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> The Budget Thread

> The Budget & Finance Thread

  • Major Studio Budgets
  • Mini-Major Studio Budgets
  • Independent Studio Budgets
  • Low Budgets
  • Micro Budgets
  • No Budgets
  • DIY Filmmaker Budgets
It doesn't matter.
Any available data on a film's budget, especially credible breakdowns, is what's appropriate for this thread.

The idea is to see what others are (reported) to be doing to use as a reference model for what we could/should be doing as a self-check.
"Compared to peer and non-peer filmmakers or the industry, am I spending too much money on X and not enough on Y?"

What got me started on this is that first I had found a reported budget for Lara Croft Tomb Raider: The Cradle of Life

"Though movie studios are reluctant to release the precise details of their movies' budgets, it has occasionally been possible to obtain (clandestinely) details of the cost of a films break down.

"Lara Croft Tomb Raider: The Cradle of Life
  • Story rights and screenplay: $4 million
  • Producers: $4 million
  • Director (Jan de Bont): $5 million
  • Cast: $17.25 million
  • - Angelina Jolie: $12 million
  • - Extras: $250,000
  • - Other (inc. Angelina's perks): $5 million
  • Production costs: $67 million
  • - Set design and construction: $17.8 million
  • Visual Effects: $13 million
  • Music: $3.3 million
  • Editing: $3 million
  • Post Production costs: $1.5 million
Total: $118 million​
Source: http://www.edwardjayepstein.com/laracroft1.htm

And that's great and wonderful and all.
Then I find another article that clearly shows the major studios are playing a completely different ball game than many of us in the PONY league.

"Consider Paramount's 2001 action flick Lara Croft: Tomb Raider. On paper, Tomb Raider's budget was $94 million. In fact, the entire movie cost Paramount less than $7 million. How did the studio collect over $87 million before cameras started rolling?

First, they used the German tax-shelter gambit. Loopholes in Germany's tax code are responsible for a good portion of Paramount's profits—an estimated $70 million to $90 million in 2003 alone. Best of all, there's no risk or cost for the studio (other than legal fees)... In the case of Lara Croft: Tomb Raider, Paramount sold the copyright to a group of German investors for $94 million through Tele-München Gruppe, a company headed by German mogul Herbert Kloiber. Paramount then repurchased the film for $83.8 million in lease and option payments. The studio's $10.2 million windfall paid the salaries of star Angelina Jolie ($7.5 million) and the rest of the principal cast.

[Second], Paramount made some more preproduction cash by taking advantage of the British government's largesse. To qualify for Section 48 tax relief in Britain, the movie had to include some scenes filmed in Britain and employ a couple of British actors. Given Lara Croft's peripatetic plot, neither condition presented an artistic problem. Again, Paramount entered into a complex sale-leaseback transaction, this time with Britain's Lombard Bank. Through this legal legerdemain, the studio netted, up front, another $12 million—enough to pay for the director and script.

[Third], To pay for most of the rest of the movie, Paramount sold distribution rights in six countries where the Tomb Raider video games were a big hit with teenage boys. These pre-sales in Japan, Britain, France, Germany, Italy, and Spain brought in another $65 million.

Through this triple play, Paramount earned a grand total of $87.2 million. [Fourth], The remaining budget—less than $7 million—would be covered by licensing the film's U.S. pay-television rights to Showtime (a network owned by Paramount's corporate parent, Viacom). At no cost to its treasury, Paramount launched a potential franchise—don't forget that sequels can be financed with the same "risk management" techniques."

Some of these techniques we might be able to use creative variants of.
Point is, the studios aren't just being dumb and lazy putting up 100% of their own cash outlays and Humpty Dumptying out to the back lot or New Zealand.

Neither should we.

Remainder of budgets available from that article:
"Though movie studios are reluctant to release the precise details of their movies' budgets, it has occasionally been possible to obtain (clandestinely) details of the cost of a films break down.

Terminator 3: Rise of the Machines
  • Story rights (Carolco and Gale Anne Hurd): $14.5 million
  • Screenplay: $5.2 million
  • John D. Brancato & Michael Ferris: $1 million
  • Director (Jonathan Mostow): $5 million
  • Producers: $10 million
  • Cast: $35 million
  • - Arnold Schwarzenegger: $29.25 million + 20% gross profits
  • - Arnold's perks: $1.5 million
  • - Rest of principal cast: $3.85 million
  • - Extras: $400,000
  • Production costs: $58 million
  • Post-production costs: $4 million
  • Visual effects: $20 million
  • Music: $2 million
  • Other costs: $33.6 million
Total: $187.3 million​
Source: http://www.edwardjayepstein.com/budget.htm

  • Story rights: $20 million
  • Screenplay: $10 million
  • Producers: $15 million
  • Director (Sam Raimi): $10 million
  • Cast: $30 million
  • - Tobey Maguire: $17 million
  • - Kirsten Dunst: $7 million
  • - Alfred Molina: $3 million
  • - Rest of cast: $3 million
  • Production costs: $45 million
  • Visual effects: $65 million
  • Music: $5 million
  • - Composer (Danny Elfman): $2 million.
Total: $200 million​
Source: http://www.guardian.co.uk/film/20 "

And if you're not paying attention, these are only production budgets/expenses.
They do not include P&A which may easily equal or exceed the production budget ($150m), listed below as "DISTRIBUTION FEE" @ $211.8m and "TOTAL EXPENSES" @ $191.8m (cumulative):

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Independent Film Profit Probability
(Formatting changes for clarity by myself)
"According to the Sundance Institute, the total number of U.S. feature films submitted to the festival was:
1,920 for the 2010 festival,
1,905 for the 2009 festival, and
2,021 for 2008.
Taking an average of these three years we arrive at

At any one time, there are about 1,949 U.S. films waiting to be picked up for distribution. This assumes, that all applicants to Sundance have no distribution already in place.

Films with no theatrical distribution in place prior to financing (i.e., most of the films applying to Sundance) end up opening at 1,000 domestic theaters or less, if they open theatrically at all.

