Film/Television Production – Are There Opportunities For CPA’s?

Above-The-Line Budget

Above-The-Line Budget

FILM & TELEVISION PRODUCTION – ARE THERE OPPORTUNITIES FOR CPAs?

The purpose of this article is to point the CPA towards the film, television and commercial production industry. Is it worth learning more about this intriguing industry? Are there opportunities for CPA’s? Read on and you’ll discover for yourself if it’s worthwhile pursuing this industry. From that point you can start to learn more about the specific practices and terminology of Film Accounting.

MEDIA PRODUCTION – DETERMINING THE VALUE OF THE GDP IN AMERICA

For starters, is it worth looking at “Media Production”? From a total dollar value of Gross Domestic Product, I’d have to answer a resounding, Yes! Back in Dec of 2013 the Bureau of Economic Analysis published the first ever analysis of the value of Arts and Culture. They reckoned that Arts and Culture accounted for $504Billion, or 3.2%, of the Gross Domestic Product in 2011. That 3.2% encompasses everything from advertising to arts education to cable distribution and movie production. To give you some idea of how the 3.2% compares to other industries, the Motion Picture Association of America stated that all of Travel and Tourism at that time accounted for 2.8% of the GDP.

I sifted through the published numbers and came up with an approximate value of $273Billion due to various media “production”: cable, network, feature and advertising/commercial production. See my notations on the table below:

BEA-13-58 Media Production

BEA-13-58 Media Production

 

MEDIA PRODUCTION – PER BEA ARTS/CULTURE CONTINUED TO INCREASE IN 2013

On February 6, 2016 the Bureau of Economic Analysis published statistics for 2013 in their document #BEA 16-07.  Here is a quote from the bottom of the second page of that report: “… total inflation-adjusted spending on all arts and cultural commodities reached $1.1 trillion in 2013. That figure was up 2.7 percent from the year before.”

Here’s another shocker for you. It’s a quote from the top of page 4 of the same report: “Employment for all arts and cultural industries totaled 4.74 million in 2013.”

Enough said. There’s plenty of energy in them ‘thar hills!

FILM ACCOUNTING & AUDITING – A NEW SERIES OF SELF-STUDY CPE COURSES

What is the the cycle of the film industry? How does it go from point A to point B? What really is a film producer and how does he/she need help from CPA’s? What are the common accounting practices and terminology used in film and television production?

The “Overview” course is a 2 hour self-study course which has been very well received, as has been the other courses for those wanting to dig deeper into the nitty gritty (Basic, Intermediate and Advanced).

Watch the video above to see how the course works and it’s content.

VALIDATED MATERIAL AND DELIVERY BY TESTIMONIAL AND CERTIFICATION

The courses have been validated by 4 years of workshops, CPE Sponsor licensing, and numerous testimonials. For more info  SEE THIS LINK.

Some Testimonials:

“We have not worked much in the film industry or film tax credits so thought it would be prudent to get a good foundation. Quite frankly, I did not realize how important it was until I took the first of John’s (self-study) courses. We have a wonderful audit department and plan to look into film auditing to add to our services. I am intrigued and enjoy the nuances of film accounting.” E.E.

The film cycle was especially helpful it IS unique to the industry.” T.S.

The course is a great presentation for an overview.” Z.K.

“I felt the objectives of the class provided good insight into the state film tax incentives and the requirements varying by state, and what the qualifying expenses incurred were.” J.B.

Cheers,

John


ABOUT JOHN

The courses are designed and delivered by a film production veteran, John Gaskin, with experience on over 50 film and television productions in 6 different countries over the past 30+ years, as well as 6 years experience as an instructor in film accounting & auditing,  and managing film budgets. John Gaskin has worked with such greats as Ron Howard (twice), David Valdes (Open Range, Green Mile, Unforgiven), George Clooney (Confessions of A Dangerous Mind) and Gulliermo del Torro (Mama).

For more information, 3 minute videos, course samples, etc. SEE THIS LINK.

