Bill Mechanic’s address to the Independent Film & Television Production Conference on Sept 29/09.

If you haven’t seen this yet, it’s well worth the read. I’ve worked with Bill Mechanic on “Dark Water”. He was a gentleman who is the antithesis of the “Hollywood Producer”.

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“I was asked to address you this morning with my observations on the present as well as the future state of Independent Production.

But before I begin, I have to relate the story of a close friend of mine, who’s a leading heart surgeon.

He said he’d recently been involved in a very trying and emotional six hour piece of open heart surgery where he and a team of people fought valiantly but unsuccessfully to save a patient.

Afterwards, my friend entered the Doctor’s locker room where one of his colleagues was staring absently into the void, clearly spent from the ordeal. He tried to cheer him up but the colleague turned to him and asked why he was not more distraught.

My friend answered with a smile:

At least we weren’t asked to save Independent Production.

Well, the truth be told, we may not be heart patients but we aren’t that far away. We have too many insignificant movies clogging our distribution channels. Tightening economic conditions are sending sharp pains through our systems. Our blood supply from heretofore vibrant markets such as DVD and TV seemingly have evaporated in front of our eyes.

The question we must ask is if the condition is fatal.

In all candor I would say only to some.

Those who ignore the warning signs. Who don’t adjust to the threatening conditions. Those producers and distributors who pretend there is nothing wrong.

Nine years ago, I was a healthy and occasionally happy studio executive. I had taken Fox over a 7 year period from a doormat to the #1 studio and before that had spent 9 years at Disney building a then-dormant minor player into a muscular and, for the first time in its history, a real force in the studio world. I left Fox with 5 of the Top 10 films in history and departed Disney with 19 of the Top 20 Videos ever and as the #1 International distributor.

I had fought with Rupert Murdoch over my desire to create a business for Fox in the world of animation. He felt no one could compete with Disney. Nevertheless I started up Fox Animation. ANASTASIA was a start, it made money. TITAN AE a misstep, and lost. Even though that is the nature of the business, that not everything works, he didn’t want to wait for ICE AGE to finish production. I didn’t have a foot out of the door before Fox tried to sell off the film. Luckily for them, they couldn’t get a deal done.

At the same time, Peter Chernin thought I was taking too much of a chance with X MEN. He called it my $70mm art film, since everyone knew that not only were comic book movies dead but you certainly couldn’t start one in a concentration camp. That wasn’t comic book fun. Maybe not, but most comic books are dark, so it was a question of being relevant, of being grounded.

Ironically, both films have lasted longer at Fox than I did and are now the most valuable franchises in the history of that studio, throwing off billions of dollars of profit.

But they also were, along with FIGHT CLUB, the leading reasons I was shown the door. My bosses couldn’t deal with the unconventional choices like those and others such as BRAVEHEART and THERE’S SOMETHING ABOUT MARY because the films weren’t pre-sold and thus seemed less predictable. This despite the fact that these unconventional movies guided Fox to the 5 best years in its history.

When I left, a few of the other Majors called to see if I were interested in running their shops. I thought instead it was time to do things on my own, to not work for companies that no longer wanted to be in the film business, that no longer thought enough about the future to not gum it up. Easier to raise money and worry only about making good movies which could make money.

Needless to say I was naïve. I thought raising money would be easy. I didn’t exactly foresee such things as the Silicon Valley bubble bursting, or the economic meltdown, or the Madof scandal. But then I guess the Captain of the Titanic thought the Atlantic was smooth sailing. And Batman thought the Joker would be a laugh.

When I first made the decision to go off on my own, Larry Gordon said to me something that I’ve never forgotten. He said running a studio is a great job but a terrible life. Producing is a great life but a terrible job.

9 years as an independent producer provides a great perspective. It also cause heart palpitations.

Here’s the one key thing I’ve learned: there is no such thing as an independent producer. There are only dependent producers.

Dependent on distributors, financiers, and bankers, and distribution channels that understand the needs of the market even less than the corporations that own the studios.

Which makes a truly independent producer even more truly dependent because the alternatives to the studio system are in many ways more difficult, not easier.

Perhaps even more than the studios, those with the controls over whether or not a movie gets made independent of the studios do so almost with less attention to the movie itself.

Part of that is due to outsiders who always seem to come into the business believing they can do better and yet rarely have an idea of what they are doing. Attorneys and financial analysts picking movies is a recipe for disaster. They can tell you all day long what hasn’t recently worked, but in truth, haven’t the experience or the knowledge to do anything different than has already been done.

That’s been the oddest lesson of this period for me. That the independent world, which should be aiming to do things better and different from the Studios, doesn’t have that as a mandate at all. If anything, the only thing that independent distributors and financiers look for is the SAME. Maybe costing a little less than the Majors, but they want what the Studios want, or in FIGHT CLUB speak, they want copies of a copy.

I now understand that unconventional choices like X MEN and ICE AGE would barely have a prayer getting made independently. Why? Because at the time, they didn’t look like anything else.

It’s disrespectful if not downright dumb to think audiences can’t tell the difference between the original, which occasionally might even have some fresh faces, and the copy, which almost always is populated with retreads. It’s like thinking you can sell yesterday’s news under a different banner.

The exception to the rule is DISTRICT 9, which didn’t try to compete with the Majors with special effects or stars or plot. Instead of feeling recycled, it was fresh and is now one of the year’s best and most successful pictures. But lot of credit has to go to Peter Jackson since it was undoubtedly his clout that got the film made.

Following the lead of the Majors, presumes that they know what they want. It presumes they have a fix on their audiences.

I would say that’s anything but true. Admissions are down over the past few years and, perhaps most troubling, the audience that Hollywood spends the majority of time focusing on, the under 25’s, are the ones finding other things to do.

Take a look at this shift over the past decade. While use of the internet and video games have dominated leisure time activities, movie consumption is down or flat over the same period. And, more to the point, you can see that there is a 21% drop in film going amongst the core target audience and a 24% drop in the next key category, 25-39 year olds.