The 2011 average was 135 theaters at widest (not total), F 76: https://docs.google.com/spreadsheet/ccc?key=0AsBznn8D13zOdGlCeDRmWTFCYXJRWjJ3SUphZDNzMGc#gid=0

"Hence, a good a place to turn for some rate of success analysis is this pool of limited opening films (specialty films).

The definition a specialty film is any film that opened theatrically at 1,000 domestic venues or fewer, “domestic” meaning the U.S. and Canada.

There were 286 English-language specialty films released into theaters in 2009 (and about 11% had studio financing). Using this 286 number as an approximation of U.S. specialty films, we can examine how they did and come up with a rough probability for turning a profit.

Of the 286 specialty films released in 2009, 52 English-language specialty films appear to be headed for a profit, with the rest not likely to make back their investment.

Films produced 2009 (1949)
Films distributed in 2009 (286)
Films returning a profit in 2009 (52)
Profit probability (2.7%)"

This biz ain't easy.

Cable Channel Strategy
"1. Today’s most typical cable strategy is built entirely around profit maximization utilizing affiliate fees. If you own a cable channel, your goal is to develop one or two key, hit programs, and fill the rest of the linear lineup with very inexpensive content. The “hits” make you a “must have” for any cable or satellite carrier – granting you the right to ask for fees. Too many hits drive up costs.

2. ... affiliate fees are the primary revenue stream that funds today’s mainstream television content development.

In 2009 DirecTV paid approximately $37/sub out of an ARPU (Average revenue per user) of $85/sub, to content owners for programming costs (i.e. affiliate fees).
In this case, affiliate fees represent roughly 43% of total revenue for DirecTV.
Similarly for Comcast, estimates are programming costs at 37% of video revenue (Comcast has high-speed data and voice revenue that are separate).

These are just two examples, but to give you a sense of scale these numbers represent around $7-8 billion/year each for Comcast and DirecTV.
The aggregate fees of all content providers are approximately $32B per year.
To put things in perspective this is about 33% higher than Google’s annual global revenues including revenues for its advertising network."

For those of you with a smidgen of humility about your made-for-TV product: consider trying to be part of that "inexpensive content" filler.
Just a... realistic thought.

"Entertainment lawyer Bianca Bezdek-Goodloe talked with host Jeff Schubert about raising money for feature films, states that offer tax incentives and a lot more... "

Much of this is beyond the scope of many here (micro-budget is considered less than $4m), but understand the financing principles involved.

Oh, goody.
There's more.
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Ultra-Low Budget Agreement - Total budget of less than $200,000
Modified Low Budget Agreement - Total budget of less than $625,000
Low Budget Agreement - Total budget of less than $2,500,000

Hmm... I think Miss Bezdek's idea of "micro-budget" is a little Hollywood-studio-version-of-such biased.

Micro Budget Case Study: TRAPPED
Budget - $65k

Watch free online: http://www.movie2k.to/Trapped-watch-movie-524579.html

Micro Budget Case Study: WAKE THE WITCH
Budget $10k

"Our on-line promotion (social media/press releases/articles) for “Wake the Witch” really started when we got the VOD deal. This time we’ll do that work beforehand to build an aware fan base that will be looking for the movie on VOD."


Micro Budget Case Study #3: Slate Of Under $10K’s
Producer - http://www.imdb.com/name/nm2806955/

"Once we have means by which people can purchase our DVDs, it’s a matter of getting people aware that these movies are out there, which is where Facebook comes in very handy. It’s a great way to generate interest IF you’re willing to put the time into doing so. We make a point to try to keep people interested in the entire filmmaking process from pre-production all the way until the World Premiere. "

Micro Budget Case Study #4: Micro Budget Profits via Traditional Distribution
Budget $50k

"We learned the hard way that no matter what your budget is, you should seriously consider adding 25-50% for “getting the film sold” costs."


Micro Budget Case Study #5: Incremental Budget Increases
Writer/Director Jason Horton - http://www.imdb.com/name/nm1862032/
Rise of the Undead – $1k
Edges of Darkness – $25k
Trap – $4k
Should’ve Put a Ring on it – $35k (estimated)
Monsters in the Woods – $30k

"Pre-planning is the most important thing, regardless of your budget. "


Micro Budget Case Study #6: We Made It To Redbox!
Darkening Sky http://www.imdb.com/title/tt1502402/
Budget $200,000

"As a writer I’ve taken the lesson that “films are for the audience and not for me” and worked to progress beyond work that only appeals to my strange tastes."

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Watched your URLs in the threads above. Nice material. Good incite into "MONEY" productions... even for someone who has no money but wants to create & play in the rich man's art scene... Keep the URL's going RAYW. Even though I have heard much f this before, I will keep watching and learning -- it is why I dwell in the realm of Indietalk. A+ thread, RAYW.
Note-like Transcript of Interview

"Entertainment lawyer Bianca Bezdek-Goodloe talked with host Jeff Schubert about raising money for feature films, states that offer tax incentives and a lot more... "

Interviewer is a congenial enough "personality-heavy" dork.
The producers really reeled in a smart cookie guest, here.
NYU Professor & entertainment attorney.
It's kinda embarrassing to listen to the IQ difference between these two.

Q. What are some of the ways filmmakers can raise money to make films?
None are easy, all are difficult in their own right.
There is no magic bullet. All films financed differently. What ever works.
#1. Equity, AKA cash. A high net worth donor, collective of investors, a company that wants to "come across brands" by providing cash.
Equity is used to secure a pay or play individual to get the project some serious traction.