Film Accounting – Fresh and Fun CPE

overviewFILM ACCOUNTING COURSES

A few years ago the Connecticut Film Tax Credit Administrator, Ed Ruggiero, asked me to deliver a workshop to CPA’s who were interested in performing audits of film productions for the CT State Tax Credit. I did just that, successfully helping several local CPA’s understand the Film Industry and Film Accounting much better. However, subsequent scheduling of workshops for CT CPA’s was difficult. As a result, I put together 4 online courses as a substitute to a live workshop.

LET YOUR PEERS DO THE TALKING

Online courses have an earned reputation as being rather boring, slow and sometimes downright monotonous. Most of us would rather have a live workshop during the workweek, with lots of interaction among the other attendees and the instructor. However, getting to the workshop location, and breaking away from the office, aren’t always possible – for you or for me. So, how do you evaluate which online CPE course to take? The easiest way is to check out what your peers have said about the courses.

EVALUATION OF MY ONLINE COURSES HAVE A SCORE OF 100%

At the end of each online course qualifying for CPE I ask the student if the “stated objectives of the course” were met. There has never been a “No” yet…. that’s 100% of the time every student has said that the stated objectives were met. Several students also had other good things to say.

A SAMPLE OF ADDITIONAL COMMENTS MADE BY STUDENTS

1. Film Accounting and Auditing – An Overview

  • “Yes. Great introduction of the role the production accountant will play within the overall film production life-cycle.”
  • “Yes – it was pretty much an overview. I feel I have a much better understanding of film accounting now.”
  • “Yes! Very easy to follow. An excellent intro to the industry.”

2. Film Accounting and Auditing – The Basics

  • “Yes, great to see the various sample forms. The workflow charts are also very helpful.”
  • “Yes, the detailed explanations of the various forms, as well as the general ledger software, were very helpful.”
  • “Yes, very useful. I now have a sound understanding of the basic principles of production accounting.”

3. Film Accounting and Auditing – Intermediate

  • “Yes. Great explanation of the inter-relationships between the various reports and overview of the audit plan.”
  • “Yes. Enjoyed the course and learned a great deal about auditing productions.”

For more detailed information about the online courses see http://www.filmaccounting.com/filmaccounting-cpe.htm

If you would like to see the stated objectives of the courses I have listed them below, along with links to short YouTube videos describing each of the course’s content.

Cheers,

John

– John has worked on over 50 film and television productions in 6 countries since 1985 on productions big and small. For more information on his credentials see http://www.filmaccounting.com/filmaccounting-cpe.htm

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An Overview – The Learning Objective Met By 100% of the Students: The participant will understand the overall business cycle of the Film Industry with specific attention on the workflow, general terminology and film industry specific accounting practices of Film and Television Production. No advanced preparation is required. See this short video reviewing the content of this course.

The Basics Course – The Learning Objective Met By 100% of the Students: The participant will be familiarized with the film production processes, forms and control points of a usual film production. With this knowledge the participant will be “up to speed” with the books and records of a usual film or television production.  No advanced preparation is required. See this short video reviewing the content of this course.

The Intermediate Course – The Learning Objective Met by 100% of the Students: (Prerequisite: An Overview) The participant will understand the interaction among the production entity, the approved budget, the production documents (Call Sheets, Daily Production Reports, etc) and the Final Cost Report – prepared by the film production accountant, this is the document audited for film tax credit certification. From this understanding an external auditor will be able to plan the tax credit audit with an understanding of all industry specific factors.  No advanced preparation is required. See this short video reviewing the content of this course.

The Advanced Course – The Learning Objective Met By 100% of the Students: (Prerequisites: An Overview and Intermediate)The participant will have an understanding of various State requirements to certify the production for Tax Credit purposes. From this understanding participants can confidently comply with their own particular locale’s certification requirements. The categories closely examined are Qualified Expenses (Payroll, Non-Payroll, Real Property) as well as Related Party Transactions, Ownership and Sources of Funds. No advance preparation is required. See this short video reviewing the content of this course.

Film Accounting – The Quandary of Breaking In

Any person who wants to break into Film Accounting as a profession has a very hard time of it. The film producers don’t budget for “training” – they want somebody to walk into the position and GO-GO-GO.