And yes, these charts beg another question: if the audiences are shifting, why isn’t the product shifting as well. Name 5 mainstream films this year that successfully targeted an over-30 year audience.

In that way, Hollywood in the broadest sense of the word is much like Detroit. It’s a manufacturer’s mentality that reigns, seemingly indifferent to the consumers it serves. Ignore whether the consumer likes our product as long as they buy it.

Market it and they will come.

And don’t worry if they don’t come back. Accept 60% drop off rates as the norm, saying it’s all about wide openings.

Three years ago the Lakers all-but sold out every game even though they had a lousy team. Since Jerry Buss is a smart owner, he knew if he didn’t fix things, no shows would eventually turn into season ticket non-renewals. He did what he needed to do to make it the hottest ticket in town again and a no-show today is a no-no.

When was the last time you heard anyone either from a studio or an independent talking about improving their product, of creating positive buzz and expanding the audience?

Here’s one basic question to ask yourself: If the most popular film in history was TITANIC and it did so by weaving together interest in all demographic pockets as well as pulling in non-film goers, why in the last 12 years has no attempted to do the same?

TITANIC was #1 at the box office for 15 consecutive weeks. It not only spurred on record year in theatrical attendance, and had the biggest video in history, but also generated the biggest Oscar telecast in years. A good movie, like a good team in sports, makes everything around it better.

An independent couldn’t and shouldn’t make movies of that scale but it should make movies as individualistic and compelling. Certainly there are good examples among some of the smaller independent films—-SLUMDOG MILLIONAIRE being an easy choice — that actually do stand out and succeed because of their quality and their uniqueness.

But as you can see from these next few charts, the independent world was no more concerned with the consumer than the studios. With the influx of hedge fund money, the past decade saw a glutting of product, again most of it with no idea of who it was for or how it could be sold. Whether some of these movies had artistic integrity or not, there is no question there was no audience appeal.

From the low water mark of 1990, there has been a 50% increase in the number of pictures and even since 2000, nearly a 25% increase. And most of the influx came from non-Majors, rising from 150 in 1990 to 450 in 2008. That, my friends, is insanity.

Remember that through this entire period, the only growth at the box office has been inflationary, which means more films were fighting for a share of a flat box office. Over approximately this same period, the biggest hits took even a greater share of the box office pie, meaning the independents, even with a vastly greater number of releases, are taking a dramatically smaller percentage of the available money.

Let me get out the rest of the bad news, though I’m not telling you anything you don’t already know. The next 2-3 years will be even worse, not because of the flood of new releases, since that is already abating, but rather due to the effect the over saturation has had combined with the economic downturn.

New money is going to be hard, if not impossible to find. Ad sales are down, so TV networks around the world, other than cable, aren’t buying. Add in a confused video market, and it’s going to be tough.

To my mind, the next few years will be about survival.

If it’s any consolation, it will be harder on the Studios than the independents. Not only is it harder for big companies to change, to adapt, but there are legacy issues in terms of personnel. And within the next few years, their big market advantage, the bricks and mortar of their distribution operations, will become a disadvantage in the democratic age of digital. I would assume at least 2 of the Majors to be sold or consolidated by the middle of the decade.

Before I turn to why I don’t think this is all fatal — and in fact, might be a boon — let me address one more item, video. I get asked a lot if the problems are systemic. My answer is not necessarily. That we would reach a point of maturation in DVD is natural and logical, but too much of the downturn is completely self-imposed.

Like much of the bad decision making that has helped take a lot of the profit out of the business, the air was let out of the tires by the studios themselves. No top management of a studio really cared what was going on over the past few years other than was their budget being met.

No one asked whether their units should be pushing Blu-Ray in the face of an economic melt-down or even whether or not Blu-Ray was going to be the next big ap to the general consumer. They simply accepted the idea that they could resell their libraries at higher prices.

So no one asked what impact dropping the price on their existing DVD’s would have. I mean if I can buy TITANIC for under $5 in some stores, why am I so eager then to rush out to pay $30 or so when it’s released on Blu Ray? Is the quality difference that great? How many formats are yet to come?

No one asked what buying great movies at cheap prices would do to new releases, which may not be as great. Give a consumer with less expendable dollars a choice between LEGALLY BLONDE for $5 or ALL ABOUT STEVE for $20 or $30, which do I want to buy?

Simply said, the studios have destroyed the price-value relationship in video, particularly when low priced rental alternatives have sprung up everywhere.

And then add in the absolute flooding of TV product from the beginning of time into the market, and you have the conditions that have absolutely killed video as the key profit center of new movies.

Ok, so in the face of all this, why can I say this is all good news? Because a lot of waste is going to be cleared from the marketplace. Excess product will go away, the people who don’t take the business seriously will go away. Hopefully those who make crummy movies will also go away, but that may just be a personal wish.

In 1984, I went with Michael Eisner and Jeffrey Katzenberg to Disney as perhaps the 4th employee of the new regime. Disney at the time was barely a film producer much less a major distributor. Before we could execute the plans to transform that company into one of the Majors, I was asked to prepare the presentation to the Board of Directors. A lot of capital was at stake.

The numbers, like some of those we’ve discussed today, were overwhelmingly negative. In truth, the film business has never been an easy one to master. More companies fail than succeed. But what I presented, and this is still one of the absolute truths of the industry, was that it was only a bad business on average. If you expect to be an average performer in this world, you can expect to fail.

Those without the ambition or the brains to figure their way through these tough economic conditions are going to be the heart patients who cannot be saved. No one has a birthright in this business.

It is a game for winners. And those who win today will win to an even greater extent than at almost any point in the past. The flattening of the box office is only true on a macro level. For the individual film, the sky is the limit. Even though there’s more piracy of the hit picture than any other, it’s still that same hit picture that can score giant revenues in all the ancillary streams.

Those who will win will be smart about what they make and how they sell their films. They will hopefully make good films but perhaps even more key they will make unique films that stand out, which means they will not have to compete against the bulk of the films for talent. They won’t look like all the other films so they won’t have to spend as much money marketing them.