A "pay or play" (PoP) http://en.wikipedia.org/wiki/Guarantee_(filmmaking) is when a talent, actor/director/producer, commits to the project by being contractually obligated to being paid whether the film is made or not.
The full amount is not placed in escrow, but a percentage of that amount is negotiated to be placed in escrow.
Catch 22: How do I get the star if I don't have the money? How do I get the money if I don't have the star?
- Pray
- Beg, borrow, and steal
- Find a star on the precipice of producing or directing and appeal to that motivation. Offer or give them production or director credit as an "in-kind contribution." http://en.wikipedia.org/wiki/Payment_in_kind . This approach is a direct work-around of the talent's agent/broker - it does generate some friction.
MY interpretation of her reaction to creative stunts to "persuade" a talent into a PoP agreement was that it was "cute" but not very professional. Just my opinion.

100% funding through equity is fantastic, but may take forever.
She suggests going about the the process to have (private) equity only be about 30 -40% of the film's budget.

Audience Question/Statement: Raining money for indie films is depressing.
Filmmaking is not a poor man's sport, much like yachting.
You have to put in that work, and the ability to raise equity.
It's not easy. You can't be bashful.
@ 7:15 You don't ask, you don't get. That's the business.

Raising equity gives away ownership.
@ 7:35 There are other ways of raising financing while maintaining creative control and ownership.

@ 7:40 #2. Tax Credits
Other nations use government tax benefits and subsidies to bring in film production money for trickle-down economics.
@ 8:47 U.S. govt. began with Hawaii and Louisiana to a current 38 states, there's a Federal incentive for filmmakers to exploit these opportunities, this is money you can get or get certification to qualify for rebates to get the benefit without giving away backend for participation (ownership).

@ 9:05 #3. Pre-Sales

Audience Question/Statement: Can you explain completion bonds?
@ 9:38 Like an insurance blanket that says for 2-3% of the budget a [third party] company will step in, monitor progress, and if a built in contingency is exceeded they will step in to complete the film - although perhaps not at the same quality or aesthetic eye you wanted - but at least it will be finished, in the can, and have the opportunity for distribution.

@ 10:20 Q. Reasons why you may not have a bond-able film or can't get a completion bond?
- You don't have a bond-able director.
- The director doesn't have the experience.
- The director hasn't worked in that medium before.
- Budget "doesn't make sense." Ex. The below the line or above the line is too heavy, something in the formula doesn't work and they don't want to take the risk to finish it because then they will be out-of-pocket [paying] for it.
This sends a message to investors you may not conclude

Audience Question/Statement: What do you feel about iTunes-like self distribution?
@ 11:05 She doesn't work in that distribution mechanism. IOW: predominantly broadcast and theatrically released studio distribution, due to budgets.
Not knocking it. Just not her niche.

@ 12:15 Blind Calls & Lead Lists
Please, please, please do not cold call.
@ 13:12 With equity financing, cold calling is in violation of securities laws. It's [viewed as] a scam unless you have a public offering, requiring an expensive and cumbersome process.
For the budgets they're considering ($millions and $millions) there's just no need for cold calling or public offering.
@ 13:35 Private placements, when raising private equity you have to go through.
- Active Investors. If one or two they will be actively involved in every step of the process, will be on set, they're going to be engaged.
You can enter into an investment agreement with active investors.
- Passive Investors. Require a PPM, private placement memorandum, a CYA document should anything go wrong the PPM protects yourself by disclosing all the risks with filmmaking. Part of the PPM requirement is that it is not a public offering and you're only going to be soliciting money from people you know that you could verify that they have the [informed consent] to enter into a high or higher risk investment and understand what's at stake.

@ 14:57 Trifecta of Documents: PPM, Subscription Agreement, and... haven't gotten to it (or they forget about it!)
Atty drafted PPM: Explains the risks, market, demographic, the genre, people attached, expectations of what the film may monetarily make, including that it may make nothing.
Subscription Agreement: Allows investors to subscribe to shares or securities in the company that owns the copyright that will enter into distribution agreements, that will then through exhibition, tickets and sales generate money.

@ 16:47 Raising private equity (PE) isn't a complicated process, it's just a specific process about how to go about raising that PE.

Gotta go!
Will resume this ASAP, but there ain't no telling when that'll be. Today. Tomorrow. This weekend. I dunno.

This is a good interview.
I've got some sapiosexuality goin' on with this chick! :bow: :woohoo:
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Welcome to the film business people. The normal need not apply.
Yeah, no doubt. :lol:

Where wuzeye... ?

@ 17:20 [For private equity (PE)] you can't solicit from more than 35 non-accredited investors depending upon if you're raising $1m up to $5m, or $5m and over.
Accredited means these investors have:
- >$1m net worth in net assets (Net Worth = Assets - Liabilities)
- in the last two years generated revenues (AKA income) >$200k, or jointly as a couple >$300k.

@ 17:45 This criteria is in place so that if things go wrong and the investor says "I wasn't forewarned" your defense is "But, you were. You saw it in bold red in the PPM, and you proceeded anyway. And so you proceed with caution."

@ 18:10 Audience Question: Do you like indie movies better since you worked your way down to them, and if so "why?"
Yes. They're more interesting from a creative perspective. [Because the German government changed the law] suddenly it became a more interesting landscape to focus on raising equity and non-equity funding through independent films because its like a bigger jigsaw puzzle to me to put together.
@ 18:47 Also, for the filmmaker you goto the studio, you bring them a project, if they like it you become a paycheck player, they pay you your producer's fee, and that's it. [The studio has] creative control, they have ownership, and you're done. From my perspective, as a producer and financial packaging producer and an attorney, it's a helluva lot more fun to piece together all of these unquantifiable opportunities as opposed to just knocking on the door of studio executives and begging for money.
That seems to be a considerably more personal-professional answer than the one I believe the audience member had in mind, likely being more towards "Do you enjoy WATCHING/EXPERIENCING indie films more than studio films?", which she either politely sidestepped or is too focused on the subject of the show and what she has to contribute to that: independent film financing. Not if she like indie films more or less because she now puts together financing packages them, IMO.

@ 19:24 Q. How do you feel about social networking sites to put up your new film project and raise money through our site, you put up a trailer and synopsis, and people can invest, and when you hit your [target $$ amount]...
(He's referring to KickStarter & IndieGoGo, and I don't think her answer reflects a fluent understanding of how those sites actually work.)

