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

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.

Finding Film Financing – Can It Be Taught?

A friend of mine told me that he is very interested in opening a Film Financing School in Los Angeles. The school would deliver a series of comprehensive courses by industry professionals. His investors have asked him why no one else has done it before. My friend asked me how I would respond to that question. When I started to answer him, I realized that I needed to find out what others thought. Please feel free to chip in with your opinion.

FINDING FINANCING IS A GAME OF CREATING CONFIDENCE

Finding financing is primarily a game of creating confidence – this is true of any business, but especially of film financing. Those who have expendable income can afford to have professional investment advisers. Those advisers are allergic to risk – period. This is not only true of “Accredited Investors” (those who the Securities Commission have defined as being open to general solicitation of funds) but also of the Major Studios.

REDUCING RISK FOR INVESTORS

So, Film Financing is a game of reducing the risk for investors. Reducing risks CAN be taught. It just isn’t taught in film schools, and is only very rarely addressed in graduate schools. Remember that those with expendable income generally have a wide spectrum of ways to invest their funds. Film is risky; however, it is also sexy, and if a large amount of the risk is eliminated through good business practice I believe that investors will come.

CREATIVE BUSINESS PRACTICES

How do you reduce the risk? The answer could generally be split into two fields: the creative script, and creatively performing the business of film and television.

The creative script is where 90% of the effort is placed, and that’s why so few Indies make it. The writing and casting of the script is left alone here. That is something that the film schools DO know how to teach. In this blog let’s look only at the creative business practices and what it takes to reduce risks as perceived by the investor.

FILM FINANCING – WHAT IS THE BEST COURSE CONTENT

Here is where I need your help. Can you give me feedback as to what you would like to learn in order to make film financing a possibility for you? These are the categories that I feel are needed. Each of these courses/categories could be attended separately; however, it would be best in sequence. These categories are well in advance of most of what’s on the web. Please let me know how you feel about it, especially if you would rather do it online, as opposed to going to LA to attend in person :

  1. Film Budgeting and Scheduling: using Excel and/or Movie Magic applied to an actual script.
  2. State Tax Incentive estimating on at least three film friendly States (say, Georgia, Louisiana and California), utilizing the film budget and shooting schedule completed above. Once an estimation is learned, then the student must learn how to best monetize that tax credit estimate.
  3. Process “An Offer to Sell Securities”, otherwise known as Crowd Funding, applying the current rules and forms per the US Securities and Exchange Commission.
  4. Prepare Cash Flow Schedules (both cash expended and cash funding arranged/postulated) acceptable by a bank as part of a Bank Loan Process. Use the Film Budget as the basis for the cash expended and the State Tax Credits, Pre-Sales to specific territories and Equity expected as the cash funding arranged/postulated.
  5. Process a mock bank loan based on an actual loan processed to experience the range of legal and accounting documents required by the banker and the Completion Guarantor. Use the cash flows above as the basis to estimate the loan interest.
  6. An introduction to the Guilds and Unions of the film industry: What are the general rules of payment and fringe due per the rules of the Writers Guild, the Screen Actors Guild, the Director’s Guild and the IATSE crew unions. How does the residual system work and what are the budgeting and cash flow obligations which the producer must manage.
  7. Film Production Cost Control Points for both producers and accountants: The investors need to know that you have the ability to control production; otherwise the investors will cut you out of the process very early on. The only way for them to have confidence in you is if you can demonstrate an understanding of film industry specific production workflows, forms and practices, including your relationship with the Completion Guarantor through the weekly Cost Report.
  8. Final Business Plan: Bring together all of the above into a final business plan that is professional looking, scalable and defensible.
  9. Salesmanship: reenactments of pitching investors with the business plan above, pitching the script, assuring investors that you CAN control the costs during production, etc. This level is very much a practical where the student will bring together all of his/her knowledge of the line items above.
  10. Other: There are certain legal templates used to Incorporate as an LLC, to acquire Rights Ownership, to write Distribution Agreements, format Pre-Sales of Rights to Territories, Equity sweeteners, etc that can either be introduced within the subjects above, or brought into the mix after acquiring the knowledge above.

 

Each of the 9 items above would have a unique curriculum.

QUESTIONS

There is no guarantee that the Semester Credits would count towards a degree in another university. Is that important to you?

Does this comprehensive course appeal to you? Would it be better delivered in person, or online?

