were selected. Back when the existing film distribution model first was developed during the 1980s, ancillary distribution essentially consisted of VHS and 12 channel cable outlets. At that time, the price point for rental video sales was about $79.99 per unit. Today, there is a much lower price point for ancillary dvd or download revenue. Under the traditional distribution model, distributors typically take a 20-25% share, but also incur promotional expenses off the top that may result in no actual back-end money to the producer. In contrast, Lorber‘s current typical distribution deal calls for a 50/50 net revenue share across all media.

Lidell noted the continued decline in newspaper readership has led to a diminution of the impact of print reviews. Further, many advertising budgets have been displaced away from traditional print and television advertising campaigns. If a project is critic driven, it is important to try to get a review from the most prestigious source possible (typically a New York Times review). From a public relations and marketing perspective, an “adopt a critic” strategy was suggested by Lorber as an alternative to chasing an New York Times review, where a producer would seek to hire a reviewer to write favorable copy that could be used as part of the project’s publicity materials. Online opinion site such as Rotten Tomatoes and MetaCritic also provide potentially useful feedback on audience response to a film.

Lorber stated that theatrical exhibition is no longer a loss leader, but now more of a loss follower, as it no longer necessarily represents the first film distribution window. Unlike the traditional film distribution model consisting of more or less exclusive release “windows” (i.e., theatrical, home video, pay-per-view, non-theatrical, pay cable, basic cable and broadcast tv, etc.), he characterized the present distribution situation as more like a kaleidoscopic mix of shards of glass (representing the myriad ways of exhibiting/delivering content, simultaneously and overlapping).

In his view, the explosion of cable channels saved the tv syndication business, even as home video saved the theatrical business by pouring new money into the industry.  Although dvds similarly revitalized the home video market, he expressed pessimism regarding the prospect for another “silver bullet” solution to save the film business. Instead, he indicated that it appears the future lies in a kind of monetization “cocktail” combining different revenue sources, including such innovations as micro payment streams.

Although the primacy of traditional theatrical exhibition may be waning, the prohibitive expense and overcrowded surplus of new content each year has led to a rise in “destination events,” including guerrilla screenings in non-traditional venues. Even though many people now have the capability and desire to screen films privately in home theater settings, the human need for community will likely continue to bring people together “around the campfire” to enjoy films in public settings.

Mer‘s company, SnagFilms provides a free online streaming platform for documentary films, supported by paid advertising. He recognized the strong expectation of “freemium” content on the web, which is monetizable when supported by advertising, such as a pre-roll of 15 second ads in front of otherwise free content. SnagFilms aims to pursue what Mer calls the “double bottom line,” seeking to accomplish the filmmakers’ goals (e.g., to promote an issue), along with achieving recoupment and profit to investors.

Beer commented that there is currently a trend toward a much greater user-managed culture for independent film distribution. Digital rights, formerly a throw-in, have become increasingly primary deal points in a distribution deal. Buyers for digital content include aggregators and sub-aggregators, however, digital rights revenues are small, typically less than $.25 per view. Content generators would be advised to be careful to limit the term of any exclusivity provision (e.g., “in perpetuity”), as new technology and changes in viewer usage may greatly impact the monetization of digital content.

Independent film finance and distribution is undergoing rapid and far-reaching change, and it is important to look forward toward the future as viewing habits and media continue to evolve into a new model.

Michael
WinGateFilms
www.wingatefilms

IIFF NYC Town Hall Meeting – 3/23/09 (Part Two)

This is a continuation of the review of the March 23rd meeting of the New York Metro Chapter of the Institute for International Film Financing (IIFF) with entertainment attorney Bianca Bezdek, Esq., producers Larry Meistrich and Ted Hope, independent filmmaker Kimi Takesue, and moderator David Rosen. Hope’s Truly Free Film blog is worth checking out.

Pitching is an art, not a science. Bezdek advised the value of underselling, then over-delivering. Meistrich indicated that pitches to professional producers ought to be different from pitches to money men (most of whom do not know how to evaluate the viability of film projects). Hope observed that money people are often greatly concerned about avoiding looking foolish. Bear in mind that the objective of a pitch is merely to get someone to read the script, not to close a potential investor.

The panel was divided on whether so-called “sport investors” who invest in films for non-financial intangibles such as status (i.e., to rub shoulders with celebrities, etc.) are still on the scene. In dealing with a situation where a potential film investor’s commitment is contingent upon attaching name talent or other commercial element, the panel advised “calling their bluff” by proposing to have the investor put his money in excrow, releasable upon the fulfillment of the agreed upon condition. If the film investor is serious, an escrow commitment increases the chance that name talent can be recruited to attach to the project.

