The Trust Barrier Facing Emerging Film Producers

BREAKING THE FINANCING BARRIER – GAINING TRUST

Once an Emerging Producer has a trusted, working script the major roadblock to overcome is financing. The concept of financing has been fraught with Ponzi schemes and false promises since money was first invented.  Is it any wonder that there is a general distrust of anyone asking for financing? … Let alone someone with little experience and  gaining the trust of investors, studio exec’s, casting directors, completion guarantors, experienced line producers, etc.

The purpose of this article is to help you break down the barriers to financing your film simply by educating you on the terms and processes taken for granted by film industry professional film producers. Watch the short video and you’ll see what I mean.

THE FILM INDUSTRY BUSINESS CYCLE

The best way I know to understand the film industry business cycle is to break it down into the basic functions of the full business cycle. The practical categories used by Producers in their everyday work are:

  • Development (Investor Confidence),
  • Green Light Stage,
  • Production Stage,
  • Post & Audit Stage and
  • The Waterfall

ONLINE COURSE – AN OVERVIEW OF THE FILM INDUSTRY

This online course takes  about 2 or 3 hours to go through, has 12 videos and a 71 page course content. I have priced this for Emerging Producers at just $39.95.

It also includes a download of a $9Mil professional budget example in pdf format.

 

 

 

For more information see  http://www.talkfilm.biz/filmbusiness.htm 

 

Cheers / John

Producer Tasks Often Overlooked – Cashflows

I recently stumbled across a Filmmaker’s Checklist by Jason Brubaker. I really liked it! Normally, those kinds of lists just annoy me; however, Jason’s list of 65 items all ring true from my 30 years of experience in production. It’s prepared for the small Indie Producer trying to emerge into this very competitive film industry. By all means check it out.

CASHFLOW OF THE PRODUCTION BUDGET

Without taking away from Jason’s excellent list, he missed one vital step – the Cashflow of the Production Budget. This schedule is KEY to arranging financing. Without it the financiers will not know how much is required on a week-to-week basis, making the financing seem like one big blob.

PREDICTION LOWERS THE RISK FOR INVESTORS

Remember, no-prediction = high-risk. Investors want you to show a week-to-week prediction of cashflow requirements FOR EVERY NUMBER IN THE BUDGET. Some of those numbers may be a guess, but it really does give the bonding company, the banks and the financiers a lot of comfort that the Producer is at least attempting to reduce the risk for the investor. See the video clip below.

CASHFLOW OF THE BUDGET WITH ALL KNOWN FUNDING

CashflowsAnother schedule which potential investor’s love to see is a match-up of all budgeted costs with the known funding – sometimes called the “Loan Analysis Schedule”. This is a schedule which matches the budgeted costs with the arrival of any and all funding, whether it be loans on Tax Credits, Equity funding, loans on any Pre-Sales in foreign territories, etc. See this video clip to see what I mean.

FILM PRODUCTION ACCOUNTANT

Yes, this might be the duties of a film production accountant; however, if you are an emerging producer you should have this task as one of your skills when raising financing early in development. Once you have the templates it really is quite easy to master.

See the following links for more information about film accounting courses and film production courses for emerging producers.

 

Cheers / John

Emerging Producers – Overview of the Film Industry

BUSINESS LANGUAGE OF PRODUCING FILMS

Emerging Producers must separate themselves from the crowd as someone who knows the “Business Language” of the investors, Major Studios, Completion Guarantors, Distributors, etc. You can’t be confused with the clutter of people who “have a great idea”, but can’t express their ideas in a business like manner.

The purpose of this article is to help you take a giant step towards your goal as a Producer, and of ultimately financing for your film.

BUSINESS CYCLE

By breaking down the business cycle of film into:

  • Development (Investor Confidence),
  • Green Light Stage,
  • Production Stage,
  • Post & Audit Stage and
  • The Waterfall

you will be able to more confidently discuss the film and television production business from a business perspective with potential investors and completion guarantors throughout North America.

ONLINE COURSE

This online course takes  about 2 or 3 hours to go through, has 12 videos and a 71 page course content. It also includes a download of a $9Mil professional budget example in pdf format.

See http://www.talkfilm.biz/filmbusiness.htm for more information.Overview-Indie

Cheers / John


John is a working film production accountant who has worked on over 50 film and television productions in 6 countries since 1985. His book, “Walk The Talk”, live workshops and online courses are highly regarded. See http://www.filmaccounting.com for more info.