Is Film Accounting That Different?

It’s not that film accounting is particularly difficult, or even that different. It’s the same principles as other industries, like construction for instance. The big three functions of Bookkeeping, Internal Controls and Reporting are true for film accounting just as they are for other industries. The biggest difference is rooted in the film industry specific practices, terminology and film accounting software systems which are virtually unknown outside of the film production industry.

Producers and the “Key” Film Accountants Want Experienced People

Most film accountants aren’t certified accountants in any other field – although if you have experience as a bookkeeper or CPA behind you it’s a heck of a lot easier to advance. Film Production Accountants are simply smart people, not allergic to fast pace and long-ish hours, who have worked their way into that position. The apprenticeship system still works, but when more and more demand is put on film producers to produce faster, cheaper, better, there’s less and less room for an apprentice. So, how do you get experience?

How To Solve This Quandary?

The only way I know of is to train as a film assistant accountant in a workshop environment using the film accounting software systems known only within the film industry. You will be saturated with film industry specific practices and terminology, all while learning the practical aspects of the unique film accounting software generally used in film production.

Come to my next intensive workshop in Los Angeles on May 17/18, 2014. It is 23 hours of CPE.

See my website at http://www.filmaccounting.com for more details. Most of my workshops are held in Louisiana, Atlanta, Detroit and Toronto. This is only the fourth time that I’ve been back to Los Angeles in the past 4 years, so don’t miss it!

Regards to all,

John Gaskin

Veteran of over 50 film and television productions in 6 different countries. See IMDb for credits.

 

Film Production Accounting

This post has been well received ever since I first posted it in 2009. I’m updating now to bring it up to 2014 standards.

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 used to be from the Los Angeles area, but over the past 4 years there has been an equal number of queries from the Film Tax Incentive States.

FILM PRODUCTION ACCOUNTANT CATEGORIES AND EXPECTED PAY

Production accountants have traditionally fallen 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. Currently, the field of film accounting is looking more appealing to a wide variety of CPA’s who are looking for something more markets to penetrate – or even to change careers. Most film accountants get into that position through a period of apprenticeship 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 in calculating complicated union payroll time sheets and is usually too 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 bigger Hollywood productions and are worth every cent.

The File Clerk would start in the range of $500-$900/Week, a 2nd Asst Accountant in the $900 – $1400/Week range, a 1st Assistant Accountant in the range of $1,500 to $2,300/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 Australia 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 signals and prevent it before someone embarrasses 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 30 years, tons more challenging and rewarding than working in manufacturing, banking, etc.

MY JOURNEY TO, AND IN, FILM 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.

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

I spend some time talking about ways to bust in during the weekend workshop. With the advent of tighter and tighter money I see even more opportunities for film accountants as aides to producers, or even film accountants producing projects on their own. Subjects like Film Tax Incentives, verification of paperwork required during Crowdfunding of “Accredited Investors”, cash-flow schedules, familiarity with equity terms, etc can all be easily learned by film accountants, or by professional accountants and bookkeepers interested in penetrating this market. (If you are interested in how this all fits together see this short video).

Good luck in your career, whatever you choose.

For more about training as a film accountant see this link to film accounting workshops and training online.

John Gaskin

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

Crossing Over to Film Accounting – “The Cost Report”

As in most businesses there is a particular report which is considered “vital” to investors of any film or television production. As you may expect, the industry has developed its own very distinct financial report for any production.  The income statement, balance sheet and profitability/ liquidity ratios are all ignored. The primary, and very confidential, report goes by the innocuous name of “The Cost Report”.

costreportTHE COST REPORT IS CONSIDERED CONFIDENTIAL

Seriously, I wish that more creativity had gone into the name; something which reflected the career breaker-maker nature of the report. Within the ‘Biz it’s so protected, and kept so secure, that not even Variety Magazine nor the Hollywood Reporter even refer to it.

