Why Should Those Rich Tech [People] Invest in your Film? [1/7]

I recently went to an event here in San Francisco aimed at bringing together the more established filmmakers in San Francisco to build a better ecosystem for the industry up here.  It’s a wonderful idea, a fantastic group of people, and the energy in the room was electric. However, there was one question that kept coming up that filmmakers had a lot of trouble understanding.  Why won’t those rich tech people give us money?

This is something that I hear not only in the bay area.  There’s a large contingent of Filmmakers in LA or elsewhere that would like to tap into Silicon Valley investment.  The trouble is that the perception of film is that it's just a way to lose a lot of money.   There are those of us looking to change that perception, however filmmakers need to understand that the overall potential for return is dwarfed when compared to other sectors.   Whether that perception is true may be another matter.   
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​This blog is not to disparage mean to discourage you, but to help you better understand the reality of your position.  Understanding your position is key to obtaining your objective.  To quote the Art of War…

In order to better understand the position of a tech investor, we need to look at how and why generally invest.  As an entrepreneur who’s worked in both film and tech, an organizer of many film investment events, and a consultant who helps vet business plans for viability, I’m in a somewhat unique position to help answer that question.  ​So I’m making this a series of 7 posts regarding every aspect of why a Tech investor would invest in a film.

I should clarify that this project is already a little bigger than I anticipated when I started writing it, so it’s going to be largely focused on Tech investment as opposed to sponsorship or any other sort of tech money entering film.  I’ll be releasing them weekly, so check back every Wednesday.  This post is to serve as a sort of landing page so you can look at all of the different aspects of why a tech investor would invest in a project.  I’ll keep this updated, but here’s a loose table of contents that will eventually be linked.  In the meantime, check out these other great resources.  From me, Producer Foundry, and ProductionNext.

I should stress that the numbers found throughout these articles are inherently speculative, and largely from personal experience, and generalized research.  Due to the fact that it’s only really possible to find data on the films and companies that made a return, estimating those that didn’t involve not a small amount of educated guesswork.   Generally, the estimates in wins vs losses for films are based on personal experience in distribution, coupled with research and data from sites like IMDb Pro and The-Numbers.com.   Tech portfolios are generalized based on research coupled with talks with several professional investors.   

In short, these numbers are not meant to be scientific, but more some of the best analyses on this topic you’ll find online for free.    If you have any thoughts or issues with these numbers, please feel free to comment below.  I’d love an active thread, and I will monitor as much as time permits.

Here’s a handy dandy table of contents for your reference.

Part 2:
Why Angels Invest, and Why they Choose Tech.  
Part 3:
Examining APR: How does Film Stack up to Tech Portfolios?
Part 4:
Breakouts vs Decacorns
Part 5:
Diversification and Soft Incentives.
Part 6:
What’s really stopping Tech Investors from investing in Film?
Part 7:
How do you make a sustainable asset class out of film?

If you liked this, you should check out my FREE Film Markets Resources pack. It’s got lots of things you’ll need to make talk to those rich tech people about your film, including a deck template, form letters, and even a free E-book called The Entrepreneurial Producer. Link below.

If this is all a bit much, and you need more individual attention, check out the guerrilla Rep Media Services page.

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Understanding Money

Since my background is at the Institute for International Film Finance, and I put in a year at Global Film Ventures, I get a lot of filmmakers contacting me asking me to help them fund their films. Some of them are good pitches, but most are not. Getting investment for your film is incredibly difficult, if not nearly impossible. There are many reasons for this, but one that is not often talked about is the fact that many filmmakers have a mindset that money shouldn’t come with strings, and that all they should need to worry about is making the film.

There’s this attitude filmmakers have that someone should just give them a check and then go away so they can make the film. I’ve had many filmmakers say that flat out to me, and the ignorance of it is incredibly disturbing. There’s a lot more to investment than just writing checks.

Angel investors didn’t get their money by giving it to just anybody. Investors generally do quite a lot of legwork to research those with who they invest in, and they’ll never invest in someone they don’t trust. This attitude of “just give me the money and let me be” is a huge red flag, and makes an investor far less likely to trust you. If they don’t trust you, they won’t invest in you.

Once you take money from someone, you have a responsibility to them to send periodic updates and let them know how everything is progressing. You need to be available to take their calls at most any reasonable time and always return their correspondence within at most two business days. All money has strings, and you can’t expect an investor to just write you a check and then never check in on you.