Line Producer – Managing Film Budgets and Cost Reports

Film production has a middle management position called “Line Producer” and/or “Unit Production Manager”. This person is charged with the responsibility of bringing the production in on time and on budget – really – and from the ground level. Most Line Producers and UPM’s learn their ability to manage shooting schedules through education and on-the-job experience. But, what about managing budgets and the related weekly cost report?

Breaking In As A Line Producer – Managing Costs and Reports

How does a 1st Assistant Director, a young producer, a filmmaker, a location manager, etc bust in as a Line Producer? How do they get exposure to the very confidential Cost Reporting process? In this environment of producing films cheaper-better-faster it’s especially important for Line Producers to understand the “Production Management” of budgets and cost reports.

Confidentiality of the Management of Film Budgets and Cost Reports

The confidentiality of the film budget, and its cousin, the weekly cost report, creates a barrier for emerging Line Producers. Most learn through a series of hard-knocks, easily avoidable with some practical training. However, there just isn’t any time on set for an active Line Producer to apprentice someone. It’s too fast and too late. The only way to learn this very important aspect of the film BUSINESS is to train in a controlled environment.

The Practical Methods of Managing Budgets and Costs

During a series of 6 live webinars, each 90 minutes long, we will review a $9Mil budget from several angles, learning the practical methods of managing a film budget used by film producers and production accountants everywhere. From that very important step, we practice the essential steps in controlling and reporting the production costs through the Weekly Cost Report – this report is fundamental to ALL media-based productions, and is reviewed weekly by the completion guarantors, the financiers, the studios, etc. In addition you will be introduced to the 6 basic ways that you can use to control the costs before they are spent.

Visit http://www.talkfilm.biz/filmworkshops5.htm to learn more. The next series of live online webinars is every Tuesday and Thursday night starting October 28, 2014. Note that the webinars are recorded for review at your convenience.

Cheers / John

Film Unions – Finding Financing or Finding Work

FINDING FILM FINANCING, OR EVEN JUST FINDING WORK

In my last article, “Finding Film Financing – Can it be Taught?” I listed several blocks of knowledge which could be taught. Having a workable understanding of such things as Union/Guild Agreements, Film Payroll, Bank Loans, Tax Credits, Production Cost Controls, etc., and how they weave together, will project you as a competent professional.

KNOWING FILM UNION AGREEMENTS ELEVATES YOUR STATUS

Does that mean that a financier will invest in your film project if you know your way around film Guild and Union Agreements (SAG, DGA, IATSE, etc)? Not necessarily. But it does mean that an experienced financier will have more confidence in your decision-making, and will have more confidence in referring you, listening to other strategies more suitable to their portfolio, etc. It definitely gives you an elevated status which the film community will pick up on. That financier might just say, “I’m looking for a young executive like you…” and start negotiating a contract to keep you on full-time.

WORD OF MOUTH IS EVERYTHING IN THE FILM COMMUNITY

The film and television production community prides itself as being much different from the rest of the business world. Word of mouth is everything. Impress one studio executive, or an experienced bond company representative, or a state tax administrator, etc. and believe me you have just made an “in” with their contacts as well. There are so many “wannabe’s” and only a few who will actually go the extra mile to learn the financial building blocks of the business of producing film and television content. Show them you’re in that small group who understand Guild and Union Agreements and their confidence in you rises sharply.

FILM PAYROLL RULES ARE LOCATED WITHIN EVERY “AGREEMENT”

The film unions and guilds have made “Agreements” with the Alliance of Motion Picture and Television Producers, generally known as the AMPTP. The “Agreements” state the rules of the contract between the Guild or Union and the Producer, including all payroll rules.

Each Guild/Union has broken down their rules for calculating payroll into the following 4 categories:

  1. The “Basic Day” and Overtime Rules
  2. The penalties associated with “Rest Violations” (also called “Turnaround”, or “Forced Calls”).
  3. The penalties associated with violating Meal Periods (called “Meal Penalties”).
  4. The various circumstances associated with Travel – whether to a “Distant Location” (i.e. staying in a hotel), or traveling outside of a defined “Studio Zone”.

Once you know where these points are in each of the agreements your task becomes one of familiarization and practice.

THE NECESSARY TRAINING AND PRACTICE

I’ve found that a full weekend practicing the feature film payroll rules, followed up by on-line links to all the materials, is plenty for your average person to learn how to manage and to calculate the union/guild payrolls to “gross” (i.e. to the gross amount of pay due before union and government benefits/deductions). I also supply timecard templates (yes, with the formulas) which are “helpers”. Once you have a working understanding of the various Agreements you can fluidly optimize your management of any union/guild within your production.