All for now,

Cheers / John

State Film Tax Incentives and Culture

BACKGROUND

The earliest instances of film tax incentives had the purpose of retaining and nurturing culture. Canada is a good example. The film tax incentives began in Canada to nurture “Canadian Content”. It was meant as a way to guard against the encroachment of American culture into the Canadian society. The concept of “French Canadian Culture” has certainly taken root with the film tax incentives; the English-speaking centers of Toronto and Vancouver, and even downtown Montreal, embrace the infusion of American cash while learning and matching the American skills of filmmaking – well, that’s part of their culture, isn’t it?

WHAT CULTURAL ADVANTAGES?

Culture is what the people are doing; how the people are communicating and living life. Does the action of producing television and film in a State boost the local pride, infuse the community with a way to communicate, provide a skill that can be identified? YUP! Look closely at Louisiana and Georgia. I have visited New Orleans and Atlanta as part of my film accounting workshops, and I see a group of people who are downright proud of their participation in filmmaking. Personal pride always pays dividends.

WHERE FILM TAX INCENTIVES HAVE FAILED

Those States that have failed to maintain a film tax incentive, have failed to recognize the local cultural pride and development. The State was looking at cash-in and cash-out on a short-term basis, without a second look at the cultural advantages and how that pays off.

PRODUCE YOUR FILM, IN A TAX INCENTIVE LOCATION, WITH CULTURE IN MIND

A good example is the making of “Whole Nine Yards” in Montreal. The film was being produced in Montreal because of the film tax incentives there, and because it could double as a European city. During prep Bruce Willis decided to let the location BE Montreal, with French accents, Canadian money, and mayonnaise on a hamburger – it was not only produced more inexpensively, but the film went on to gross $106 Million worldwide. It’s an example of boosting the local culture while still making profits – and please take note – the film would not have been produced there without a film tax incentive.

HARD FACTS

Yes, the hard facts are that a State usually gets about 8% of the employees tax, plus 8% of the cast and non-local crew, then the State pays 25% tax incentives to the production company. However, there is also an infusion of millions of dollars into the local economy for purchases, rentals and facilities that would not otherwise be there. The win that tips the scales is the spirit of winning that is granted to the local culture.

If you want to find out more about developing your film, the skills of a film accountant, or just interested in the business of media, visit http://www.filmaccounting.com/filmbusiness.htm .

Cheers / John

Crossing Over to Film Accounting – Financing

FILMACCOUNTING101DEFINING THE WEAKNESS IN FILM FINANCING – NO ACCOUNTING EXPERIENCE

An accountant is seldom used to help the Producer pitch for financing. Most emerging Producers aren’t educated in pitching to financiers who are well schooled in standard business practices – and, even if the pitching Producer has some idea that help is needed in preparing financial projections, the cost of the accountant’s services may seem prohibitive.

ACCOUNTANTS GENERALLY LACK EXPERIENCE

Even if the pitching Producer does go to his/her local CPA, it may very likely be a disappointment. Most accountants ARE weak in this unique area of film finance. Ask any CPA about investing in film production and they’ll tell you straight up – too risky! But … ask that same accountant about investing in a rental property in Bohunk, say a small medical center, and the accountant will jump in with both feet. Why? Simply because the accountant has experience in similar projects and there is an infrastructure in place to find and analyze data of a similar nature.

FINANCING FILM PROJECTS IS PIONEERING WORK

The film industry has been a closed industry. The current blast of YouTube, Netflix, etc has opened the door to the industry, but it certainly isn’t a “taped path” to success. However, there are a few steps that are proven true in current film financing projects. These steps are only a crossover from standard business accounting to film accounting. The standards are still in the pioneer stages, so be prepared for some hard won work.

FINANCING = GENERATING CONFIDENCE WITH GOOD BUSINESS STANDARDS

The weakest factor for emerging producers to overcome is to have the ability to generate a financier’s confidence – that is, to have those with disposable income (financiers of any kind) feel confident that the film project being pitched will generate a return. That financier has several investment avenues available. Indeed there are teams of professional investors knocking on their door, all with clear documentation and proven track records. Your best hope of generating that confidence is to present your facts according a business standard that the financier is familiar with.