It’s not that the buyers aren’t there. Consumers, TV outlets, Retailers and, yes, even Pirates want what works.

Don’t believe me? Ask Summit about TWILIGHT. Ask Searchlight about SLUMDOG MILLIONAIRE. Ask Screen Gems about DISTRICT 9. Ask Focus about CORALINE.

Let me conclude by saying that the challenges are great. Technological innovations often hurt before they help, it takes resources to fight the sense of entitlement that breeds piracy, it takes skill and experience to know what FDR really meant when he said: We have nothing to fear but fear itself.

Over the past few years a common denominator of most emails sent to me is – How do I get into film accounting? It’s a tough question to answer. How do you get into film accounting? It’s an insular industry, but not impenetrable. I go over this in more detail in my workshops, but this blog gives you a good idea of what to do. Essentially, you need to discover what the film accountant believes she/he needs, then fill that need – remember they’re looking for someone who is a FILE CLERK, or an INPUT CLERK. 

Here’s a long-ish email that I just sent to a young woman who moved from DC to LA with the express purpose of starting to work at the introductory level of film accounting:

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The only way to get work in film accounting is to convince someone that you can fill their needs. It would help if you had some of the terminology and had some knowledge of the working environment. 

Word of mouth is the only reliable method of getting work – I always call the previous accountants because it’s more important to me that the person I’m looking at can take direction and is relatively friendly, and isn’t afraid of hard work, long hours, etc. If you’re not working you may consider volunteering for free – just start calling productions in LA and ask for the production accountant and let her/him know that you’re willing to work for free (for about 2 weeks) and in exchange they answer calls made to them from other accountants. That way you can get 2 or 3 accountants who would know you and, assuming they like you, will provide some good telephone references.

Another tip is to say that you’re willing to go on Distant Location. A lot of LA accountants don’t want to leave town, so it makes your chances higher.

The most important step in finding work is to send out notifications that you’re ‘available’. Put together an email list, and a snail-mail address list, that has at least 200 names and addresses of accountants, assistant accountants and production managers. Then send out emails and snail-mail in an organized way, cycling through the emails and mailings every 3 weeks. When I started out working in film I found that I got 3 inquiries for every 125 letters mailed out, and usually one of those inquiries turned into a firm offer. With emails now, it’s easier to communicate, but I still find that snail-mail has more impact (a lot of blind emails ends up in Junk Mail).

Regarding your resume throw out whatever you’ve learned before. Have a covering letter stating what clerical functions you’re good at – practical things like – type 80 words a minute, use an adding machine without looking at the keys, understand the networking of computers, counted lots of cash before, understand purchase orders/petty cash, etc. Remember you’re applying to be a clerk, so you want to play down any accounting degrees, certifications, MBA, etc. That’s not what the accountant needs – they need a good CLERK.

Then on the second page have a list of jobs you’ve held in the past with a short 2 line (max) description of what you did and a person’s name and telephone number who the accountant can contact. The accountant is only interested in whether or not you are a good worker or a wacko who argues easily, is perpetually late, gives excuses instead of results, etc. 

Nobody’s interested in your long term goals, etc – those kinds resumes taught in schools everywhere sound like BS to people in the film business and result in them concluding that you really don’t know what you’re doing.

At any time that you’re promoting yourself keep your eye open for what that particular film accountant says they need – pay attention to the actual words they say. You’ll find a trend in there pretty quickly – it’ll go something like “someone who can start right away and who I don’t have to spend a lot of time training”. Or it may the negative side of the same concept, “I don’t want someone who takes a lot of my time learning – I might as well just do it myself.”

Then use those same words in your covering letter. That way you’re promoting yourself to fill what they feel they need. 

Finally, understand that you’ll be lucky to find something right away. According to statistics, it normally takes 5 to 7 weeks for a big promotional campaign to bite. So, be persistent and know that what you’re doing will work (provided to know, and can fill, what the film accountant needs). Don’t be afraid to re-cycle your mailings and emails. I had one producer call me up and say that because I had written to her 6 times, that she was going to hire me out right without even interviewing anybody else. Generally, people in the film industry understand that promotion is part of the business, and they respect that you’re out there doing it.

Let me know how it goes.

Best regards,
John Gaskin

News to Hollywood – productions are “Running Away”.

The big difference is the various State and provincial tax credits being offered.

recently, both Ontario (June 30th) and Quebec (June 14th) now have enhanced tax credits of 25% of All Local Spend (rather than local labor only). This is huge for out-of-town productions effectively doubling the tax credit available and easily bankable. Quebec has reduced their VisFX Tax Credit, but Ontario has no updates yet on their 20% VisFX Tax Credit.

The best tax credits in the world are still in Michigan with an All-Spend credit of 40% + 30% for non-State residents. However, the lack of infrastructure is still holding back the big Hollywood productions from stampeding the State – probably a good thing in the long run. But there’s no question it’s helping and once their sound stages are built and crew start to congregate there, it will be a film production force to reckon with.

Will Hollywood start screaming “Runaway Productions” again? News Bulletin to Hollywood – production already ran away.

In this next weekend workshop (July 25/26) we will create a film budget from scratch, using MMB, and we will estimate the Michigan Refundable Tax Credit -over 90% of the Film Budgets received by the Michigan Film Commission are submitted in the  Movie Magic© software format so it’s important that you, as a film professional, have a hands-on familiarity with it.

For CPA’s - I also have an example of an “Opinion Letter” – both for the Estimated Tax Refundable Tax Credit and for the Audited Film Production Cost Statement that have been used in other places successfully. These templates will be distributed at the workshop. This workshop is CPE qualified.

TRIAL EP Movie Magic Budgeting© trial software can be downloaded at the workshop which gives the users 15 FREE boots. (I am applying for “School Status” with the software sales company which, if accepted by them, will give attendees a 50% savings in the purchase price of EB Budgeting – stay tuned).