For more information see http://www.talkfilm.biz

Cheers / John

 

What Producers Want To Know About Film Accounting

Over the past few years I have been delivering workshops on Film Accounting to Women In Film and Television to maximum attendance and rave reviews from the attendees. I say this, not to brag (well, maybe a little), but more to emphasize that we covered topics which emerging producers want to know more about.

There were three areas that we covered over 3 days which resonated with all attendees:

1.THE FINANCIAL AND ACCOUNTING CONTROL POINTS

The students drilled utilizing the typical forms and rules used in film production accounting, getting a reality on how they, as producers, can control the costs on their own productions. Students went home with templates and forms, including the typical form flow charts of all basic film accounting processes.

2.A WORKING UNDERSTANDING OF THE FILM BUDGET AND THE “COST REPORT”

The Cost Report issued during any film or television production is the career maker/breaker for any producer. The student is left with an understanding of how to present, read and manipulate the Cost Report, something so important to their career as a producer.

3.A WORKING UNDERSTANDING OF CASHFLOW REPORTS AND FILM TAX CREDIT ESTIMATION

An emerging producer who can prepare a weekly cash-flow schedule from the budget, as well as a reliable estimate of the tax credits expected, is far in advance of other emerging producers in the same pool. Students received cash-flow templates, and various tax credit estimating templates as well.

REAL SITUATIONS

Within these three areas I conveyed as many real situations as I could, throwing in examples of fraud and how to control it, examples of “Back-End” deals and how to sweeten them, examples of bank loan interest and how it works, etc.

FILM ACCOUNTING WORKSHOP 101

My Film Accounting 101 workshop coming up in NYC next month and GA in Jan/15 does not cover the Step 3 above – the curriculum is more designed for those who want to actually work as film accountants. However, the testimonial below from a producer who recently attended reminded me that it is still what many producers want to know about film accounting:

“John Gaskin has an amazing wealth of knowledge that crosses over into various film departments. In his Film Accounting workshop, he outlines the big picture of film financing and production, and then hones in on the detailed accounting procedures. As a producer, the course has given me the confidence to manage larger budgets and communicate with production accountants more thoroughly on different points of financial control. In addition to attending his course, I also read his book “Walk the Talk”, which I’ve recommended to other industry professionals many times. With both formats John breaks down a breadth of complex information in a manner that is clear and digestible.” SR

To all you emerging producers, find out more about the Film Accounting 101 workshop at http://www.filmaccounting.com

Cheers / John

Crossing Over to Film Accounting-Film Budgets

The film and television approved budget reflects what the financiers have given you permission to spend in order to create a product of a specific quality. Throughout the production process the Producer is managing that budget, and the Film Accountant is swiftly comparing the actual costs with that budget on a line-by-line basis. Both of these professionals must be thoroughly familiar with each others duties and responsibilities.

THE PRODUCER MUST MANAGE QUALITY WITH THE $ IN MIND

Above the Line

Above the Line

The best way to really know how to manage a film or television budget is to know how to create one from scratch. But … that is a time-consuming task and really isn’t a requirement to being a good Producer, nor a good Film Accountant for that matter. What’s vital to exist as a Producer? It’s being so familiar with the budget that one can manage any type of cost, within any number of layers, in any film or television budget that you are given. This is not as easy as it looks in a chaotic film shooting environment.

THE FILM ACCOUNTANT MUST BE SURE WHEN MEASURING

By sure I mean certain and stable, especially when measuring the costs against the approved budget – all in relatively unstable conditions. Again the film accountant may never have created a budget from scratch; however, the accountant better be darn sure of where every type of cost is located and in what layer of each budget under his/her control.

CROSSING OVER TO FILM BUDGETING

So the first step is to know the overall format of every film and television budget anywhere that I have worked or seen budgets – USA, Canada, Europe, South Africa and Australia. We use a professional budget in my workshops which you will have a pretty darn good grasp of by the end of any workshop. At the risk of telling you something that you may already know

Budget Topsheet

Budget Topsheet

the breakdown of sections of all film/TV budgets are:

  • Above the Line
  • Below the Line Production (also called Shooting Period)
  • Below the Line Post Production
  • Other (Insurance, Legal, Interest costs, etc)

CHART OF ACCOUNTS

For you non-accountants the chart of accounts is a listing of all account numbers and account descriptions. I bring it up only because all of the Major Studios and Independent Producers have developed different Charts of Accounts. It’s a bummer, because as soon as you’re very familiar with the account numbers in one budget, another budget will use an entirely different Chart of Accounts.