Another attitude problem a lot of filmmakers have is that they feel they don’t need to understand business. Many feel just need to make the best film possible and money will come to them. While there’s a kernel of truth in that, relying solely on making the best film possible is a great way to end up broke with a film that never goes anywhere. The best product without a marketing team will never make money. Filmmakers

do need to make a great film, but they also need to understand at least the basics of how to promote a movie and how it will see revenue.

Distributing a film, promoting a film, and selling a film are all incredibly different skill sets that require decades to master. Filmmakers can’t be expected to be experts in every job involved in making a movie. They do, however, need to understand what they don’t know and compensate for that by getting people on their team that do understand how to do those jobs.

In essence, this is the difference between a producer and a production manager, or the difference between an executive producer and a line producer. Line producers and production managers are great at understanding how to manage a crew and get a film in the can. Producers need to have a good understanding of business, negotiation, deal-making, finance, and distribution. Executives do the latter almost to the exclusion of everything else. Every film needs at least one of each of these people, and really they shouldn’t be the same person filling multiple roles.

Every film needs people who understand money, how to raise it, how to make it back, and creative ways to save it. Filmmakers of all kinds can be excellent at the last part of that. Innovative bootstrapping is a skill perfected by many guerilla filmmakers. That said, you still need money, and people who understand how to make a film see revenue on your team.

Even if you find an intermediary who can help you get the money from angels, you’re still going to have to have regular phone calls and meetings with that intermediary. In fact, that intermediary is probably going to have more contact with you than an investor would because they understand both investment and filmmaking. You need people like this on your team, and you need to understand that you’re creating more than just a film. Every film is in essence a business, and in order to run a successful business you need skilled business people just as much as skilled artists and visionary directors.

Whenever you seek investment, it is into your business. You need to understand that the business side of the indusry is necessary. You also need to have an appreciation and at least a basic understanding of what it takes to make money in business. This should not be your sole consideration, but it does need to be part of your plan when creating a film. If you do not include this in your plan, you’ll never actually see revenue from your projects.

So readers, if you’ve ever thought that all you need is someone to write you a check; remove that notion from your head. In order to get money, you need to understand money. Only if you understand how money works, and have a good business plan will you be able to successfully get investment and make a profitable film.

What does a Producer’s Rep Do Anyway?

As stated in the article What's the difference between a sales agent and a distributor, one of the most common questions I get is What does a producer’s Rep Do?  Since that post teaches the major distribution players are by type, (you should read it first.) I will now thoroughly answer what a producer’s rep does.  
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Simply put, a Producer’s rep is a mix between a PMD and an executive producer.   A Producer’s Rep takes on a lot of the business development jobs for a film.  We wear a lot of hats.  Most often we'll connect filmmakers with completed projects to sales agents and negotiate the best possible deal.  We're skilled negotiators with a deep knowledge of the film distribution scene, and entrenched connections there.   

Would you rather watch or listed to a video instead of reading an article? Check out this video on my youtube channel for most of the same information.

If a producer's rep comes on in the beginning, we’ll do the job of an executive producer.  We'll help you finance the film in the best way possible.  not just through equity investment, but planning proper utilization of tax incentives, pre-sales, crowdfunding, occasional product placement, and sometimes helping to connect you to some of our angel contacts.   That said, if we’ve never met, you have no track record and want us to start raising money for you, that probably won’t happen.   

​Not all producer’s reps will work with first-time directors and producers, I will, but generally only on completion or near the end of post-production.   I will not help someone who I have not worked with before garner investment for their projects, except in very limited circumstances.  I will help filmmakers get their financial mix in order.  If a rep makes connections for investment, we need to know if the filmmakers I'm working with can deliver a quality product and get our investment contacts their money back.

A Good Producer’s Rep will also be able to act as a PMD, or at least refer you to a good one.   We don't just work in traditional distribution, but we can help plan and implement other tactics including proper use of VOD.  We’ll help you plan your marketing and distribution, then we’ll tell you how to implement it, helping you along the way.   We’ll help you develop the best package in order to mitigate the risk taken by our investors. If we do bring on investors, you’d best believe we’re with you through the end of the project, to make sure that everyone ends up better off.   We’ll check in and act as a coach to help you grow to the next level.   