A. The same principles apply. (No. They don't.)
How can you know individuals that you're basically soliciting online? You don't know them, and therefor you are in contravention of Reg D, [securities and exchange commission] federal securities laws, and you're just begging for trouble.
I'm pretty sure she isn't aware of the often, relatively to donor income, insignificant amounts these donations are which I believe she's viewing as investments.
Donation. Investment. Ain't even the same thing.

@ 20:05 Use that as a promotion tool, but not as a financing tool.
Yeah. If you're raising a few million or even a few hundred thousand dollars for your indie film, maybe.
The scope of a few thousand dollars for most KS/IGG budget goals is waaaaaaaay below what she's talking about for her professional work.
Her advice is FINE if you're trying to finance >$1m to $5m for your indie film.
Her advice is... incorrect if you're just trying to scratch together a few hundred to a few thousand dollars for your indie film.

@ 20:13 Q: Tax Credits. There are certain states in the U.S. where it's better to make films than others. Why? And which ones?
There are currently 38 states which offer some kind of a subsidy, credits, or rebate.
Louisiana most people know about, it's one of the more complicated ones to qualify for.
Massachusetts & Connecticut are lucrative.
Rhode Island is a good one.
New Mexico.

@ 20:56 Q: If Louisiana is one of the most difficult one what might be the simplest?
None of them are "easy" and none of them are a killer.
The hardest part is timing, because how most of them work is you get into the queue, you get in line, submit your application, you have to get your ducks in a row, submit your budget breakdown, and give them a date by which you will start production.
And if you do not start, and every state has its own unique specifications, most states, if you don't start within 30 days before or after that date, you loose your place in line.
Actually filling out the application that's just heavy lifting a lawyer can do that for you, it's not brain surgery.
@ 21:53 It's just really being sure that the project, when you make your submission, it's kinda the last step, kinda the lowest hanging fruit in financing, but if you screw up the timing you lose your ability to be able to collect on that tax credit.

@ 22:13 Q: How's the best way to find out which state offers what? Is it a state website or one central website?
You can google the state film commissions.
But what I would do is there are a number of, the codicil of how do you get to the money, what I was talking about Connecticut, it's 30% credit there, but you're not going to get 30% of your budget.
@ 22:36 How it works is you can wait and spend the money, wait for the state forensic audit to make sure you actually spent that much and you get your certificate, and then you can either use that certificate or sell it to someone for 100 cents on the dollar.
But what good is it to you then if you need it now to put it towards your budget?
@ 22:54 So, what you do is contact a tax credit broker, if you've patch-worked together your production correctly with the other financing aspects, then they will monetize that tax credit in advance, not at 100 cents on the dollar, but at competitive rate, depending upon state by state, is 70 to 75 cents on the dollar.
@ 23:20 That's still not really getting 75 cents on the dollar. You're getting a 30% tax credit in Connecticut from 75% on average of the qualified expenses in your overall budget.
So, 30% of 75% discounted by 75 cents on the dollar will amount to about 15% of your budget.

I'll come back later and knockout the explicit math on this.
Someone remind me if I forget.

@ 23:43 Q: Qualified expense means could be anything. Salary for crew... ?
It's different state to state.
Some state limit it to flights into the state, others by flights out of the state.
There's a million different nuances.
You can contact your film commission for this information.
Or call a couple of tax credit brokers, have them create a bidding war for your production, they will give you all the information, they will do your homework for you because they want your business.
Have them provide you with the most up to date opportunities on state by state laws.

@ 24:39 I gotta go!!!!
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A director inflated his expenses in Mass. and has to pay the consequences. http://www.washingtonpost.com/natio...-tax-credits/2012/04/19/gIQAZBhjTT_story.html
LMAO! :lol:
Excellent! Thank you, Morris for posting this.

Whata idiot.


"The investigation was sparked when the Department of Revenue spotted suspicious tax returns connected to “The Lightkeepers” film, in which withholding taxes hadn’t been paid to lead actors. That discovery prompted the DOR to dig deeper into the tax credit application, and to eventually refer the case to Coakley’s office.

Coakley’s staff said Adams reported that more than $17 million in expenses were eligible for credits on “The Lightkeepers,” prompting an award of $4.2 million in credits. But prosecutors said expenses were either fictitious or inflated, resulting in an overpayment of $3.6 million. For example, prosecutors said Adams reported that actor Richard Dreyfuss was paid $2.5 million, when in fact he was only paid $400,000.

Similar problems were found in the tax credits that Adams received for “The Golden Boys,” which he shot before “The Lightkeepers.” Prosecutors said Adams benefited from an overpayment of $1.1 million for tax credits related to that film."

LOL! :lol:

Whata moron: http://www.imdb.com/name/nm0010871/bio
"Adams attended Harvard University, majoring in history. After college, he worked in politics, including two gubernatorial campaigns, a race for attorney general, and two presidential campaigns."
Looks like the good citizens of Massachussets dodged several bullets on those!

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Where we left off at...

@ 24:34 Studio Q: What has been the most difficult challenge you've personally had to go through with film finance?
Because I do this all day every day the financing isn't the hard part.
@ 25:00 I take on projects that I know I can raise all the financing for if I'm producing them.
One project called "August and Everything After" With Pierce Brosnan and written and directed by J. Mills Goodloe...
(J. Mills Goodloe http://www.imdb.com/name/nm0328987/bio
I bet it's her husband.)

... and we had everything. We had the equity, debt, the right sales agent, the tax credits.
But we could not cast the female lead within the time we had allotted before the tax credits would fall out.
That was a hurdle I couldn't surmount.
But, that's the casting process; not really the financing process!