CROSSING OVER TO FILM ACCOUNTING

Enter the accountant, or professional producer, who has crossed over to film accounting. The film accountant is familiar with five particular ways of generating confidence – all of which should be referenced in any Executive Summary and Business Plan:

  1. FILM BUDGET: A professional film budget with both a summary page and supporting detailed accounts. If this document is unfamiliar to you please click here for more information. (Note: Within the appendix of the business plan include a copy of a standard “Cost Report” so the investor can see the industry standard of reporting the costs and how they are controlled.)
  2. STATE TAX CREDIT ESTIMATE: A clear schedule estimating the State Film Tax Incentive available based on the budget. If this topic is unfamiliar to you please click here for more information.
  3. FILE FORM D WITH THE SEC (CROWD FUNDING): Show the investor that you are only looking for “Accredited Investors” by filing a “Form D” with the SEC. This is a relatively simple form which separates you from the novice who is looking for a freebie. Please read my blog on this topic to get a better understanding of what it takes to legally solicit funds broadly.
  4. CASHFLOW REQUIREMENTS: A weekly cashflow requirement schedule both in summary and in detail by account (based on the budget). Click here for more information.
  5. FINANCING CASHFLOW SCHEDULE: By preparing this schedule the investor can see that you are transparent and alert to the costs of borrowing from film friendly institutions. Click here for more information.

Including these documents in your business plan, clearly referenced in your executive summary, will raise your credibility meter significantly with any financier.

For those of you interested in getting into film accounting in a more detailed way, should visit my web site for upcoming Film Accounting 101 2 Day workshops – two coming up, one on the West Coast and one on the East Coast. See http://www.filmaccounting.com

Cheers / John

30 year veteran of over 50 film and television productions in 6 different countries.

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

Creating Investor Confidence For Your Film Project

“ACCREDITED INVESTOR” – THE OFFICIALLY WEALTHY WHO YOU NEED TO SOLICIT FOR FINANCING

The “accredited investors” as defined by the new SEC ruling allowing for general solicitation, are officially wealthy, and are accustomed to dealing with basic financial reports and terms.

THE HIGH RISK OF INVESTING IN FILM

Mr. Bucks has heard about the high risk of the film business. You will need to create the confidence with Mr. Bucks that you CAN produce – at a return. So, now, more than ever before, it behooves Indie film producers to understand the basics of the film industry as a business – especially if he/she wants to solicit the officially wealthy who don’t know film.

THE BUSINESS LANGUAGE OF FILM

For those of you who do learn the Business Language of the film industry you will find that doors previously closed to you will open – just a crack , at first, but with some perseverance the Completion Guarantors, experienced Directors and Cinematographers, some Mini-Major Studios, etc. will be impressed and will offer more and more opportunities. Success breeds success, and it starts with generating confidence.

CREATING CONFIDENCE THAT YOU ARE FISCALLY RESPONSIBLE

From my point of view (30 years in the ‘biz) there are 5 or 6 things you should learn more about, and with a little practice, you will have a very good shot at creating the confidence needed by the investor that you are fiscally responsible. You really can’t lose. In my book, “Walk The Talk” I refer to it as “Directing the Money”.

Here are the topics. All are inexpensive online self-study courses. Most of the information is on video. See the Filmmaker page of my website:

1. Learn More About the Full Business Cycle of the Film Industry (From Development through to Revenue Sharing)

2. Have a working Insight Into Film Tax Incentives in America and Canada as a Source of Financing (Including Section 181)

3. Know How to Manage Film Budgets Professionally (not create from scratch, just to be able to manage)

4. Know How to Manage Cost Reports Professionally

5. Know the fundamentals of Creating Cashflows “Out”/”In” for Bank Loan Purposes

6. Understand the Role of Hot Costs During Film/TV Production 

Knowing these topics you won’t be confused with the clutter of people who “have a great idea”.

For more information on the online self-study courses offered see the Filmmaker page of my website

Cheers / John

Business Management for Media Professionals

The business end of producing and releasing any media project is still overwhelming. The money is tight; investors are careful; the projects that are being “green lit” are under constant risk assessment; those who have done it before are somewhat trusted – those who haven’t are openly distrusted.

Credibility, by that I mean your financial credibility with those who hold the purse strings, was never so sought after – at least not that I’ve seen over the past 30 years.

The missing credibility factor dies off quite fast during the Development Stage. That’s because 50% of development is financial. There are several stages within the development stage which, when ignored, signal an “in-(not)credible” producer.

When was the last time you a saw an Indie Blog talk about Cashflows-Out Matching the Cashflows-In for bank loan purposes, or impressing the Bond Company with your ability to manage the six basic accounting functions during production….

Rhetorical, I know, so I’ll stop.

I have done my bit with this video followed up with 2 hours of videos.

Please have a look, and let me know what you think. Or, go to http://www.talkfilm.biz/filmbusiness.htm

Power Meetings For Emerging Producers

I just finished the final of 3 days of workshops for Women in Film – Toronto Chapter. This was my 3rd year delivering one of the 4 modules of the “Business Management For Media Professionals”. Each year I’ve been refining the delivery so it was very pleasing to receive a round of applause from the 20+ students at the end of the 3rd day. Thanks to all.