We will be working with two budget templates and one mock-up of a shooting schedule - I will supply you with a fully prepared film budget as a reference throughout the workshop, and the other film budget will have only the accounts and account numbers pre-loaded. It is this last one that you will use for the workshop training exercises. Here is the course outline that I will be following:

1. Familiarize the attendees with the final budget and shooting schedule and how it will be viewed by financiers, executive producers, production accountants,etc. as well as how it relates to the film accounting general ledger and weekly cost report.

2. Familiarize the attendees with the budgeting software’s overall features and how they are utilized by production managers, accountants, etc. to estimate the refundable tax credits and how it is used during the film’s production.

3. Familiarize the attendees with the navigation tools, and the main features of Globals and Sub-Groupings and how sub-groups are used to Estimate the MI Tax Credits. Then have the attendees practice entering to their own laptop computer several simple non-labor expenses, utilizing the Globals and Sub-Groupings.

4. Demonstrate the correct way to prepare a budget for one ATL labor account (Stunts). At the same time, demonstrate how Fringe rates are applied to ATL Stunt labor accounts. Then have the attendees practice entering to their own laptop computer several several cast members, utilizing the Globals, Sub-Groupings and Fringes.

5. Demonstrate the correct way to prepare a budget for one BTL labor account (Chief Electrician-Gaffer) and then have the attendees practice entering several crew categories to their own laptop computer. Repeat this step for Teamster drivers and again for DGA members (the UPM, Assistant Directors, etc.)

6. Work with the attendees to copy paste the line-items learned above, using magic buttons and libraries.

7. Demonstrate how to set-up percentages of the total budget for Contingency, Insurance, etc.

8. Work with the students to format their printouts in a professional manner.

9. Work with the students to Estimate the MI Tax Credit utilizing the Sub-Groupings and an Excel template.

10. Depending on the progress made in the 2 day workshop, work towards polishing the a budget that the attendees can re-format and expand upon in the future for their own projects.

11. In addition to a copy of my book and any course binder of materials, all attendees will receive a CD containing an example budget including the Detroit local area’s union rules and fringes, Excel examples of calculating SAG and crew OT and rest violations, as well as screen-recordings of the steps learned above for future reference.

Visit my web site at http://www.talkfilm.biz/MichiganWorkshops.htm to learn more.

TESTIMONIALS from the May/09 workshops

“I very much enjoyed meeting you and participating in the production accounting workshops this past weekend. It was both educational and confidence building. You are a great teacher – you freely shared your knowledge and really encouraged us at the same time. Let me know when you will offer the Movie Magic Workshop.” KS – Commercial Producer/Director, Grand Rapids, MI

“It was a real pleasure to meet and talk with you this past weekend. Your Workshop is truly valuable.” GD – Internal Audit Professional, Grosse Ile, MI

“I made some really good contacts this weekend, and learned a ton. The contacts alone were worth the fee!” MP – CPA, Troy MI

“I feel I gained a lot from the workshop that will help me be better prepared and able to move up the ranks in the industry. Great job. It was more informative and organized than any other film workshop I’ve been to.” MT – 3rd AD, Flint, MI

“I liked all the extraneous material; the practical aspects of the business that can’t readily be captured in a book. This seminar/series goes far in de-mystifying what’s required to provide accounting services to the film industry.” VS – CPA, Dearborn MI

“Thanks for all the ‘invaluable’ information – the extras that are not, and cannot, be put in a book.” TS – General Accountant, Detroit, MI

“Thanks for the workshop. I learned a ton and had a lot of fun.” GM – Producer, Royal Oak MI

There’s so much money floating around during film production, so many ways to twist and turn, so many demands on time that it can all get pretty overwhelming. Somehow, somewhere the film accountant has to generate some energy to deal with it all. Sounds simple enough, right? Hmmm… Let’s see what reduces my energy the most.

When you’re a production accountant you’re often pigeon-holed right away.

1. The cast & crew consider that you’re very much a service department.
2. The financiers consider that you are their watchdog/auditor.
3. The producers and production manager swing back and forth between considering you their best friend or their worst enemy).

This kind of evaluation all too often leads to a defensive attitude from veteran accountants – displayed as cranky at best and downright mean spirited at the worst. And, man, does that every sap the energy out of you. There’s nothing as draining as being forced to defend your position, or just plain being angry, either openly or privately.

This is where generating energy comes into play. The word ‘energy’ is used more in the film business than any other business that I know. I’ve seen good people lose a contract because they didn’t exhibit ‘energy’ when interviewed. Some creative people throw the word around without pre-defining what it means to them, leaving the listener wondering if there’s some cool new definition of energy that they hadn’t heard before.

Usually I’ve heard the word ‘energy’ used with this meaning,

FILM BUSINESS DEFINITION OF ENERGY

“Get creative in finding a solution to this particular problem that has no apparent solution”.

That’s my made-up definition based on the way I hear it being used the majority of the time. So, let’s look at the agreed upon definition in the Oxford dictionary – the ‘last word’ in dictionaries.

In my workshops, when talking about ‘Finding Work’, I actually take a good dictionary and read the definition of energy. Here’s one of the definitions of ‘energy’ in my Oxford:

ENERGY

“The capacity for activity.” (The derivation goes back to the Greek word ergon, WORK).

Let’s look up the word, ‘capacity’. The definition in my Oxford dictionary is:

CAPACITY

“The power of containing, receiving, experiencing, or producing; e.g. the capacity for heat.”

Okay. So, energy does not mean immediately running around, or leaping to immediate action. It means that there is a CAPACITY to do that, and when called for, that POWER can be called to action.

Where does that lead us…. ??

It leads me to conclude that there must be a way to at least stop draining my Energy, my Capacity, my Power – and that way is to stop being so damned cranky, quick to accuse, thrust-and-stab at the first poor bozo to screw up around me. That definitely sucks the energy out of me, and along with that, my power.

So, what’s the opposite of cantankerous?

Here’s another word that I like to show my workshop attendees.

INSOUCIANCE

“A cheerful disregard for worries or concerns.” (The derivation goes back to French, not Latin, as meaning lack of caring).