PRACTICE

The best way to learn thoroughly learn about film budgets and cost controls is to practice in a controlled environment. See my web site for workshops, live webinars and online self-study. Go to http://www.talkfilm.biz

Cheers,

John

Film Production – Your Daily Report Card

hotcost The Hot Cost measures the daily cost of labor (Cast and Crew) with the budgeted amount of daily labor – along with the page shot compared to the page count planned to be shot that day. It goes to all financiers, studio execs, the completion guarantor, etc – establishing your credentials as a Producer/Production Manager. You could call this your daily financial report card.

A KEY DOCUMENT KNOWN ONLY TO A FEW

The Film Production Accountant prepares it, usually without too much input from the UPM or assistant accountants. Some key film production accountants involve their payroll accountant; however, I have found that unsuccessful – it simply puts too much burden on the payroll accountant. The Hot Cost should be prepared with enough information to be checked by the UPM.

THE DAILY PRODUCTION REPORT (DPR):

Each day the Assistant Director’s prepare a “Daily Production Report”. The In/Out times, as well as the lunch break, is recorded on the DPR. Every person who worked on set is named along with their title. In addition, the DPR shows all the times related to each and every actor, the number of lunch plates, the page count shot (per the Script Supervisor),any notations of accidents/delivery of major equipment/illnesses, etc. From the DPR the Key Film Production Accountant calculates the actual costs of cast and crew for the day and compares it to the budgeted  daily cost.

UNDERSTANDING PAYROLL:

You really need to have a grasp of the cast and crew union rules for calculating payroll in order to effectively manage the hot cost reports. Once you get a grasp the union rules you’ll start to wonder what all the fuss was about. No matter what union contracts you’re dealing with, each Union has broken down their rules into the following 4 categories:

1. The “Basic Day” and Overtime Rules

2. The penalties associated with “Rest Violations” (also called “Turnaround”).

3. The penalties associated with violating Meal Periods (called “Meal Penalties”).

4. The various circumstances associated with Travel – whether to a “Distant Location” (i.e. staying in a hotel), or travelling outside of a defined “Studio Zone” (also often referred to in each locale as “The Circle”).

For those of you newly exposed to Screen Actors Guild, the various IATSE (crew) Locals and the Teamster (driver) Locals, it may seem a little too much; however, it’s MUCH easier than learning to use Excel – so, have a little patience, do a lot of practice time cards, and you’ll have it.

THE PAYROLL SOLUTION TO UNDERSTANDING HOT COSTS:

The solution to understanding any Hot Cost is to find a central source of contracts for SAG, DGA and IATSE then summarize the four rules mentioned above. Then have someone show you their version of Excel formulas which comply with these central rules. At the risk of shameless self-promotion, I have done that, one union at a time for each of SAG, DGA, IATSE National Low Budget (any feature or TV production in North America less than $13Mil) and IATSE Area Standards (any feature or TV production greater than $13Mil outside of the Los Angeles and New York zones). I have a general Teamster contract for the non-LA/NY areas, but, honestly, it’s child’s play to understand after learning the above. Actually, it is not a problem for me to say that if you understand SAG, DGA, IATSE Low Budget and IATSE Area Standards you can work anywhere in America or Canada – it would only be necessary to get a copy of the local contracts in those higher production centers and you’d be ready in a day or so.

THE TRAINING AND THE PRACTICE:

I’ve found that a full weekend practicing the film and television payroll rules, followed up by on-line links to all the materials, is plenty for your average person to learn how to calculate the union/guild payrolls to “gross” (i.e. to the gross amount of pay due before union and government benefits/deductions). I also supply templates (yes, with the formulas) which are “helpers” ad which you can use to develop your own Hot Costs, no matter the circumstances. I leave you with on-line links to all of the materials – see this link to get an idea of what I mean.

Have a look at this link to a short video of how my SAG on-line course works.

Check out http://www.talkfilm.biz  for live weekend payroll workshops, as well as workshops on Film Accounting.

If you are already a film accountant and would like to learn more about Hot Costs, see this short video.

Cheers,

John

CPA OPPORTUNITIES – NEW SEC RULES FOR FILMMAKERS

As of September 23, 2013 the SEC passed rules for the JOBS ACT allowing filmmakers to advertise their fundraising publicly (Billboards, Twitter, LinkedIn, Websites, etc). This is causing a lot of excitement within the film community. What’s scary for filmmakers, though, is the tasks of making “reasonable efforts” to ensure that investors financing the film are “accredited investors”, not to mention the filing of “Form D” with the SEC. How is this an opportunity for CPA’s?