@ 25:51 Q: You represent/work with both sides. You work with studios, actors, directors, investors, tax credit brokers, step financers providing advice to everyone. If a filmmaker makes really low budget film, $50k to $100k range, gets some good write ups, press, maybe a few festivals. Now, wants to make his or her next film in the $500k to $1m range, wants to grow his or her career. Do you have any advice for that particular type of filmmaker?
First of all, [with any of these price ranges] my question is how did you arrive at that? The jump? That next number?
@ 26:49 I find the problem most filmmakers have is they have a number that gets stuck in their head. That they haven't "made it" until they've made a film that's $5m.
The way to arrive at your budget is do your breakdown of your scripts, see what your drop-dead number is below the line ( http://en.wikipedia.org/wiki/Below_the_line_(filmmaking) ), and really that's your budget.
And if you can get one talented, commercial, actor on board for however much you can get them - suddenly! - THAT'S your budget. (New Budget = Below the line costs + actor fee.)
@ 27:24 You get your two leads then basically you goto a sales agent and say "How much can you sell these guys for?"
If that number is greater than the number you have to pay them then - fantastic. You've done something right.
And if you're not getting your sales estimates in excess of what you will have to pay your talent then it's not working. The talent isn't bringing the value.

@ 27:53 ... you're paying... for talent that will bring butts in seats and will make enough money to cover the budget.

@ 28:00 Jeff Shubert: I think a good point to be made here is if your estimate after your talent is attached doesn't exceed your budget then the budget is too much.
(GD, this guy is sharp!)
A: Absolutely. You need to re-tool. You need to re-cast.

@ 28:11 Q: So, where do those estimates come from? How do you evaluate what a star or talent brings?
Foreign sales agents.
Different foreign sales agents of varying degrees of reputes specialize in different genres and actors, they sell to particular buyers.
@ 28:34 So, if I were a filmmaker with a great script, and based on my $50k film that perhaps (bemused smile) didn't get widely released, I'm using that as my reel to get investors to show them I have the right stuff, not loose their money, I try to circulate [the film] as widely as I can and try to get someone attached, then bring it to the sales agent to say "Hey, I'm serious. I've done this much of my homework. I haven't cast wide. I need your advice on who do you think can help me sell this project by."
Then you try to get that talent.

@ 29:15 Q: Have you ever run into a situation where a package has been put together and a producer or director thought they had bankable cast, but they really weren't? Because they were like a low-level sitcom star or on a dramatic deal here, but they have no bank in foreign territory, and that's such a big part when we're talking in the $1m to $5m range that you'd really have to make your money in the foreign market.
Happens all the time.
@29:39 And it happens because filmmakers don't approach the sales agent early on in the process.
Because you have to know YOU'RE not selling the film.
You're sending... you're outsourcing it to a specialist to sell the film. And I would want to know who that seller can sell!
So, I won't go to someone who specializes in period pieces if I'm doing a scifi.
I'm going to find out a slate of what a foreign agent has sold, and I'm going to try to get the actors that have sold before, because if they've sold them well they'll do it again.
And I kind of reverse engineer what my budget is based on what they can get for it.

@ 30:19 Q: Are these foreign sales agents approachable by independent filmmakers, let's say when they complete their script?
No. (Laughs)
Obviously it's a short list. I don't play favorites. I advise filmmakers to try to find inroads to... whichever foreign sales agents the banks will believe in, believe that they are credit worthy, because I can give you estimates, [anyone] can give give you estimates, doesn't mean [they] can sell it, doesn't mean the bank will believe [them].
So, I can recommend highly reputed foreign sales companies... (he interrupts her)

@ 31:00 Q: And typically, when is the time to approach [the foreign sales agent]? And are they receptive to...
(she interrupts him :lol: ) The way to get to them is... that's the job of a good producer. A producer has these relationships or a producer that can actually lure a director that can lure the talent.
And then you walk in with a package to a foreign sales agent and if they sense some opportunity to make money of course they're going to consider the project.
@ 31:20 Or if the foreign sales agent had a good experience with a particular producer they are prone to working with them again. That's WHY you're paying a producer. That's your entré.
So, try as a writer and burgeoning director to staff yourself up with the right team to open those doors.

@ 31:39 Q: I was reading in some of your material you talking about tier one and tier two foreign sales agents. How many are in that tier one category?
It's a short list and it changes around all the time, because... a lot of companies merged and the marriages weren't very good, so a lot of companies dissolved and management has jumped ship on a couple companies.
@ 32:07 Summit is as good as they get. http://en.wikipedia.org/wiki/Summit_Entertainment
Their sweet spot is $20m. They have their own fund so it's very difficult to get them because they tend to sell their own product.
@ 32:19 Mandate has been acquired by Lionsgate.
Same kind of concept there; it's hard to get them interested in a project that's not one of their own.
@ 32:28 Hanway is a wonderful company. Kathy Morgan International is a wonderful company. Myriad, they know what they're doing.
These aren't "my buddies." These are companies that I know that I can go to a debt financer and say "Can I cash-close these pre-sales, and can you also provide GAP and super-GAP based on the open territories of they say that they can sell?"
And if they can put the seal of approval on it then that's great with me.

@ 33:01 Audience Q: How can I tell if your entertainment lawyer rep is legit?
That's kind of speaking to two different hats.
You can tell your entertainment lawyer is legit by doing your due diligence; do your homework.
Ask around, see their reputation, see what films they've done, who their clients are, and if you like them. If their contentious then it might not be the right fit.
And then the sales rep or producer's reps and attorneys are mutually exclusive of each other; they're not necessarily the same person. They can be, but the producer's rep tries to sell a film typically in the domestic market at a festival.
A foreign sales company can also sell [films] domestic, but is typically engaged to sell foreign territories to the best buyers you can get the most money out of for those distribution rates.

@ 34:06 Getting back to why I think foreign sales reps are going to stay in foreign markets and not come over to domestic is because producers are getting smarter and they're learning how to work the relationships so they can plan their own domestic distribution deals, which actually my expectation is that's the job of a good producer.
And therefor, producer's reps are becoming a thing of the past because producers are doing their job better, they're getting savvier.