POWER MEETINGS

When the students were receiving their certificates 4 or 5 students said they would like to have more time together – to get a guiding hand in applying what we learned to their own projects. So, I’m writing this blog to clear my head on what went right, and also as a way of asking you, the reader of this blog, if it make sense to start a series of three “Power Meetings”.

SUCCESSFUL STRUCTURE USED IN THE WIFT MODULE:

Throughout the three day module I pushed competence and management skills, along with some laughs, on the following topics:

  • Managing a Film Budget without bumbling.
  • Managing a Cost Report with a working knowledge of the terms, presentations and processes common in the industry.
  • Creating a Cashflow Out (Money Spent) on a Prep/Shoot/Wrap/Post timeline – reconciled to the budget
  • Scheduling the expected Cashflow In (Telefilm, Pre-Sales, etc – i.e. Promised Lumpy Funding Arriving in the Future) on a timeline with the Cashflow Out to find the borrowing required.
  • Understanding the development concepts of ownership, transferring of rights and knowing how to use the terms commonplace in the business of filmmaking – all with an eye towards the “Waterfall” – the sharing of revenues. After all, nobody likes a loser.
  • Knowing how to estimate the expected tax credits as a funding possibility which would be accurate and professional enough to attract investors.

In every case I brought real life budgets, cost reports, accounting forms, picture, cashflow schedules, charts, references, internet links, tax credit templates used by producers and as many short true stories as I could muster (and a bit of light-hearted humour). I must say that the students let me act up and even seemed to enjoy it when I recounted a harrowing story from my past.

PROPOSED “POWER MEETINGS” TO REALLY DEVELOP YOUR PROJECT

Without varying too widely from the structure used during the WIFT module I am proposing 3 days of small groups, say 5 or 6 people, who have projects of their own that need kick starting from a business perspective. The meetings would have some structure, but not unbreakable.The days would be Saturdays from 1:00PM to 5:00PM at my Condo Boardroom (Yonge and Sheppard about 8 minutes from the subway) – coffee and snacks will be provided. Ideally, the students will work together in 2’s and 3’s (or not if it doesn’t work).

The structure would follow very practical aspects, such as:

  • Develop a working budget that is professional looking
  • Create a Cashflow (Out-Flow) as well as a postulated In-Flow of cash over a timeline – recognizing the borrowing required or the raising of more investment.
  • Estimating the Tax Credits expected using professional schedules
  • Preparing for a meeting with the Completion Guarantor
  • Creating a corporation and understanding the HST and income tax obligations
  • Setting up a simple accounting system to capture your development costs and understanding how that fits into your budget.
  • Working one’s way through the application for Tax Credit status.
  • (Anything else that the students want to raise).

FEE

Oops. There will be a fee. TBA.

Let me know what you think about something like this. I’ll be working on a couple of self-study courses over the next week or two then I’d like to get something like this going!

Cheers / John

Producers, Film Accountants, Admin – Excel Training A Must

One of the most vital tools to Production Accountants is Excel. It really is a necessity to analyzing and reporting the various elements of media based financing, budgeting and costs. So, in a recent workshop where emerging producers were predominate in the group it was a shock to see how little the group knew about spreadsheet software – a couple weren’t even sure if it was on their laptops. One of my attendees found a great free site for on-line Excel tutorials.

I pass her email on to you all:

_______________________________________________________________________________

Microsoft Excel Tutorial for Beginners #1 – Overview

Okay, here is a link to a series of fabulous tutorials on Excel by Motion in Training.  This is a guy is from England  . . . he’s a great teacher and wonderfully easy to follow.  I went through 16 of the tutorials today for beginners.  Here is the YouTube link to first tutorial:

http://www.youtube.com/watch?v=8L1OVkw2ZQ8&feature=related

Excel is a powerful spreadsheet program used in all businesses today . . . a must know!  It is a marketable skill that you will want to highlight on your resume! And believe me, as you look for a job in the arts industry . . . they will be asking for those skills. Even if you are not working in an office, you will need this for all accounting, inventory, merchandising, props lists, suppliers, expenses,  . . . . budgeting for almost anything.  In the film and television industry, you will need to know it as a production manager or assistant – whether you are on the set, or in the production office. If you are a producer, you will need to know this.

The better you are at it, and the faster you are at it, the easier your job will be and faster you will move up in the industry.

SO CHECK IT OUT!   It’s really worthwhile. 

-Virginia

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