NEW SEC LEGISLATION

General solicitation for the financing of filmmaking has been illegal until recently. In order to comply with the JOBS ACT to create small business in America, the SEC passed Rule 506 (c)  to allow general solicitation and advertising for a private placement offering. However, in a Rule 506(c) private offering all of the purchasers must be accredited investors and the issuer must take reasonable steps to determine that the purchaser is an accredited investor. The SEC amendments can be read at this link

ACCREDITED INVESTOR

The SEC has defined an “Accredited Investor” in 8 ways – see this link for a very clear, and easy to read, definition (there are 8 types)  http://www.sec.gov/answers/accred.htm . The most interesting to me is #7: “a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year”.

HERE’S WHERE THE CPA COMES IN – “REASONABLE STEPS”

The SEC makes some suggested “reasonable steps”. Here is a quote from the amendments web page published by the SEC: “Rule 506(c) sets forth a principles-based method of verification which requires an objective determination by the issuer (or those acting on its behalf) as to whether the steps taken are “reasonable” in the context of the particular facts and circumstances of each purchaser and transaction”. You can read more about the verification methods BY CLICKING HERE. A review of the last 2 years tax returns , or a review of bank statements, investments, etc will verify that status. However, accredited Investors will not be comfortable turning over this information to filmmakers directly. This is where a CPA enters the stage.

FORM D FILING WITH THE SEC – A TASK FOR THE CPA

In addition to verifying the Accredited Investor status, the filmmaker must also file a Form D with the SEC. See http://www.sec.gov/answers/formd.htm for the details of the Form D, as well as a download of the form itself. As you can see from the form, it is a relatively simple online filing – at least for a CPA. In my experience, most filmmakers would want help with the form. Again, this is an opportunity for a CPA. There are proposals to file the Form D at least 3 times: 15 days before applying exemption under Rule 506 (c), 15 days after the first investment, 30 days after the funding has been concluded and whenever a change to the solicitation materials has been made. For more info click here.

PROPOSED NEW RULES TO ENHANCE THE SEC’S ABILITY TO EVALUATE

At the time of this writing (Oct-2013) there are a few additional proposals, which you can see here http://www.sec.gov/news/press/2013/2013-124-item3.htm . The SEC does a surprisingly good job of writing their articles – they’re very easy to read. Since we’re on the topic of opportunities for the CPA, please read the proposals with an eye towards creating new business.

FINALLY, THE “BAD ACTOR” DISQUALIFICATION

Your client, the filmmaker, is also responsible to ensure that anyone participating in the fundraising does not fall under the BAD ACTOR provisions. This includes investors, investment advisers, producers or anyone else mentioned in the fundraising documentation. BAD ACTORS are individuals that have committed a crime, fraud, etc. On July 15, 2013 Morrison Foester wrote a very short, clear article about this: to see this article click here. There are simple ways to discover this information, and I would suggest that the CPA would be able to perform this discovery for the client as well as the above services.

Cheers / John

To learn more about Film Accounting and Auditing see  http://www.filmaccounting.com/filmaccounting-cpe.htm  This is definitely not the same old CPE!

My next workshop is in Orlando Oct 12th and 13th, 2013. Learn more about the workshops at http://www.filmaccounting.com

Manufacturing Desire – by Slated

Slated, my favorite online source for Indie filmmakers, has a truly spot-on article. It’s based on a talk given by Erikl Feig, president of production at Lionsgate, explaining to a WGA West audience last year how even the largest independent film studio in North America has to tap dance between two polar sets of interests.

Colin Brown, the managing editor at Slated, has written this article and is well worth the time to read – as usual his writing style is simple to follow with excellent references.

It starts out with a quote from Erikl Feig:

“Every single movie that we make has to be sold twice. First, on a pre-sale basis, to a bunch of independent foreign distributors who are worried about losing money. And second, to a consumer who wants to see something that they haven’t seen before. Trying to find the right project and the right package that can satisfy both of those moments in time, separated by eighteen months of hopefully good execution, is really, really hard.”

The article is at this link:

http://info.slated.com/the-manufacturing-of-desire/ 

To learn more about the the basics of putting together a business-like package, see more at http://www.talkfilm.biz/filmbusiness.htm

Cheers / John

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