Now…. This can be an excuse to abandon all work, but looked at intelligently, by a working individual in the Film Business, someone who has the permission and encouragement to be creative, insouciance sounds pretty workable to me. Have some fun with the crew when they’re serious. Tell a joke to the producer. Wing it now and then.

Yeah, when I do it my energy level soars.

Try it. Especially you film accountants. We need all the tips we can get.

CPA’s who want to service the film industry as auditors in some way have several routes:

– prepare an opinion of the Estimated Tax Credits from the Film Budget in ‘prep’,

-  prepare audited statements of the Cost Report in post-production for the Tax Credits,

- service the administration of the tax credit with the State for the Production,

- claw through the interim costs to see if the Estimated Tax credits are in-line, etc.

Or, work as a Production Accountant.

To do any of these tasks, as a professional, you need to get a feel for the rapidity of the film production business from and the responsibility and authority expected fom you. The weekly petty cash is about $50,000 a week, the weekly payroll is anywhere from 0 to $800,000 for the crew alone, etc – so there’s no time to train or figure out systems, it’s got to be right first off the mark.

FILM ACCOUNTING SYSTEM:

That system has been worked out over the years and that’s what is called Film Accounting – it’s basically the same system used throughout the film production industry internationally. None of it is brain surgery, but the rapidity of the life cycle is unique – in a few weeks/months you start with nothing, open a bank account, find a studio, order furniture, hire crew and cast, buy/rent everything, finish shooting, sell/return everything, pay off whatever, close bank accounts, turn off the light – the door slams on the back of the last man/woman standing – the film accountant. A FULL understanding of the film accounting system is vital to external auditors who need to move quickly to balance their chargeable hours to a competitive field.

BOOKKEEPING-REPORTING-AUDITING:

Throughout the Film Accounting process the multiple details of bookkeeping, reporting and auditing (ensuring that the transactions are legal and ethical), can get a little overwhelming, especially if you’re not ready. If you have 3 or 4 weeks before the shooting starts, to go from an empty room to a fully functioning office, you need to have a system that is drilled to the level of habitual. There is nothing on a ‘Woman Scorned’ when compared to a producer who doesn’t get his/her cost reports on time (the Weekly Cost Report compares every line item in the budget against current Estimated Final Cost, and all variances accounted for). There are a number of ‘tricks-of-the-trade’ in managing that report; remember, it goes to all bosses everywhere.

THE FILM ACCOUNTANT’S PRODUCT:

The film accountant’s Boss is the Financier(s). That would include the funders as well as lenders and the bonding company. It’s a little difficult sometimes, because the Producers are in direct communication with the Film Accountant and technically have the right to fire him/her. I could tell you stories – actually, I do tell you real stories how to handle that situation if it gets noisy. The Weekly Cost Report, more than anything else, is the ‘product’ of the Film Accounting Department. If all systems are ‘in’, the result is a meaningful Cost Report that the Producers and Financiers take to heart – the bond company has the right to take over the production and their most used document is the weekly cost report.

WORKSHOPS #1 and #2:

The first workshop drills the film accounting system. The second gives you a look at the building blocks that comprise what you will be auditing – the costs as compared to budget. Knowing how those costs are tabulated, along with a system to capture certain types of costs with Free Fields, really gives you an understanding of where the producers are coming from – not always on the up-and-up. This is a vital area for both aspiring film accountants and for external auditors.

For example, here’s something I’ve seen:

The producer wants more tax credits – one way of increasing those tax credits by ‘flipping’ – an actual example is the producer puts a Story Consultant in the budget for $100K, then funds the $100K from Company A, then has the production pay $100K to a local State shell Company B, then has Company A invoice Company B for Management Fees of $100K. (or, more nefariously, has Company B make advances to someone the producer actually is doing another deal with entirely). This is a ‘flip’ or ‘turnaround’ that could be viewed as a sham and is fairly common.

SMALL GLOBAL VILLAGE:

The film industry is a small global village. I have seen line producers, 1st AD’s, production accountants, etc. keep working in spite of a downward spiral of bad habits and poor performance – simply because they already have a resume and others have ‘heard’ about them. It’s just the way it is. Almost no attention is paid to self-promotion, and even if a face-to-face meeting is finagled, the ‘I love you baby’ routine is actually real – so, you’re in a quandary that you have to solve. The only way I know of to solve it is to get started by learning the trade from the ground up and do the workshops. I say, with some humility, that I know the bond companies, I know the bigger international Tax Admin Companies, I know a few VP Finances at the Major Studios, quite a few people on the food chain at various levels, etc – simply by stating my name you’ll at least get an ‘Oh yeah, I know John’ – of course, I can’t promise anything, but I’ll always back you up as one of my attendees if called.

A COMMENT TO EXTERNAL AUDITORS:

It’s going to be a shark fight very soon for the simple tax credit audits. Really, to just do the audit is a meat grinder – stick the meat in one end and out the other end comes hamburger. But, the guys who take the extra step to learn what is really needed by the studios and producers, and provides what’s needed, will be the ones who get the callbacks. Out of State studios will need someone to set up a Prod Co (a shell company used only for the production), they’ll need access to an inexpensive lawyer for simple in-State assignments, deals of whatever kind, they’ll need advice on how to estimate the tax credit and what’s current with the State decisions, the banks will want a letter of opinion that’s accurate and quick, the producers and banks will want an interim report of the Estimated Tax Credits to make sure everything’s in-line, etc. The only way I know that you can do that is to get real familiar real fast with all film budgeting and cost reporting and general ledger formats.

WHERE AND WHEN:

In Detroit, MI near the airport at the Lexington/Hampton Inn on May 16/17 and May 30/31. See this link to learn more: http://www.talkfilm.biz/MichiganWorkshops.htm

I hope to see you at the workshops.

John 

www.talkfilm.biz

There is an unprecedented demand for Film/TV Production Accountants and Assistant Accountants in Michigan. The unique practical aspects of Film Production Accounting is not taught by an experienced Film Accountant anywhere else – except here. FREE Showbiz© Budgeting & Scheduling software, a Film Labor Guide, plus much more, is included.