@ 34:39 Q: So, if an independent filmmaker completes their film, a producer's rep: good thing/bad thing? Or... ?
Q: Because the sales agents and the distributors are readily approachable without them?
Yeah. If you've carefully constructed your package, the script and talent, then you don't really need to pay a commission to get your domestic deal. You can take it to the studios directly.
Or then you can pay that commission twice, you just pay that foreign sales agent that can provide you with that entré to studio distribution.

And I'm gonna give this a rest here!

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Anybody Wanna Play?


"Watching Tom Hanks and Julia Roberts in Hank's unfairly poorly rated directorial debut Larry Crowne (7/10) also got me watching Tom Hanks and Julia Roberts again in the more highly rated Charlie Wilson's War (8/10).
Philip Seymour Hoffman's character Gust is a hoot. Love it.

And just for fun & games: Would you rather make
A) a poorly received $30 million film that made $68 million in the box office, or...
B) a well received $75 million film that made $119 million?"​
What number does are these above equations missing?

Return On Investment = (Production Budget + _____&________) / Box Office Revenue​

Perhaps for us non-studio filmmakers the equation would look more like :

Return On Investment = (Production Budget + _____________) / Distribution Revenue​

This same principle applies to any of our non-art-for-the-sake-of-art attempts at monetizing our film products.
Exchange "millions" for "thousands" in the example above:

And just for fun & games: Would you rather make
A) a poorly received $30 thousand film that made $68 thousand in distribution revenue (to you, of course), or...
B) a well received $75 thousand film that made $119 thousand ?"​


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I think most would opt for the second, 75 that brings in 119 and is well received. There's more money and a larger audience (hopefully helping your chances on your next project) even if more is spent up front.

@ 35:22 Audience Q: What is your opinion of tax credits offered in Toronto? Is it a large incentive to film there? And how does the U.S. compare to Canada in general?
Toronto is a great place to film in and most talent likes to go there.
The problem filmmakers will run into [planning to film in Canada] is they make a pay-or-play, they get the talent. Wow! It's a "go!" project. And then they can't get their tax credits because the lead refuses to go to frozen Saskatchewan or somewhere in Nova Scotia.
Toronto's not really the problem. It's the other parts of Canada that offer very lucrative tax credits, it's just not practical because part of negotiating the deal memo with the talent is they want to stay in the U.S..
Or they're going to want to fly back and forth all the time, which the savings from the tax credits are being gobbled up by the expense of shuttling the talent back and forth.

The other problem is there are so many tax credits on the state and federal level in the U.S. that they are very commensurate with, highly competitive, if not more lucrative than a lot of the Canadian provinces.

@37:00 Audience Q: Is there a "Danger List" of unpredictable actors?
Yes, there's a list of high risk actors, directors, and producers.
When you get your completion bond it's not just looking at the actors, it's taking your production itself as a whole and seeing "have we mitigated the risk in the varying above and below the line risks?"
Also, it's not just actors that have drug habits that would shut down production...
The system is changing.
[Due to an actor recently delaying production to re-negotiate his contract] not only is that actor not popular, his deal memo changed that the studios are incentivizing him to "be on the same side of the line as them" by giving him a low quote or not paying him his usual quote and giving him back-end.
Therefore, he's incentivized to not delay or beleaguer the process that's money out of his own pocket.
(Back end deal defined: http://www.brighthub.com/multimedia/video/articles/17214.aspx )

To take a note from the studios on that, independent filmmakers should try to do a "no quote deals" with the talent and give them a lot of back-end, because if you raise your funding correctly, (not through equity), you'll have more of that back-end to give away and that will keep the talent on the same side as you are because you sink or swim.

@ 39:12 Q: What about foreign pre-sales? Why are they important and how much should I pre-sale?
Foreign pre-sales are absolutely important.
[How much is] not a legal matter; it's a practical matter.
If I were selling to you something I'm going to make, and I'm describing it to you, and I want you to buy it from me for $10, I could give you something hideous and you don't want to pay $10 once you see it.
You're taking a risk in [buying] this.
Foreign pre-sales are selling something as a pre-sale that as of that moment is unquantifiable.
That have things called "essential elements" which means that you are going to deliver a film that's in this genre, this long, with this rating, this talent, and this director - but that's pretty much it.
You don't know if the aesthetic is going to be right, you don't know if there's going to be chemistry, it could be just real crap.

@ 40:24 So, you are pre-selling territories at a discount.
It could be 50¢ on the $, it could be more, it could be less.
It's a little bit of a fire sale because it's unquantifiable.
I recommend filmmakers not pre-sell as much as they can; pre-sell as much as they need to to give the debt financers "comfort."

@ 40:49 Typically a debt financer [or bank] is going to say...
Well, there's two kinds of debt: There's gap and there's super-gap.
(Gap & super-gap financing defined @ http://en.wikipedia.org/wiki/Film_finance#Gap.2FSuperGap_financing )

Gap can be called senior debt, and super-gap mezzanine financing.
(Mezzanine Financing defined: http://www.baselineintel.com/research-wrap?detail/C8/film_finance_what_is_mezzanine_financing )

@ 41:12 Senior debt is... banks come in... and when you make a pre-sale you're not getting money from the buyer, You're getting a commitment from the buyer to make a payment once you deliver what you promise you're going to deliver.
So, You're getting a contract to buy.
You take this contract and collateralize it and the bank will lend against it, and it will cash-flow those pre-sales.
Let's say you have... (Host interrupts)

JS: Let's back up and do those one-two-three. You don't get the money; you get the commitment from the [foreign sales agent] company that when you deliver... (Guest interrupts)
BB-G: Let's say you have a budget that's $10, you are pre-selling, and you want to get as much debt financing as you can.
@ 42:00 The debt financer will say "I need you to pre-sell two foreign territories that are lucrative territories." Typically, if they are the bigger, lucrative territories that's going to be about 20% of your budget.
When you make these pre-sales these are contracts you don't get cash for, but you take these contracts to the bank and the bank will cash-flow them.
Then you have, if your estimates are [$10] that means you probably over-budgeted your film for $10 because your estimates are only [$10]... you'll call it "even".
You won't make money.
You won't loose money.
You get the movie done. Hoorah. You get your Oscar.