COST OVERRUNS ARE LEARNED VIA THE COST REPORT

It’s not uncommon to hear in the news about a wildly Over-Budget movie like ‘Titanic’ or ‘Water World’.  In reality, there aren’t many films that get that far out of hand.  With only two or three exceptions, most of the films that I’ve worked on have been produced for amounts in close proximity to the Approved Budget. Indeed, it’s a career breaker not to have foreseen those Over-Budget costs, regardless of very good reasons offered up by the Director, Producer, Production Accountant, Department Head, etc. why they didn’t know.

The whole reason for a Weekly Cost Report is to give the Studio Execs, Producers, Bonding Company, etc. enough time to correct for any projected over-budget costs (that is, to find ways to cut the costs in the remaining time of shooting, or to find more money, etc).

DETAILS OF A COST REPORT

Now let’s get down to the nitty-gritty of this little known, but key, film production report.

The first thing to understand is the simple arithmetic of the report. First, have a look at the picture above , or click here to see a clear pdf page, and then follow each of the columns as described in the next paragraph.

When examining the 10 columns, keep in mind the following simple arithmetic:

Col. 1 and 2: are the account number and description of the account.

Col. 3: The numbers here represent the costs PAID THIS WEEK only.

Col. 4: The numbers here represent the costs PAID from inception to the current date.

Col. 5: The commitments are Purchase Orders committed but not yet paid.

Col. 6: Total Costs = Col. 4 (Cumulative Costs PAID) + Col. 5 (PO’s not yet paid)

Col. 7: Estimate-To-Complete = Amount of money needed to complete the production.

Col. 8:Estimated-Final-Costs = Col. 6 (Total Costs Paid/Committed) + Col. 5 (ETC’s)

Col. 9: The Final Approved Budget (sometimes called the ‘locked’ budget).

Col.10:Variance: the difference between Col. 7 (Budget) and Col.6 (EFC’s)

TRICKS OF THE TRADE
A working knowledge of costs reports and the data behind them is a prerequisite for any CPA to be able to audit the Cost Report for State tax credits; it’s also vital that any emerging producer have a working understanding of Cost Reports.

There are several ‘tricks of the trade’ in reading a Weekly Cost Report. They’re available in my book,“Walk The Talk”.

Visit http://www.filmaccounting.com for more info on the book, week-end workshops, self-study courses and live webinars.

Cheers / John

PS – If you are curious about film production accounting as a career see this article.

Crossing-Over to Film Accounting

As in any business, but particularly in the film and television business, there are unique reports that any accountant must know before understanding the business. Having a working knowledge of these reports is vital for any CPA who wants to audit film production cost reports for the local film tax incentives.

PRODUCTION REPORTS

Within the film production business the term “Production” refers to that body of crew who manage the project (i.e. Production Manager, Assistant Directors, Production Office Coordinator, etc) as distinct from “Accounting”. It is Production which prepares and distributes such reports as the “Shooting Schedule”, “Call Sheets”, “Daily Production Report (DPR)”, “Day Out Of Days”, etc. are all prepared and distributed by “Production”.
Each of these reports plays a part in the Film Production Accountant’s control, reporting and forecasting of the project’s costs.
callsheetTHE CALL SHEET
The Call Sheet lists what is expected to be shot that day and every Cast and Crew’s  expected arrival time on set – referred to as their “Call Times”.

The Call Sheet also lists specialized equipment, props, etc which will be required for the day’s shoot. This document is a “legal” document when insurance claims and tax credit situations arise. For example, if a Director was too sick to work for a day, the Call Sheet would be examined for justifiable costs that couldn’t be avoided.

The location of the shoot day can be confirmed from the Call Sheet, as can be the cast and crew.