 Workshop #1. Film Accounting 101 - for Assistant Film Accountants   Intro Level Production Accounting The emphasis is on the practical requirements of a junior film production accountant. The expectations of the Key Production Accountant when hiring a junior film accountant are universal – ability to route, file, retrieve and understand fundamentals of accounting entries, etc. all according to the standard film production accounting systems. The practical aspects of this course will make you a candidate for work in the Accounting Department. It helps if you have some accounting experience, but is by no means a prerequisite (the basics of accounting are few and are covered at the beginning of the workshop). The five basic accounting entry modes, which are most important to film production, are drilled using general ledger software common to the film industry - 1. Accounts Payable-Invoices Received in the Mail,  2. Accounts Payable – Check Requisition, 3. Journal Entries, 4. Petty Cash and 5. Purchase Orders. The high volume and rapid movement of money in the film industry requires that assistant accountants have some exposure before working – this is it. Most of the workshop is taken up with drills and general ledger applications, although an hour or so will be spent on familiarizing you with basic “Call Sheets”, “Daily Production Reports”, etc.

Followed By Workshop #2. Senior Film Accounting Workshop – Managing Film Budgets and Weekly Cost Reports  Senior Level Production Accounting- This workshop is primarily for film production assistant accountants who have had experience in the film production business, although accountants of any background are invited. The workshop’s emphasis is on the Weekly Cost Report and the aspects of the Film Budget that most assistant accountants never get exposed to. Other accounting functions usually addressed by the Production Auditor, but not understood by the assistant accountant will be addressed as required (for example, bank reconciliation procedures, IRS reporting responsibilities, etc.). All aspects of this course are applicable to novice Line Producers, Click Here and you’ll see what I mean.

INSTRUCTOR: John Gaskin has worked in the film production business since 1985, primarily as a Film Production Auditor. John has worked on 45 different productions in 5 different countries, working with greats such as Ron Howard, Frank Oz and Walter Salles – as well as small independent films and TV episodic productions, pilots and mini-series. During his career many of his assistants have gone on to become Key Accountants (another term for the Production Auditor).

John also has Supervising Producer credits – see his resume on IMDb. In his previous seminars he was touted as the Billion Dollar Man because the accumulated budgets that have been under his control has exceeded a Billion Dollars.

John’s book, “Walk The Talk” is required reading at the University of Southern California’s Cinematic Arts (Peter Stark Graduate Producer’s Program). John has numerous internet articles on Google Knol and EzineArticles  and enjoys answering your questions on his blog – filmproduction.

John has several ‘Testimonials’ but his favorites are from Ron Howard and David Valdes (David worked with Clint Eastwood for a chunk of his career and has been an independent producer for some time in his own right). Click her to see Ron Howard’s letter, and here for David Valdes’s hand written note. Another testamonial that John is proud of is Peter D. Marshall’s book review. Peter is a 35 year veteran film director and instructor. Visit John’s Web Site for more testamonials.

 BENEFITS:  The workshops provide you with a ‘door opener’ to film production – especially in the Film Accounting department, but also as a novice Line Producer, Producer’s or Director’s Assistant, Production Assistant, etc. If you are unsure of the the role of a Film Accountant, click here, for a quick run down on the income levels and career potential.

·   Media Services, a 30 year entertainment payroll service company, and one of our sponsors, is providing each attendee with:

·           - Showbiz Budgeting© Software – Value $299.99

·           - Showbiz Scheduling© Software – Value $199.99

·           - Showbiz Labor Guide© Value $39.99

·     You will receive a copy of John’s book, “Walk The Talk” jammed with practical tools of your trade. (When you register below you will be sent to a web page where you can download the e-book of “Walk The Talk” – please read through it before the workshop so you will be familiar with some of what we will be covering).

·     John will provide each attendee with their own CD packed with

·           - over 20 different budget templates on Excel, PDF, Showbiz© and MovieMagicBudgeting©,

·           - over 50 practical film production form templates, including all accounting forms used in the business, as well as sample Call Sheets, Daily Production reports, release forms, etc. (Note: Most forms are on Word or Excel for your future application)

·           - screen recordings of the general ledger software applications, as discussed in the workshop will be provided on DVD, for your future reference.

·     All practical assignments are based on John’s 25 years experience in film production.

·     John will consult with those who would like to know the best way to go about getting contract work in the film production business as an assistant production accountant. There is so much to cover that the practical aspects of finding work will be done after the workshop hours, from 5:00PM to 9:00PM on each evening of the week-end workshops. John makes no promises, but he has many years of experience finding work as a film accountant and will mentor you on his successful actions and contacts.

·     Coffee and snacks will be provided.

·     Certficates are issued on completion of each Workshop.

·     If you have any further questions about the workshops, or about the film business in general, feel free to email John Gaskin.

WHEN:           Workshop #1: May 16 & 17/09 (Sat and Sun), Cost $325                         Workshop #2: May 30 & 31/09 (Sat and Sun), Cost $325

·   8:30AM Continental breakfast,

·   Workshop Starts 9:00AM,

·   Lunch 12:00 – 1:00PM,

·   Break 3:30-4:00PM,

·   End Workshop at 5:30PM,

·   From 5:30PM – 9:00PM Consultations, as reserved or informally, on How-To-Find-Work in film production.

WHERE:          Hampton Inn, Detroit-Metro Airport 30847 Flynn Dr., Romulus, MI, 48714  Ph: 1-734-721-1100

   The meeting room is roomy and has the facilities we need. This is the photo provided by the Hampton.

    Note that the Hampton has offered our out-of-towners very reasonable rates – just $70/Night.

 COST:      $325/person per workshop. Limited attendence of 25 per Workshop.

