Black Box - A Cry for Transparency in Film

8/17/2014

Photo Credit thierry ehrmann Via Flickr

The process of Filmmaking has been evolving rapidly over the past decade. With the massive change in the availability of equipment, negating the need for tapes or stock, and bringing professional quality down to a price point thought unfathomable merely a decade ago, the barrier to entry for making a film has been almost completely obliterated. Additionally, education on how to make a film has become widely available, from a massive emergence of film schools to a plethora of information available in special edition DVDs, anyone can learn how to make a film. However, the same cannot be said for Film Distribution. Film distribution is still a black box from where no light or information emerges. There is a very palpable air of secrecy around film distribution, and now that film production has become available for anyone curious enough to seek it, it’s time the same is done for film distribution.

I’ve always loved film, and I’ve been making film in some fashion for nearly a decade. Even though that’s really not that long, I realized that when I started, camcorders were still fairly rare among middle class families, and far rarer among high school students. Even the local Access channel worked with three chip cameras, and those who could afford it swore by film. That landscape is now nearly unrecognizable, now every other high school freshman carries a 1080p camera in their back pocket anywhere they go. This process has been going on for decades, far longer than my personal experience.

In the 70s, even Super 8 home movies were few and far between. To make a movie in the 70’s involved an incredible amount of time, effort and skill. Many learned by trial and error, with limited training and education often in the form of watching the great films of their eras. In those days, no one went to Film School, because there really weren’t that many of them. You pretty much had to go to New York or LA.

Even those who entered the industry in the 60’s and 70’s often went to school for something else. Today, there are 389 Film Schools spread across 43 states, which considerably changes the landscape for Education.

However the same cannot be said for film distribution. Despite the fact that technology has evolved beyond where even the most visionary filmmakers could scarcely imagine back in the 70s. Much of it is still a black box where even the most simple information about budgets and returns are kept largely under lock and key. Studio accounting and net proceeds are just as secret now as they have been since Jimmy Stewart became the first Actor to be a net profit participant back in the 50s.

Even if you made the film that’s being represented by a distributor, many of them will not share accurate information regarding the returns you’ve made. A simple balance sheet is difficult to track down, and even if you can get one it’s often hindered by studio accounting and the breakeven point is never reached, so the filmmaker never sees his or her share in the net proceeds, also known as profit participation. If filmmakers don’t make money making films, then all they have is an expensive hobby that is unsustainable in the long term. The problem is so vast that even Star Wars Episode 6 never made a profit. Even if they can get their first project bankrolled, unless they can make a profit on their film it is unlikely that they will get to make another one. In the independent film world, most times if the producer never sees their share in the net proceeds, then neither does the investor who footed the bill.

If the investor doesn’t see profit, then they won’t be an investor for long. Unlike the filmmaker, most of them won’t continue to do this just for the vision. The first thing any savvy investor will tell you is that they only invest in what they know. And while they may now be easily able to find information on the process of making the film, the metrics measuring the performance of independent films are unclear and almost always unreliable. If an investor can’t decode and project revenue through clearly definable analytics, most of them are far less likely to close an investment deal. Even if they do invest, if they feel like the distributor is not telling them the whole story, they generally won’t invest again.

If the Industry is to change, new money to enter it. The old money is tied up in sequel after sequel, and rehashes of old stories. The movie going public is fed up with it and want something new, different from the old franchises. This leaves a demand in the industry for quality content that is simply not being filled to the extent it needs to be. In a way it’s similar to the 60’s and early 70’s here in San Francisco when Venture Capital was just starting, there are many talented young people with great ideas, but little business sense.

The studios are entrenched in the old ways of thinking, and behemoth companies don’t adapt well to change. Startups do adapt well to change, and they really can change thought processes through ideas that take hold. The Film Industry is changing more rapidly than ever before, it will likely be just as unrecognizable in another 5 years as it was 10 years ago. Anyone can make a movie, even with a small device they carry in their pocket. This fact is even more true after the launch of MixBit. The old companies and the old money can’t adapt as quickly as things are changing, so logically we need new ideas and new money to enter the industry and shake things up.

This is exactly the effect that Venture Capital had when the Traitorous Eight left Shockley Semiconductor to start Fairchild, and then left to start other companies that eventually became Silicon Valley. Fairchild was only able to be started due to a new idea that evolved into what is now known as Venture Capital. In order to effect change as quickly as is needed, something similar must happen in the film industry. But Venture Capital can’t enter an industry where the risks are incalculable. Without a more transparent method of accounting, the risks are indeed incalculable.

The industry is evolving more rapidly than ever before. The future is unclear. It’s a wide open frontier where anyone can make a movie, even with a small device they carry in their pocket. The process of film production has moved out from the dark rooms and light proof magazines of old and exposed for all to see. It is time for the business side to do the same. It is time for every filmmaker and investor to have a clear understanding of Distribution. It is time for daylight to expose the studios’ accounting practices. It is time for transparent accounting in film.

While there's not a lot an individual can do about the lack of transparency in the film industry as a whole, there are ways that it can be lessened on an individual basis. Those tactics are some of what I teach in my executive producer expressway program. The program also teaches you how to properly package your film with LOIs from sales agents and attaching directors and name talent, some of the places to find angel investors and other ways to finance films, ways to market your independent film other than social media and film festivals, how to tell a good film distribution deal from a bad film distribution deal as well as what you can and can't negotiate when talking to sales agencies and distributors. This program starts with a completely free strategy session where I assess where you are, and how to get you to where you want to go.

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