In a lot of ways, we’re agents for producers and films. Good reps, like good agents, won’t just think about this project, they’ll help you use your projects to move to the next step in your career.

So how do you pay a Producer’s Rep? Since the services we offer are so varied, our pay scale is as well.   Some things are based primarily on commission. Sometimes that commission will come with a small[ish] non-refundable deposit that would be things like connecting to distribution. That commission is generally around 10%, but can range between 5-15%.   Some things [like document and plan creation] are a flat fee, others are hourly plus commission on completion. That would apply primarily to packaging. 

It is worth noting that not all producers reps are trustworthy.  There are some that charge 5 figures upfront with no guarantee of performance. Admittedly, no one can guarantee they can sell your film, or get it financed investment.  If they guarantee it and ask for a large upfront payment, you should be very wary of them.  However, there are some with a strong track record of doing so.  Just as you would when talking with sales agents, talk to people who have worked with them in the past.  

Most reps will give you a discount based on doing multiple services.  Remember to check last week's post for an idea of what each major player in indiefilm distribution Does! 

If reading this made you think you want a producer’s rep, check out the Guerrilla Rep Media Services section!

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What’s the Difference between a Sales Agent and Distributor?

As a Producer’s Rep, one of the questions I get asked the most is what exactly do I do?   The term is somewhat ubiquitous and often mean different things to different people.   So I thought it might be a good idea to settle the matter.   In this post, I’ll outline what a producer’s rep is, and how we interact with sales agents, investors, filmmakers, and direct distribution channels. But first, we need a little background on some of the terms we’ll be using, and what they mean.   These terms vary a bit depending on who you ask, but this is what I’ve been able to gather.

Would you rather watch/listen than read? Here’s a video on the same subject from my Youtube Channel.

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​DISTRIBUTOR / BUYER

A distributor is someone who takes the product to an end user.   This can be anything a buyer for a theater chain, a PayTV channel, a VOD platform, to an entertainment media buyer for a large retail chain like Wal-Mart, Target, or Best Buy.  The rights Distributors take are generally broken up both by media type and by territory.  

For Instance, if you were to sell a film to someone like Starz, they would likely take at least the US PayTV and SVOD rights, so that it could stream on premium television and their own app which appears on other SVOD services like Amazon Prime, or Hulu. They make take additional territories as well. 

Conversely, it’s not uncommon to sell all of France or Germany in one go. It should are often sold by the language, so sometimes French Canada will sell with France. This is less common as of late.

Generally, these entities will pay real money via a wire transfer, and almost deal directly only with a sales agent. Although sometimes to a producer’s rep, and VOD platforms will generally deal with an aggregator.   The traditional model of film finance is built around presales to these sorts of entities, but that presale model has recently shifted.   

Recently, more sales agents have begun distributing in their territory of origin. XYZ is a good example of this. Some distributors have branched out into international sales. This is something that we did while I was at the Helm of Mutiny Pictures, to allow us to deal with filmmakers directly in a more comprehensive way.

Sales Agents

A Sales agent is a person or company with deep connections in the world of international sales. They specialize in segmenting and selling rights to individual territories. Often, they will be distributors themselves within their country of origin.   This business is entirely relationship based, and the sales agents who have been around a while have very long-term business relationships with buyers all around the world.   That’s why they travel to all of the major film markets.

Examples on the medium-large end would be Magnolia Pictures international, Tri-Coast Entertainment, and Multivissionaire. WonderPhil is up and coming as well, as is OneTwoThree Media.   Lionsgate and Focus Features would also be considered distributors/sales agents, but they’re very hard to approach. They also both focus on Distribution over sales.

​Generally, these sales specialists will work on commission. They may offer a minimum guarantee when you sign the film but that is not common unless you have names in your movie. Generally, they will charge recoupable expenses which mean you won’t see any money until after they’re recouped a certain amount. In general, these expenses will range between 10k and 30k, with the bulk falling between 20 and 25k. If it’s higher than 30k without a substantial screen guarantee, you should probably find another sales agent. There are ways around this, but I’ll have to touch on this in a later blog [or book].

​A sales agent commission will be between 20% and 35%, this is variable depending on several factors, but generally 25% or under is generally good, and over 30% is a sign you should read more into this sales agent. Lately, this has been trending towards 20% with a slight uptick in expenses.