Here’s an example of a Call Sheet: http://www.talkfilm.biz/FA/MA/callsheet.pdf

SHOOTING SCHEDULE

A shooting schedule is the detailed plan of shooting every scene as it is to be shot from the first day of production through to the final day. All the necessary information is provided including the Scene #, if the scene is Day or Night, the location description, the specific requirements for Props, Special Equipment, Mechanical Special Effects, number of Background Extras, Picture Vehicles, etc.
It is usually prepared by the 1st Assistant Director who reports to the Production Manager/Line Producer managing the production schedule.
In the Development and fund-raising-stage the Shooting Schedule is an assurance to the investor that the script can, indeed, be produced in the timeline presented by the Shooting Schedule.
Here is an example of the 1st page of a Shooting Schedule: http://www.talkfilm.biz/FA/MA/shootingschedule.pdf
APPLICATION OF THESE FORMS
These forms, and several others, supplies the discerning public auditor with vital information – I really can’t see how you could perform an audit without knowing how to read and interpret the vital information in these reports.
Cheers / John

Film Accounting 101 Workshop – Next Stop Orlando Oct 12/13th – 2013

ABOUT THE WORKSHOP

The film accounting week-end workshop is hands-on training using a common proprietary general ledger software used in the Film Industry. You’ll be doing exactly the same thing all assistant production accountants do – all of the details are practiced in a controlled environment.

A PRACTICAL HANDS-ON WORKSHOP

  • Film Accounting practices, processes and work-flows are generally the same throughout North America (if not the world).
  • We DO in the workshop what any assistant accountant must DO in the actual working environment of any film or television production.
  • After 2 days of practical ‘doingness’ you will be feeling pretty good about walking into a film production accounting office as an accounting clerk or a 2nd assistant accountant.
  • As an additional option you can also attend the 6 live on-line webinars after the weekend training which will take you into the next level of managing a film budget and cost reporting to the financiers.

SOME BENEFITS:

In addition to having the skills to break into the film accounting business, you will also receive:

  • my ebook “Walk The Talk”, used by the Peter Stark Producing Program at the Univ of Southern California
  • multiple formatted film budgets
  • +50 practical Accounting & Legal Form Templates
  • accounting policies
  • flow charts of film accounting systems
  • a typical film production organization chart
  • a booklet in pdf on Managing Film Budgets
  • a booklet in pdf on Managing Cost Reports (a “Cost Report” is the weekly financial report card showing detailed and summarized information on the variances from budget as well as prediction of the final costs expected)
  • SAG payroll templates
  • IATSE Low Budget payroll helper template
  • cashflow templates
  • hot cost templates
  • enjoy a weekend in Florida at one of the best conference centers in Orlando
  • etc.

I hope to see you there. You can check out the details of the course by visiting my web site at CLICK HERE FOR MORE INFO

Cheers / John

Film and TV Production – A Growth Area for Accountants

The growth in the film industry is indisputable.

REVENUE GROWTH – FILM AND TELEVISION

Stats show revenue growth over the past year in both the film and television. The Motion Picture Association of America 2012 stats show the Domestic Revenues have 6% growth from 2011, and 12% growth from 5 years ago. The Global Revenues show 6% growth over 2011.

JOB GROWTH FOR FILM AND TELEVISION INDUSTRY

The MPAA stats show that in 2010 direct industry jobs generated $42.1 billion in wages, and an average salary 32% higher than the national average. Also, there were nearly 282,000 jobs in the core business of producing, marketing, manufacturing, and distributing motion pictures and television shows. These are high quality jobs, with an average salary of nearly $82,000, 74% higher than the average salary nationwide. Those numbers don’t include over 400,000 jobs in related businesses that distribute motion pictures and television shows to consumers. (And … remember that there has been steady growth over 2011 and 2012)

STATE FILM TAX INCENTIVES

Of the 52 States a whopping majority – 42 States – have some form of film tax incentive. (The naysayers are Nevada, Arizona, North and South Dakota, Nebraska, Kansas, Iowa, Delaware and New Hampshire.)   After working in the film production business for 28 years, and delivering workshops in 7 States, I can say unequivocally that filmmakers need your help to manage the required reports for Film State Tax Incentives, as well as give audit opinions, agreed upon procedures, etc for the certification of their cost reports.