A key factor to raise money for independent films is attaching a commercial element to the project. Up front assets for a project typically may include a great script and one or more known and marketable actors. With either or both, it may be possibly to interest a great director with a reputation for being able to execute a saleable film. Once one or more commercial elements is attached, a producer may be able to interest a sales agent who may be able to suggest other possible attachments. Of these various elements (script, actor(s), director), the onscreen talent is often the most quantifiable element for financing purposes. Bezdek mentioned that if a well-connected casting director can be brought on board at a modest fee (perhaps as low as $3k or less) on the strength of the script, it may be easier to attach name talent.

Notwithstanding the importance of considering financial commercial considerations in formulating a workable strategy to raise film financing, Kimi Takesue provided an inspiring counterpoint supporting an artist’s compulsion to create art independent of commercial considerations. She described going out on her own and shooting some test footage of powerful human moments as an exercise, and then pulling those pieces together into a short film, “Suspended” which was selected this year at Sundance and Rotterdam, as well as at New Directors/New Films in NYC. The value of those top level festival laurels is that her short film will open further doors for her with producers and potential investors.

Hope opined that film festivals are now more about trying to connect with your target audience, than about trying to find a film distributor. Fewer and fewer films are selling each year at Sundance, Toronto, etc. Festivals remain an excellent marketing/public relations oppportunity, as the festival itself also has an interest in driving traffic to screenings.

Meistrich noted that there are about 200 theatrical release slots each year, and that about 190 of these slots are filled by ”professional” (i.e., major studio or mini-studio) films. He analogized the situation to professional sports, indicating that an independent filmmaker needs to be a “top draft pick” to have any chance of getting an independent film released theatrically.

Consequently, Meistrich recommended a film distribution strategy of marketing to a niche audience, always striving to make product and selling it to get money back to investors and to underwrite a lifestyle of making films. Delivering content online is the emerging growth vector for distributing product; costs are low and the problem of collecting from film exhibitors is avoided.

Michael
WinGateFilms
www.wingatefilms

IIFF NYC Town Hall Meeting – 3/23/09 (Part One)

On March 23, 2009, the New York City chapter of the Institute for International Film Financing (IIFF) held a Town Hall Meeting at the School for Visual Arts on the topic of “Financing Your First Feature Film.” Once again, media consultant, David Rosen hosted a distingushed panel consisting of the following film industry experts: high-powered entertainment attorney, Bianca Bezdek, Esq.; producer/distributor, Larry Meistrich (NEHST); producer, Ted Hope (This Is That Productions); and independent filmmaker, Kimi Takesue.

Ted Hope mentioned his perception that in LA, more than NY, entertainment attorneys may be more willing to be compensated by a percentage on the back end, as many independent filmmakers may have difficulty budgeting payment of traditional legal fees when raising financing. Larry Meistrich emphasized the critical nature of utilizing a qualified attorney to prepare a private placement memorandum (PPM) to solicit investment from “accredited investor” (over $1.2 million net worth, or at least $250,000 per year income in last two years)participants. Bianca Bezdek, Esq. advised that soliciting investment in a film constitutes issuing a financial security, subject to state “Blue Sky” laws and federal securities regulations, hence the need for retaining a qualified attorney to prepare the offering.

Bezdek suggested a strategy of setting up three levels of companies. The top tier company is utilized as a development vehicle; the middle tier company serves as an investment vehicle; and the bottom tier company functions as the production vehicle. A savvy investor will want to see chain of title in the creative property pass into the investment vehicle.

Meistrich stated that so-called “1-off” (single project) film financing is no longer particularly viable, and proposed the innovative strategy of “selling a piece of you” for filmmakers to offer percentage participation (e.g., 10%) in one’s future career development as a financial incentive to potential investors. Most first films lose money, so that if a burgeoning writer/director manages to get signed for further projects on the strength of a first effort, it may be fair to offer participation (or at least “make whole” protection) to investor(s) willing to take a risk on an undiscovered talent.

Hope provided the practical advice that it may be preferable to negotiate business terms and put them in writing up front at a time when the parties are both enthused and getting along, to protect against disputes when problems arise. As an independent filmmaker, Kimi Takesue recommended finding a way to connect directly with investors, to be able to impart one’s passion in the project. Meistrich offered the sobering counterpoint to advise that passion or sacrifice are essentially meaningless to a sophisticated investor, who is only interested in whether investing makes good business sense.