Aggregators

​Aggregators are companies that help you get on VOD platforms.   The most important service they provide is helping you conform to technical specifications required by various VOD platforms. This job is not as easy as you would think it is, which is why they charge so much.   Additionally, they have better access to some VOD platforms than others. These days, it’s very difficult to get on iTunes or most platforms other than Amazon’s Transactional section without one.

Generally, aggregators charge a not insubstantial fee to get you on these platforms, and they offer little to help you market the project. Companies like this include Bitmax and arguably filmhub or IndieRights.

There are merits to going this this route, but they can be expensive, often costing about one thousand USD upfront and growing from there. If they operate on a commission like Filmhub or Indierights, they won’t help you with marketing so you’ll have to spend a decent amount there in order to get your film seen.

Producer of Marketing & Distribution (PMD)

​In the words of Former ICM agent Jim Jeramanok, PMDs are worth their weight in gold. A PMD is a producer who helps you develop your marketing and social media strategy, your Festival strategy, and your distribution strategy.   They’re also quite likely to have some connections in distribution.   They’re there to give your film the best possible chance at making money when it’s done.

Generally, they’re paid just as any other producer would be, but if they’re good, they’re worth every penny. With a good PMD on board, your project’s chances for monetary success are exponentially better.   

​If you’re an investor reading this, you want any film you invest in to at least have access to a PMD or Producer’s Rep, if not a preferred sales agent or at least domestic distribution. (Not Financial Advice)

Executive Producer (EP)

In the independent film world, these are producers who are hyper-focused on the business of independent film. They either help raise money to make the film, or they help bring money back to those who put money into it in the first place. As such, the traditional definition in of an indiefilm executive producer is someone who helps you package projects by attaching, bankable talent, investors, or other forms of financing.    They’ll also help you design a beneficial financial mix, [I.E. where can you best utilize tax incentives, presales, brand integration, and equity, and gap debt.] in order to help your project have the best chance of success. They can also play a significant role in distribution. The latter is where most of my EP credits come from.

Often, they’ll take a percentage of what they raise or what they bring in. sometimes they’ll require a retainer, but most of the time they should have some degree of deliverables such as business plans, decks, or similar as part of that.   These fees should not be huge, but they will be enough to give you pause due to the amount of specialized work involved in doing these jobs.

Producer’s Reps

I’ll go into this much more deeply next week, But Producer’s Reps are essentially a connector between all of these sorts of people and companies.  Producer’s Reps will connect you do sales agents, aggregators, buyers, and investors. But more than that, a good one will help you figure out how and when to contact each one. Most often, they’re credited as an executive producer or a consulting producer as the PGA does not have a separate title that applies to this particular skillset. For a more detailed analysis of what exactly a Producer's Rep does, Check out THIS BLOG!

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One Simple Tool to Reopen Talks with Investors

Man in suit in front of a chalkboard with angel wings drawn on it holding fanned out 100 dollar bills in front of his face.

Taking a little bit of a break from the visions of the film industry and the direction that it should go in, this week I'll be offering a piece of useful advice for all the producers out there.  I should start this by saying that I am NOT a financial planner. I am IN NO WAY qualified to evaluate security.  I am also not qualified to give professional advice as to what stocks to buy, how to manage a portfolio, or anything even remotely related to that information.

In my time at the Institute for International Film Finance and Global Film Ventures, I’ve heard many people speak on various tricks to get Films Financed.  One of the single most valuable tools in my arsenal is one that I will share with you now. I will say this was not developed by me, but rather by a speaker for one of my events a while back.  I will start by saying that in order to be a producer, you need to understand your competition.  Not just in terms of other movies and entertainment that are up against yours in the marketplace, but also how your investment stacks up against other potential investments that High Net Worth Individuals may be considering. This requires that a savvy producer understand the stock market, as it is the most common place where investors keep their money.

It’s important to understand that just because someone is worth 7 or 8 figures doesn’t mean they have millions of dollars to throw around.  Most of their money is “Tied Up.” Pretty much any qualified Investor you’ll talk to will have a rather large stock portfolio.  A lot of their stocks they’ll have been holding for quite a long time, and they’ll have grown quite a lot in value in the time they will have held them.  Given the amount of Capitol Gains Tax they’d have to pay on selling those stocks, getting them the liquidity needed to invest in your film can be a difficult sell.