DIGITAL CAMERAS AND FILM SCHOOLS CREATING MORE FILMMAKERS THAN EVER BEFORE

It has been said for a few years now that the digital camera will revolutionize the film industry. There was a time, say just 4 or 5 years ago, when it was only possible to make films with very expensive 35 mm cameras that were bulky, required tons of lighting, dolly tracks, etc. Those days are still with us on the big time film productions, but it is swiftly declining as the major means of shooting film and television projects. This new generation of filmmakers need the accountant’s help.

EVEN ACCOUNTING FIRMS ARE PRODUCING THEIR OWN FILMS!

Even Accounting Firms are doing their own filmmaking, witness Withum’s Mob Flash Dance (really up-beat!) and the Center For Audit Quality’s series – my fav is CAQ – The Financial Statement Audit (very cool comic book style).  These two YouTube videos have had 53,000 and 72,000 views, respectively.

OPPORTUNITIES FOR PROFESSIONAL ACCOUNTANTS AND BOOKKEEPERS

This all spells opportunity. Take a minute to get an insight into the opportunities available for accountants of every status – watch this video.

#4 of 7 – Above-the-Line Budgeting (A Producer Favorite)

I was getting tired of having 7 articles that I had taken a lot of time to prepare sit languishing on Google Knol. So I started printing them here. Since then Google no longer will let my Google Know articles appear on Google searches. Shame. Oh, well, there’s always WordPress.

Above-the-Line budgeting (if you don’t know what Above-the-Line means look a little lower for the definition) is a very hot topic – as you can well imagine. It’s the favorite topic of most film producers who package a show in development. It’s probably more important to them than the script!

Pretty much anything you hear about on the internet, on entertainment shows and in magazines is about the Above-the-Line people. What actors, directors, writers and producers are earning, creating, developing, etc. That’s all Above-the-Line stuff.

ATL (as it’s often referred to) is where most of the money goes. Sometimes over ½ of a film budget is Above-the-Line. So, our employers, the Executive Producers, Bonding Companies, Major and Independent Studios, spend much of their time on that topic as well. It’s important that you know that language and can walk-the-talk when it comes to this ATL area.

Picture this – Steven Spielberg just called you into his office for an interview. He wants your point of view as the potential Film Director, Line Producer, Unit Production Manager, Director of Photography, Gaffer, Film Accountant, etc.

Would talking to him in the language of the pros about the Above-the-Line Budget make you tongue-tied? If not. Throw this article away. If you think it might be a problem, then let’s get carry on.

Above-the-Line Defined – ATL includes all costs associated with the Writer, Director, Producers, Cast and Stunts.   In keeping with the purpose of these Articles, I want to show the reader how to survive film budgets and costs — within the degree of control of the reader. Therefore, I am avoiding the costs of the Writer, Director, Producers and Stars.  All of those costs are driven by the financiers/Studios and they don’t need my help there.  It’s the everyday cast and stunts (normally called Daily/Weekly  Performers, ‘Bits’ and Stunt Performers) that you need to know about.

ATL Basics

There are five different kinds of cast costs.

1.Stars – this is the early stages of packaging the project and usually is not a factor in any cost control decisions during the production of a film.

2.Supporting Cast – as a film director, or producer, it’s up to you to plead your case from a script point of view. From a cost point of view, it’s up to how well you can sell your case. For the rest of us – ride it out.

3.Day Performers – this category refers to an actor who comes in for a day or week, or for upgrades of extras to a small speaking role. During the early days of creating the budget not a lot of time is spent on this category. Producers and accountants have a tendency to budget Day Players slightly higher than the minimum scale rates. There’s also a tendency to budget for at least 12 hours worked per Day Player.
The cost of each individual day player is not huge; however, if their hours worked as a whole are well controlled and brought in under 11 hours a day, you can save from $20-$40,000 on a studio feature production.

4.Stunt Performers – the unpredictable problems of stunts can make this cost a big over-budget item, or it can make for some big savings, too.  This line in the budget is a favorite place for producers to add some “fat”. It’s difficult to argue with the number of stuntmen needed or the stunt equipment needed, etc.  So, a prudent producer tosses everything possible into this category in a blind bid to cover unforeseen problems. If you can control the stunt within an inch and get it done fast, there’s a very good chance you’ll save a significant amount of money to use on other things you’d like to do.