Meistrich characterized raising money for independent films as “begging for a living,” and recommended compiling a list of potential investor prospects three levels deep (i.e., friends of friends, etc.). Within the last 45 days, he indicated that a lot of investors “have their money on the sidelines,” the downturn in traditional investments such as the capital stock or real estate markets increasing interest in alternative investment opportunities.

The panel provided a strong ”wake-up call” to filmmakers to really do their homework to determine why an investor should want to invest in their film, and how the film could be marketed. Hope emphasized that a filmmaker needs to make completion of one’s film project seem “inevitable,” by identifying your audience and figuring out how to reach your audience. He mentioned with the recent plummeting of the domestic distribution market, and the 40% drop in the foreign sales market, that films in the $10 million budget range are finding it increasingly difficult to raise money. Conversely, small indie film projects with low (under $500,000) budgets, perhaps as low as $200,000, may be more attractive possible investments, as recoupment is less inherently risky.

In raising money from potential investors, Bezdek emphasized that “pitch is everything,”  and shared the rare anecdotal story of a client who literally got a $1 million commitment from an investor on a pitch alone. One should keep in mind the “Three Cs of Lending”: Collateral, Creditworthiness, and Character. The last of these (Character) borrower characteristics is an element that should come through in delivery of the pitch.

Michael
WinGateFilms
www.wingatefilms

IIFF NYC Town Hall Meeting – 2/2/09

On February 2nd, the New York City Chapter of the Institute for International Film Financing (IIFF) kicked off 2009 with a Town Hall Meeting entitled “Innovative Strategies in Challenging Times.” The distinguished panel moderated by David Rosen included: John Hadity (PGA East), Adam Elend (CBS Interactive), Ezra Doner, Esq. (Herrick, Feinstein LLP), and Sandra Schulberg (IFP Founder).

John Hadity had just returned from this year’s Sundance Film Festival, and reported that attendance was down significantly, especially among the financial community. Private capital, rather than commercial lending institutions, is where potential film investors maybe found in the current market. There is a strong conservative trend in film financing where the big question is “what are the chances of losing my investment?”

Representatives from about 9 states and 6 countries participated in a panel at Sundance about their respective film tax incentive programs. Although foreign film tax credits have been generally stable, there has been increased concern about the solvency of many state programs. Michigan’s lack of cash is a major concern, notwithstanding that state’s high film tax incentive rate. New York State’s 30% credit back program needs allocation of additional funds, as the nearly $515 million earmarked for 2007 through 2013 is already locked in existing and pending projects.

In other states, Connecticut recently revitalized their transferrable film tax credit after-market by legislative changes authorizing sale of film tax credits to insurance companies. Pennsylvania’s 25% film tax credit program is in its second year of implementation with $75 million available for qualified projects. Ernst & Young has been compiling reports for various state film tax incentive programs, and have concluded generally that for every $1 spent in tax credits, there is a value of $1.50 to the state in economic development.

Transferrable credits are probably more viable in the long term, even though refundable credits may be more desirable (representing hard cash return). Unfortunately, a number of state programs may not have cash available to be distributed when the time comes.

Adam Elend sold his internet distribution company taking a position heading up CBS Interactive. According to Elend, YouTube is still the best platform on the Web for social networking for video, as MySpace is for music.

YouTube Insights provides valuable web analytics, and YouTube also provides advertising programs to assist filmmakers to increase traffic to one’s video channel. The Playstation 3 also now provides online access to YouTube content, even as XBox Live carries Netflix streaming video access.

Filmmakers may also benefit from the use of Google Ads, Google Gadget Ads, and the Google Content Network (GCN). Google Gadget Ads are a widget pay service that charges about $2-3/1000 impressions.

Ezra Doner, Esq. discussed that the cost of advertising has been the main bottleneck in film financing and film distribution, and noted that the pre-sale model has not really been working well at the moment. Banks only want to lend you “your own money” (i.e., expected income stream), particularly in light of the serious loan default environment. These days, Doner suggested that it is probably easier to finance (and sell) a $2 million film, than a $5 million film, as recoupment may be more reasonably anticipated by pre-selling 10 major territories with less overall exposure.