If you’re talking to a wealthy friend or relative, and they’re interested in your project, the little voice in their head is likely saying things along the lines of, “Hmm… I like it, it’s got potential, but I’d have to sell this, this and this, and my capital gains tax would be this…”  That alone is often enough for them to not invest, sometimes simply out of the hassle and paperwork involved in the transaction, not to mention the loss of money.  That, my dear readers, is where portfolio loans come in.  A Portfolio Loan is essentially a mortgage on a stock portfolio.  It allows the investor to keep the stocks in their portfolio, but also free up some money to invest in other projects, such as yours.

​It’s extremely low interest, often below 4%.  The interest varies week to week, so for precise rates have your Investor contact their broker and/or financial planner. It’s lower interest than borrowing on margin, and while there are many risks involved, the repayment terms are very flexible, and the interest can often be offset by stocks that pay dividends.  Also, if you’re borrowing on Margin, you are technically only allowed to invest in other stocks, at least according to the SEC.  Although that is admittedly not all that well enforced.  This tool can be a great excuse to call up some of your potential investors who have all but turned you down, and can help to reopen conversations with them.  It has done just that for me, as well as several of my clients.

In no waay should this be considered financial advice, but in my personal experience this tool is best used in times when the market is expected to go up over the period between when your investor funds your project and when you start to pay them back out. That makes it an excellent tool for when we’re heading towards the bottom of a bear market or towards the beginning of a bull market that is expected to continue. In times when the market is pretty much at its peak, it would probably make more sense to just liquidate part of their portfolio in favor of a higher-risk speculative investment such as an independent film.

Again, I’m not a financial planner, advisor, or a lawyer.  Contact one of those people if you really want to know more about this, but just knowing what to ask about can be a huge leg up.  As always, be well and thanks for reading, and please share this with your friends!

If you want to hear more from an experienced Executive Producer, or find other tips, tools, and templates you should sign up for my free film business resources package. It includes contact tracking templates, form letters, and even a deck template that should translate to your investors better than most look books sign up for that below and follow on social media for all the latest from Ben Yennie and Guerrilla Rep Media

If you liked this content, but need help from an experienced producer to take your project to the next level, check out the services offered by Guerrilla Rep Media by clicking the button below. If you’re the sort who would rather save some money and do it yourself but need a roadmap, check out my books, courses, and other standalone projects. Finally, if you just appreciate this content and want to support it, check out my Substack and Patreon. Those services don’t pay my bills the same way film projects do, but they help justify me creating more content like this.

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Why Film Needs Venture Capital

A lightbulb next to a chart outlining the allocation of venture funds in 2011 above a text blurb outlining the data source.

There’s an old joke that goes something like this.  Three artists move to Los Angeles, a Fine Artist, a poet, and a Filmmaker.  The first day they’re in town, they check out the Mann’s Chinese Theater.  When they get there, a wave of inspiration overtakes them.  The fine artist says, “This is incredible, I have to draw something! Does anyone have a piece of chalk?” Low and behold a random passerby happens to have one, and hands it over. The fine artist does a beautiful rendering on the sidewalk.

Watching this, the poet says, “I’ve had a flash of inspiration, I must write!  Does anyone have a pen and paper?”  It happens to be a friendly sort of Los Angeles day, and someone hands over a pen and paper.  He writes a beautiful Shakespearean sonnet about his friend’s artistry with the chalk.

​The filmmaker says “This is amazing, I’ve got to make a movie about it!  Does anyone have any money?”
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Even though the costs of making a film have been cut drastically, the joke remains true.  I mentioned in my last post that the film world is in need of new money, and that what the film world really needs is something akin to Venture Capital.  I think the topic deserves more exploration than a couple paragraphs in a post about transparency.

​Venture capitalists bring far more than money to the table.  They also bring connections and a vast knowledge of financial and industry specific business knowledge to the table.  Essentially these people are experts at building companies, and when you really break it down the best films really are just companies creating a product.

The contribution of connections and knowledge is just as vital to the success of the startup as the money is.  We have something somewhat similar in the film world, it’s generally the job of the executive producer to find the money for the film and put the right people in place to run the production and complete the product.