5.Fringes (additional payments to Governments and Unions) – for every dollar you spend on cast/stunt wages, you pay an additional 32% in fringes. This is a significant figure, and one often overlooked. Save $40,000 on stuntmen and day players, do not pass go; get an additional $12,000 in saved fringes.

Those definitions had to be stated. Now – how can we make those categories of ATL budget work for us? What, exactly, can it do for our careers?

Before we can get into that with an example, let’s look a little closer at the term ‘Non-Discretionary Costs’.

Non-Discretionary Costs Defined:

Non-Discretionary costs are the costs that are mandatory to be able to shoot the film. Those costs include hiring the characters in the script, performing the stunts called for in the script, renting the appropriate camera equipment and vehicles in order to shoot the sequences called for in the script, buying film stock, etc.  These are the costs that are the last to get cut in any budget belt tightening.

In this section we’re talking about Cast, Stunt Performers, Dancers, etc. that are categorized as ‘Above-the-Line’.  We want to determine how to ‘direct’ the ‘Non-Discretionary’ costs to our favor.

‘Direct’ Non-Discretionary ATL Costs

Whether you’re the Director, Producer, Production Manager or Department Head, find the Non-Discretionary costs in your particular area. If you’re budgeting, pump them up. If you’re not budgeting, find a way to control those types of costs.

If you’re a Director, this is your big chance – don’t miss it. Get involved with this process. Ask to see the budget pages involving cast and stunts – plead, joke, cry, laugh, whatever it takes – just make sure you follow the advice below:

1.The Studio (or other financier) pushes back hard on costs that are considered to be discretionary.  If there are costs that are easier to defend as non-discretionary, such as cast and stunt costs, then overplay this hand as much as you like.  It’s irrefutable that the cast and stunt costs go directly into the film.  Also, the Studio Executives can’t refute the fact that you “…want the stunts to make the audience leap out of their seats”, or you want the Director to “…have enough time to work with the actors.”

2.If you end up with more than enough budgeted funds in the non-discretionary costs, you can apply that savings to apply to the discretionary cost areas. (“Yes, you can have the silk shirts. We’ll offset from our savings in the Stunt Budget”, says the Producer to the Costume Designer).

I know – you’re muttering ‘Machiavelli’ under your breath. Hey! It works!

Have a look at the chart below. (If you can’t see it well, click here for a clearer PDF page of Figure 13.1.
 

 

In the example, I calculated the cost of a 10-hour day for a group of stunt performers to shoot a typical heavy stunt – which I’ve called a “Bridge Sequence”.

Then I calculated what it would have cost for a 12-hour shoot day.

You can see that there is a difference of $26,824. That’s a sizeable sum.

It’s now up to you to suggest ways to apply that savings to other factors that will enhance the ‘look’ of the movie.

The $26,800 saved in the example above can be utilized in a Crane Shot, or for a spectacular eye-catching special effect – whatever you like.  It’s funding in the bank that has been created by YOU.

Don’t get too concerned about calculating the details above – that’s why there are Production Accountants.

In summary, here are the key points:

Ensure the budget for cast, background extras, stunt sequences, etc. has a comfortable number of man days and worked hours,

Then beat the budget with good planning, fewer worked hours and reduced man days.

Be aware of this process so that you can ask the accountant for estimated savings.

Then stakeout that savings for your own purposes to enhance the film.

Don’t forget about the 30% fringes on top of the gross payroll.  You can utilize that amount as well.

Does all of that seem like too much? Then, you’d better get a good book, that’s easy to read, that lays it out for you. As of July 27/08 both the University of Southern California Masters of Fine Arts (Peter Stark Program) and the University of Tampa Film Program have ordered my book, “Walk The Talk” as required reading for their students.

They’re available in my book – see my web site here “Walk The Talk”. All of them are simple but effective.

Cheers,

Visit my web site at www.talkfilm.biz.

John Gaskin’s Profile: http://www.linkedin.com/in/johngaskin

Email: johngaskin@talkfilm.biz

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