@ 42:40 If you pre-sell $2 out of those $10 in estimates that leaves you $8 in open territories in these estimates.
So, a bank will say... it's the 2-1 rule of comfort, the bank is comfortable in lending you half of those open territories.
Half of $8 is $4.
So, you can get $4 through a combination of gap financing and super-GAP financing.

@ 43:05 The distinction between the two is gap gets repaid in first position, so it's less risky, before any equity investor gets paid back, before anyone gets paid back,... the first money after the sales agent takes their commission, then the bank, the gap lender, get's paid back in first position.
Then after that... you're never going to get more than 20% of your budget through gap because gap lenders don't lend more than that, but you will get more than that through the super-gap lender that takes on more risk because they get paid in a position after gap .
The [super-gap ] interest rate is higher, it's riskier, but you've already got $4 out of the $10 that you need to make your movie through debt financing, and an additional $2 from pre-sales that have been monetized, so you're $6 into the budget that you need.

@ 43:54 If you can monetize some tax credits of a $1.50 to $2, depending upon where you bring this, you only need $2 left to make your $10 film, and that's your equity.

And that's all for me tonight on this!

Do you guys get all the equity and debt differences stuff?
I can literally draw pictures to really illustrate these things, if any of you'd like.

So far, my take-away is that if you/we/I can't get any sort of debt lending and "monetization of foreign pre-sales" for our films then we're considered no-budget filmmakers.
This stuff, while fairly interesting and quite enlightening, doesn't even apply to 99% of our usual crowd at the bar.
Just sayin'.


* * * * * * * * * * *

Additional homework for you non-lazy bastards: http://www.wipo.int/ip-development/en/creative_industry/pdf/869.pdf
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The strategy here, in the para-Hollywood independent filmmaker financing model, is to fork over or expose yourself to as little financial loss as possible.
Let EVERYBODY ELSE assume significant portions of risk.

Worst case example:
You make and market a $10m film.
(The oft cited production budget will cost you $5m, prints & advertising+marketing another $5m.)
You've raised 20% = $2m in PE, private equity, between yourself, family, friends and your 35 foo... non-accredited investors.
All the remaining money comes from people that will just be pretty darn p!ssed at you if the film goes belly up.

The film's a box office disaster. No one wants to see your self-naveling metrodrama queen biopic.
Foreign distributors get squat in ticket sales.
Bank gets no money to even take to repay gap senior debt.
Super-gap gets hind tit: zilch.

Everybody looses.

But you're only out $2m between family and friends - INSTEAD OF - being out $10m.

Do indie films loose money?
Oh, yeah, baybee!


(Assume P&A+Marketing = Budget, making Total Budget = Budget x 2)
Budget - - - Worldwide Gross

Devil's Double
$19,100,000 x2 - - - $1,361,512

Salvation Boulevard
$5,500,000 x2 - - - $28,468

The Ledge
$10,000,000 x2 - - - $9,216

The Son of No One
$15,000,000 x2 - - - $30,680


I'd say some "investors" got monkey-punched in the anus on those.
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Financing the Micro Budget Film (Without the Stinkin' Bank, Thank You Very Much!)

So, you don't have a bankable star to draw in foreign pre-sales which the bank is dependent upon to start their gap and supergap debt & equity contribution.
Be that way. We don't need your stinkin' money anyways. :tongue:Thhhhp!

So, now whadda we do?

Investigate >$500k micro budget filmmaking financing, (because investigating no-budget filmmaking would be just too whack even for me!)

No surprises here:
1. Private Equity - the #1 way most micro budgeted films are financed. Realize that it’s not necessarily the smartest way to finance your entire budget since depending on what your budget actually is, it will be near impossible to recoup it all. Just look at what realistic sales projections look like these days and you’ll see that bringing in anything over $100K in revenue on your micro budget film is considered a home run.
2. Crowd Funding - a great way to supplement or even entirely fund your micro budget film... there’s actually very few films who ever reach the six figure mark with crowd funding, but let’s say instead of 50% of your budget you’re even able to raise 10%-20% of your budget... [filmmakers] implemented and kept the momentum going on this campaign... allocating the funds they raised towards their budget...
3. Tax incentives - a no-brainer and are essentially ‘free money’ if you live in or plan to shoot in a state that offers film incentives. Yes you’ll need to weigh any tax savings against whether it’s cheaper to shoot at home and save on travel expenses...
4. Sponsorship - And then there’s sponsorship – often misunderstood and entirely underutilized! Let’s say you have a film with a sports theme, and you’re going to be using certain sporting goods products in your film anyway, and want to see if any of these sporting brands or companies would like to become official sponsors of your film by paying you a fee for product placement. That’s how a few of my clients right now are utilizing sponsorship to contribute to the overall budgets of their film. To be clear, it’s not easy to get sponsorship money, but it is possible and producers I’m working with on this are financing anywhere between 10% and 50% of their micro budgets like this.

Eventually I'll get around to determining the best protocols to actually contact businesses to request sponsorship. (May very well be strongly linked to the Product Placement thread.)

An in depth UK micro budget film finance report:

First of a five(four) part micro budget finance article:
"If you want to get your film [traditional bank financed], you have to have to make it for a price that all concerned feel it will certainly recoup at. ”Absolute sense” is this regard is a film that will inevitably make back what it cost. ”Absolute sense” can also mean a project that a company feels it has to have, usually due to the people involved or the timeliness of the concept, but those “packages” are frankly even harder to come by than those that seem to be inevitably recoupable.

Between foreign sales estimates, tax credit rebates, and the undisputed value or attraction of the stars, if you want to be sure your film will get made, your project needs to read that the value of the work will exceed the cost of creating it. Value in this regard, is strictly business related, and not cultural.