• Registration: Workshop #1 - Film Production Accounting 101  Pre-registration guarantees a seat.
• Registration: Workshop #2 - Senior Production Accounting   Pre-registration guarantees a seat.
• Registration: Workshops – $50 Discount for Both Workshops   Pre-registration will get you $50 off.
• When you register you will be taken to a sign-up page which will allow me to pre-deliver to you my e-book, “Walk The Talk”, the course ‘checksheet’, the Master Budget we’ll be using, etc. Please familiarize yourself with the materials before the workshop so we can hit the ground running on the Saturday morning (a hard copy of all materials will be provided in the workshop).
• If you have a wireless laptop, please bring it so we can load the software and templates as part of the workshop materials. I have limited the attendance to 25 people, so please book early.
• Out of towners are invited as well (the Hampton has offered a special rate of approx $70/night – when booking a room please quote “Film Accounting Workshops”).

• John’s Email for any queries.
• John Gaskin – Film/TV production credits on IMDb
• John Gaskin – Profile on LinkedIn
• John Gaskin – Google Knol Articles
• John Gaskin – Web Site
• John Gaskin – Workshops
• John Gaskin – “Walk The Talk”
• John Gaskin – FilmProduction Blog Articles 
•  

Michigan has been the go-to State for film production and there just aren’t more than a handful of local film production accountants and asistant accountants. I have decided to do a couple of weekend workshops in May/09. The first one will be for those who want to learn to be an assistant film accountant. The second one will be for novice line producers, and experienced assistant accountants, to learn such key duties as Managing a Film Budget, and Manage a Weekly Cost Report. The key focal points of controlling the costs are emphasized. I have a sponsor in Media Services (an entertainment payroll and software company) and the Michigan Film Commission has promised to promote my web page. 

Film Accounting is the only business category on earth which doesn’t require you to have previous accounting training. The assistant accountants usually rise on the food chain with a series of on-the-job apprenticeships. Of course, you’d be ahead of the crowd if you had accouning and bookkeeping fundamentals, but really the only requirement is a sharp mind and bright attitude.

Film Accounting has the same elements as any business – Bookkeeping, Reporting and Auditing. However, the rapidity and convention of the film accounting process has to be experienced to believe. There’s “Petty Cash” of $50,000 a week, about 200 to 500 Purchase Orders a week (at least in the last weeks of prep and the first weeks of shooting), etc. The paperwork can trample the accounting system IF you aren’t prepared with a workable system. And THAT’s what separates Film Accounting from any other – the workable system that’s the same from production to production and which the producers, financiers, crews and the cast have grown accustomed to. 

The production of a film or TV project can be seen as a full-blown dramatization of the life cycle of a manufacturing company. In a few months the crew move into an empty warehouse/studio, rent or buy furniture, equipment, vehicles, props, wardrobe, shoot the ‘product’ for a very specifically locked-in budget, and then  return all the rentals and sell whatever was bought, wind up the bank and leave the warehouse/studio as they found it – empty of everything except maybe the dumpster awaiting pick-up. Most business accountants don’t see the full life cycle of a business – ever. So, the production personnel and production accountants have developed a niche for this kind of thing – especially, given the very specific type of budgeting and cost reporting that is entailed in such a fast life cycle.

All of this, and more, is covered in my workshops. My one hestitaion about a workshop is – How much should it cost? There will be $539 worth of software giveaways, as well as all the forms and templates you’ll need as an assistant film accountant, or as a new line producer starting up a smalish production.

Please leave me a blog with suggestions – I’m thinking in the $500 range, but not sure. What do you think?

I just Googled “Faster Better Cheaper – Pick Any Two” for film and tv production and was shocked to see that no one’s (apparently) blogged this old adage.

Because old it verily is. About 1970 I saw an interview with Hattie Jacques, a veteran character actor who always played the dowdy Matron, Wife, etc. through the series of “Carry On ___” movies out of the UK. She not only used the phrase, “Faster-Better-Cheaper pick any two”, but she said that it was a mantra that she had been living for many years.

 Let’s think about it. It’s a generality, and I think it’s lasted so long because it really makes you ponder. But, like all generalities, not always true.

 Let’s look at the easier combinations first:

Faster-Cheaper: Yep. It’s pretty much a no-brainer that faster-cheaper will ultimately lead to NOT “Better”. But there are rare exceptions, like Sydney Lumet and Clint Eastwood. In general, though, faster is usually “Cheaper”, unless wholesale panic ensues from the props, wardrobe, set dressing buyers. If they need to grab the first thing they see because of the lost time, it will cost more and will have a ripple effect on “Cheaper”, upsetting the director, causing the cast to mope because they’re not wearing what was promised, etc. In spite of it all, though, Faster will reduce the labor time and so should bring it in “Cheaper”, but at a sacrifice of “Better”.

Faster-Better pretty much excludes “Cheaper”. A better quality, even if it’s just more rehearsal time, will cost more than otherwise. Better-Faster would mean ensuring you have an experienced Cinematographer, a ‘show runner’ who knows the genre and can coax the best out of the script, etc. These types of heavy hitters are worth it, and will speed up the production. Perfect locations, stylized wardrobe, manufactured props are all “Better” at the sacrifice of “Cheaper”. Keep in mind, though, that “Better” may not mean “Faster”. Most directors want more coverage and love to wait for that perfect shot (dawn-in-the-desert kind of thing) and that is definitely not “Faster”. So, this combination works only with tried and true professionals who have enough time to plan an agreed upon shooting schedule.

Better-Cheaper is the bane of Independent Filmmaking. I have personally heard Production Designers lament, “If only I had more money, it would have looked so much better.” (I giggle in my sleeve when it’s already a $30Mil + production.) Each year, though, there are independent films that just DO IT cheaper and better than anyone else – “Little Miss Sunshine”, “Happy Go Lucky” and “Frozen River” are three such films that come to mind right off the top of my head. But to get back to topic, “Cheaper” is not any right of passage to “Better”, and this is where the adage falls down. There is some truth to the fact that if you ignore “Faster” and take more time to plan and rehearse, as well as to shoot, then you can make it better – but the “Cheaper” factor is only possible if the cast and crew are working for flat fees (i.e. no overtime). You would need to find a production cast and crew that are willing to do that for no extra fee – hmmmmm. Was that a Union Rep who just called?