According to Doner, financing a film project is analogous to financing a shopping mall. As a developer purchases the land, a producer acquires the underlying creative property. Both types of projects require a design and marketing phase. A mall project seeks to arrange “anchor tenants” (i.e., large retailers) to lock in long term leases, similar to a film producer’s pre-sale of major territories. Once anchor tenants (or major territories) have committed financial obligations, it is easier to attract smaller stores (or smaller territories) to be incorporate into a collateral package to show private investors and/or commercial lendors.

Sandra Schulberg, founding president of the Independent Feature Project (IFP), commented that although production and distribution costs have been coming down, that advertising costs keep going up. One challenge for independent filmmakers is to try to get private investors to “cash flow” their investment to avoid having to go to banks, with the attendant need to procure a completion bond.

Interestingly, sometimes the “overbudget issue” is driven by project enhancement concerns. If a project turns out particularly well, the producer may feel strongly about trying to go back to the original investors for an additional modest amount to fund enhancement of the film (e.g., to commission better music, etc.).

Schulberg recommended trying to include a “gross corridor” provision in the investor agreement which slows down recoupment slightly, but allows the production company to continue to function while trying to market and sell the finished film. As a practical matter, investors are not “living on” their investment, however, many indie filmmakers are eking out an existence and may “need to keep the lights on.” For example, a 10% gross corridor would provide that $1 of every $10 received from sales would pass through to the production company to permit it to continue to function, with $9 flowing back to the investors as recoupment. 

Former Wired editor, Kevin Kelly’s piece, “1000 True Fans” is an excellent articulation of a potentially successful Long Tail Marketing strategy for independent artists and filmmakers. John Scalzi’s blog, “The Problem With 1000 True Fans”  presents some counter points.

Reportedly, out of 5760 short films were submitted to Sundance this year, only 96 shorts actually screened at the premier festival.

Michael
WinGateFilms
www.wingatefilms

IIFF NYC Town Hall Meeting – 11/17/08

On November 17, 2008, the New York City Chapter of the Institute for International Film Financing (IIFF) held a Town Hall Meeting to discuss film financing topics. The panel moderated by David Rosen included Dan Cogan (Impact Partners), Judith Helfand (Chicken & Egg Pictures), Slava Rubin (IndieGoGo), David Davoli, Esq., and Jared Moshe (Sidetrack Films).

Dan Cogan remarked that with the passing of indie film distributors ThinkFilm, Warner Independent Pictures, Paramount Vantage, etc., the days of theatrical distribution for low budget indie features is just about over. Realistic monetizable distribution is primarily currently achievable through tv, dvd, and internet download sales. Efforts to build online community for serious film may find Ted Hope’s Truly Free Film blog useful.

Jared Moshe shared the insight that potential corporate film sponsors tend to get more excited about giving money for marketing P&A, than for production itself. It is important to reach out to brands as soon as the rough cut is ready. For corporations, it is about how your film fits into their marketing initiatives.

Judith Helfand recounted that many foundations are required to give away 5% of their assets each year. Of course, although foundations are loathe to fund film projects, indie doc-makers may be heartened to learn that many non-profits may be more open to funding outreach marketing efforts to educate their target audience about the social issues important to the organization.

Slava Rubin, founder of IndieGoGo, talked about “groundsourcing” as a way to pursue funding through building community around your fim project. IndieGoGo has various DIWO (do-it-with-others) tools available online to assist independent filmmakers pursuing grass roots fundraising. For supplemental fundraising through IndieGoGo directly, IGG charges a 9% fee.

David Davoli, Esq. explained that the relatively recent (prior to the current financial crisis) excess liquidity led to a glut of film product clogging distribution. What this meant was that many films were made that should not have been made, due to the eagerness of private equity investors to try to take advantage of perceived opportunities to profit from independent films. As a practical matter, legal defect in chain of title of the underlying creative property was cited as near the top reason for distribution delivery problems. The recently settled “Watchmen” litigation between Warner Brothers and 20th Century Fox is a high profile example.

A typical equity mix for investment in an independent film was cited as ranging as follows (varying from project to project): 20-30% equity, 30-50% tax credits, 20-30% pre-sales, and 10-20% gap or supergap financing. It is recommended to put money received in escrow until all funding is raised. A completion bond will typically be required if any bank financing is involved. Gap financing to enable completion of a project often follows the “last money in, first money out” preference.

Recently, international financing has become much more important in the mix. International sales and home video is the source of most expected revenues. A good business model always starts with a distribution plan. As a hint, don’t make a North American distribution deal if you want to pursue a festival run, as many festivals will not accept a film in competition that already has a distribution deal in place.

Michael
WinGateFilms
www.wingatefilms