As foolish as it is, the mainstream indie film industry relies on estimates from foreign sales agents to set the value for the films. It is this “market value” that truly determines the budgets for the films that get made under this system. Forget for the moment that everyone recognizes that those estimates rarely hold water any more these days. Let’s ignore the fact that international sales have been dropping 20-30% annually for several years. Dismiss it as anomaly that certain former major territories no longer license films like they used to. Until we develop the tools and know how to assign valid figures to the other factors that actually determine a film’s success, this is the system we have."

Paul G, if you're out there reading this, this is exactly what I was talking about in the "Budget Supplements" thread about how important it is to understand something in context.

First, not enough people around here make a BIG and CLEAR distinction between investors and donors.
  • A loan you have to pay back.
  • A grant you do not.
  • Likewise, an investor wishes to be paid back - with interest!
  • A donor has no such expectations.
But all too often people want to use the two words interchangeably out of ignorance or as an obsequious ingratiation that basically means "You just gave me money but there's no hope of me ever paying it back, so I'll call you an 'investor' because it makes you sound good!"
Pfft. Kiss@ss punk. Go f#ck off.

Second, so now that we all CLEARLY understand exactly what a real investor really is, we can put this bizarre "foreign pre-sales" dependency into some context.
As we read from the Bezdek-Goodloe interview, ideally these only account for 20% of the foreign territory, meaning the remaining 80% can also be sold. Theoretically. And likely.
On paper the math works out fine.
Not only can the remaining 80% be eventually sold, but the bank will give loan against that 80% for both gap and supergap.
Fine. Great. Wonderful.

There's been ZERO mention about anything regarding domestic sales for VOD, limited theatrical, DVD, or anything of the sort.
Theoretically ALL of the income the film's budget hinges off from is PE+tax credits+foreign sales.
No domestic sales.
Once the 20% PE is recovered almost all domestic sales should be gravy.

Budget Expenses
- PE covers 20%
- Tax Credits cover 15-20%
- Foreign Sales cover 60-65% through pre-sales + debt & equity loans

Revenue Recovery
- Foreign pre-sales have already paid 20% cash in hand.
- Remaining 80% of foreign territory sales repay the 40-45% debt & equity loans
- Tax Credits don't require any repayment/recovery outgo whatsoever.
- All that remains is the 20% of private equity (PE).

All domestic sales from theatrical distribution, VOD, DVD, etc repay the PE.
Anything left over is all gravy.

Yeah, this looks good on paper, but somehow I suspect it's not that easy to achieve.

But those're the numbers - in context - and an explanation on what and why the focus on foreign territory sales and pre-sales.

I'm sure there's a good reason why domestic sales aren't used and foreign sales are considered gravy, I just don't know what that could be.
Maybe because foreign sales are a fixed figure while domestic sales are always considered variable.
I dunno.

"How would micro/no budget filmmaking be different if we applied
this foreign pre-sales+PE model to our own projects?"

Part Two: http://trulyfreefilm.hopeforfilm.co...-indie-film-finance-v2011-1-foreign-valu.html
"Foreign estimates still set the initial value for films, and it is CAST that is the predominate determinator for this value. Before a film is shot, there are three types of actors that mean something to foreign buyers:
  1. stars that have been in big hits in the relevant territories;
  2. stars that have been in popular television shows in those territories;
  3. stars that can be expected to generate a great deal of publicity everywhere.
For there to be foreign value, you need to have the potential to sell. The things that increase that potential also increase a film’s foreign value. "

Part Three: http://trulyfreefilm.hopeforfilm.co...m-finance-v2011-1-domestic-value-funding.html
"As artists build communities around their projects in advance of actual production, they are developing a plan to give domestic value to their films. It is hard to imagine that any artist will be able to do enough pre-orders to predict 20% of *negative costs from the USA — unless they are working on microbudgets — but taking a step forward is still a better plan than surrender to the unknown.

So where are we now in the process of getting your films funded? If you’ve gotten your foreign sales estimates, and you can somehow reasonably anticipate a 20% of *Negative Cost US Acquisition License, you are in great shape. That is, you are in great shape if you have foolish investors. The wise ones will still be wondering about how they cover sales fees, sales expenses, and the opportunity costs on the money. Those numbers are still routinely ignored in many business plans for indie film I find. If you are working with semi-literate investors, you will still be scrambling to find another 25% or so of your *negative costs."

*Negative cost means the actual cost of producing and shooting a film. It also includes the cost incurred for manufacturing a completed negative. It is the costs incurred up to the production of the completed or final negative. Negative cost does not include the costs of prints or advertising. However, it may include overhead expenses, interest, and other expenses, which may increase the amount beyond what was actually spent to make the film. Promotional or advertising expenses may be greater than the negative cost in the case of some low budget films.

Part Four: ??
Part Five: http://trulyfreefilm.hopeforfilm.com/2011/03/indiefilmfinancemodelv2011-1-the-ten-factors.html

Hmm... kinduva bust on this article.
It just kinda petered out into nothingness on that last part five article between there being no post four and an allusion to a post six which doesn't materialize. Not to mention this is all a general reaffirmation of what we already know from the BB-G interview, which is fine and all, but not really what I was looking for. Nothing about really financing a >$500k indiefilm.

Okay, editing this gigantic thread is getting to be a hassle, so I'm transplanting that last four part article to another post - which I actually will do! ;)

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Rayw, are any of the tax incentives you've read about relevant or applicable to a micro or no budget like a lot of us? I haven't spent too much time reading into other states, but from what I read about Texas it seemed like you needed to be spending at least $2mil in the state to get major breaks. They were great breaks, but yeah.

Then again, Texas doesn't have a state income tax, just a sales tax. Maybe that's why?
I haven't yet gotten quite that far into some legit digging around in "tax credit" land, however from what little I have run across "Yep", there's a lot of "You must be at least 'THIS' high to ride this ride" minimums in most every state.

Please share links and take aways of your own research! :yes:

UPDATE: (Brace for a groan) Yes, eventually I will get around to compiling a spreadsheet of all 38 state tax credit/rebate program fundamentals, including minimums and such.
Yay. :blush:
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