There is a professional accounting niche that is little known – Film Production Accounting. I regularly receive queries to my web site, or my blog, about film production accounting and of how to enter this field. Most of the queries are from the Los Angeles area, especially from accountants who have a small accounting practice, but not always. One young man emailed me from the mid-west – he was interested in working in Louisiana, where a number of productions have sprung up over the past 4 or 5 years.

FILM PRODUCTION ACCOUNTANT CATEGORIES AND EXPECTED PAY

Production accountants usually fall into the field without much of any kind of accounting background. I believe that film production is the last industry in the world to hire accountants who don’t have some kind of formal training in accounting. Most film accountants get into that position through a period of apprenticing as assistant accountants. The levels usually go from File Clerk, 2nd Assistant Accountant, 1st Assistant Accountant to Key Production Accountant (sometimes referred to as the Production Auditor). Another position that is classified as an assistant accountant is the Payroll Accountant. The Payroll accountant is an expert is calculating complicated union payroll time sheets and is usually to busy to do much else than just that one function. A good payroll accountant can make in the area of $1800 to $2,000/week on the bugger Hollywood productions and are worth every cent.

The File Clerk would start in the rane of $500-$700/Week, a 2nd Asst Accountant in the $900 – $1400/Week range, a 1st Assistant Accountant in the range of $1,500 to $2,000/Wk.  usually the accountants get a little more on a big Studio production, and less on a small independent production. 

THE SKILLS OF A FILM PRODUCTION ACCOUNTANT

The Film Production Accountant needs to be conversant with every area of film production, if not downright expert when it comes to predicting cost overruns. The rapidity of spending during the production of the feature film, or TV show, is so high that it would be a nightmare for someone who hasn’t been exposed to the usual reporting system. That’s why an experienced Film Production Accountant doesn’t get out of bed for less than $2,500 a week (a 5 day week). Experienced production accountants demand and get at least $3,500/5 day week, and if they go on location ask for another $1,000 to cover off Saturdays worked (even though they don’t need to work many Saturdays). 

The Film Production Accountant’s job falls into the same three categories as any other accounting function:

- Bookkeeping (the speed of bookkeeping has to be experienced to understand. Petty Cash is often in the $60,000 to $80,000 a week range.)

-Reporting (there are very specific Budgeting and Weekly Cost Report formats which can be a bit of an IQ test until you get used to it. This type of report is used throughout the film production world from Austrailia to India to Europe to North America).

-Auditing (because the money appears to be spent so helter-skelter it can be abused, mostly by producers and department heads. It’s up to the production accountant to see the signs and prevent it before someone embarrassed themselves. There really are lists kept of those deemed to be A, B or C listed. Those that are B and C listed are almost always because of their inability to control their departmental budgets).

So, if you have an accounting background you can pick it up very quickly, but you really do need some experience first. The fact that you’re intimately dealing with so many facets of the actual film production it’s certainly a challenge and, I have to say after 25 years, tons more challenging and rewarding than working in manufacturing, banking, etc.

MY JOURNEY TO, AND IN, PRODUCTION ACCOUNTING

My own background started out in Engineering in the 70″s. Then, when I graduated I saw that open pit mining wasn’t doing it for me, so I started working with an accounting firm to earn a designation. My original purpose was to become skilled enough to be able to use both Engineering and Accounting to help failing businesses turn around. However, after I got my accounting designation I discovered that I would be taking a steep cut in pay to go back to being a junior engineer so I took a job as a Chief Accountant/Controller at a place with about 15 branches. After 5 years I went out on my own, starting a small accounting practice with a couple of other people. After a couple of years of beating the bushes and working 7 days a week I saw that I could make more money as a Film Production Accountant than I could in my practice, so I dropped my office space, my 2 staff, and started working as an assistant accountant.

I honestly thought that I would be a Key Production Accountant in no time, but it actually took me almost three years – with a wife and 2 kids, a third on the way, and a cut in my income I was REALLY pushing to start being the ‘Key” – as they call the department heads in film production.

By the late 80’s I was really enjoying myself, travelling with my young family, but always returning home for a gig or two, before travelling again. I’ve had my kids in school in Florida, upstate New York, Boston, Vancouver but always knowing that they would be returning home to their own school and friends. My wife didn’t have to work because I was making good money and the production was paying for my place to live and a daily ‘per diem’ which covered our food and spending while we were away. To me those were the glory years. As my kids grew up I had to stop travelling so much because they didn’t want to leave their friends, college, etc., but I still managed to get the family to Spain and South Africa. When i had to spend several months in Germany, though, I started to look at other ways to earn an income.

STEPPING STONE TO FILM PRODUCING AND PRODUCTION MANAGING

Like other industries, after spending many years accounting for and auditing the money, including advising producers and production managers, you start to get the idea that you can do as good as, or better job, at producing. There are many production accountants who have gone on to related film production careers – although, funnily enough, they often keep quiet about it. I presume because they want to distance themselves from the infamous “Blue Suit” – the much maligned Big Studio Exec. (Not a job for me – man, talk about pressure).

THE DOWNSIDE

A downside to Production Accounting is that you don’t ever have a JOB. You get CONTRACTS which last anywhere from 5 weeks to 9 months (pretty seldom longer than that). I’d say that my average contract on a film or TV production in the $20Mil to $40Mil range was about 6 or 7 months. Honestly, I really liked the fact of working with different people. I have often talked with other people in the biz, and we almost all agree that the independence that brings is worth the stress of looking for contracts. Once you’ve been in the business for 3 years, and if you haven’t messed up, you’ll be on call, especially if you’re willing to travel.

So, there’s the pros and cons to getting into the film production industry as an accountant.

HOW TO BUST IN

In another blog I’ll tell you how I got started as an assistant film accountant and some tips for you to put yourself ahead of the pack.

Good luck in your career, whatever you choose.

John Gaskin