The biggest problem is that good executive producers with contact to money are few and far between, and there are very few connection points between the big money hubs and the independent film world.  Filmmakers often don’t only need money, they need to have an understanding of distribution and finance that many simply do not have, and most film schools just do not teach.  These positions are generally not full time positions, and most filmmakers just don’t have the money they need to pay people like this.  If a venture capital model were to be adapted in film, the firm could link to these experts, and included in the budget for the film at a cost far less than it would normally be, because the person could split their time between all of the projects represented by the firm.

​Most people understand that filmmakers need money, what many people do not understand is that there are very valid reasons for an investor to invest in film.A good investor knows that a diverse portfolio is far better than one that focuses solely on one industry.  Industries can change and the revenue brought in by any single industry can crash with little notice.  Savvy investors will seek to have money in many pots as it really helps to weather through downturns.  Film is considered to be a mature industry, and has grown steadily over the past several years, even in the economic downturn.  In fact, the film industry is moderately reversely dependent on the economy, so it often does better in economic downturns.

The biggest problem is that most investors just don’t invest in things they don’t know.  Investors need to understand an investment before they put money into it.

Film is a highly specialized and inherently risky business.  All the money goes away before any comes back, and that can scare off many investors.  Especially since they often don’t understand what a good use of resources for a film is and are often incapable of seeing when the project should be stop-lossed as to not lose any more money.

One solution a venture capital firm could bring to this industry that single investors simply cannot is stage financing. Stage financing is a system of finance that is widely used in Silicon Valley.  The concept is basically that the investors only release funds once certain checkpoints are met.  Single angel investors do not have the time or expertise to act in this way, which is a big part of the reason for the standard escrow model.   If a project that makes it through the screening process is only given the money they need for pre production up front, they must pass a review to have funds released for principle photography then it becomes a far more sustainable investment.

​Filmmakers may balk at the idea of review, but quite frankly so long as the production is being well managed, they should be able to complete the checkpoints and have the additional funds released with little difficulty, assuming that the right review panel is put in place.  The fund itself has every reason to see it’s projects through to completion, so it will only be filmmakers who are not doing their jobs that end up not passing the review process.

Edit: Additionally, there are deals that can be made to help agents and bankable talent feel more comfortable with such a process.  This may be a subject of a later blog, and is mentioned in the comments.

Why does the fund have every reason to see films through to completion?   Because if the films are not completed, then the fund will have lost all the money it put in with no chance of getting it back.  That said, if the production is a disaster, and it’s clear that additional funds would not actually result in a finished and marketable film, then it is far better to cut losses and move on with other projects that have higher potential for revenue.

As mentioned in the last blog, a lack of transparent accounting is also a big issue with investors.

A single filmmaker does not really have the ability to negotiate with a distributor, at least not to a level necessary to resolve the transparency issue. In the relationship, the distributor has all of the power and there’s really very little most filmmakers, especially those just starting out, can do to change that.

​But in film as in any industry, money talks. If there were a venture capital firm for film that only worked with distributors who have transparent books, and those distributors could then turn around and propose new projects to the venture capital firm, then some of the issues of transparent accounting could start to change.  Many distributors, especially those working in the low budget sphere, are continually raising money for their own projects.  So, having a good relationship with a venture capital firm is a big incentive to maintain good books and responsible business practices for filmmakers.

It got listed in the comments section of Black Box that filmmakers shouldn’t necessarily need to have that much business sense, since it takes their whole being to create.  Filmmaking is indeed a collaborative effort, and it’s not a director’s job to think about target demographics and marketing strategies.  The problem is the people in the film world that truly understand investment and recoupment are few and far between.  Many of them also take advantage of filmmakers, as evidenced by the stories of studio accounting from Black Box.  Part of what’s needed is the creation of teams that have what it takes to both tell quality stories with high production values, also get the films to market and figure out exit strategies, target demographics, and general budget recoupment tactics.

Many Film Schools just don’t teach this part of the business.  Film schools focus everything on how you can make the film, and what it takes to do it, but few of them really give you the ability to actually go raise money.  So what’s really needed is a new class of producer that understands the executive side.  What’s really needed is a new class of investor that understands what it takes to invest in film, the risks, the rewards, and how it’s diversified.  What’s really needed in film is a company that can successfully link the two together, and create a new class of media entrepreneur.  What’s really needed is an incubator for independent film with a team that can execute both of these aspects and create a sustainable business model out of it.

Right now no such organization really exists. Legion M has some elements of it, but they miss the new talent discovery elements in favor of risk abatement. Slated works similar to AngelList, but I’m not sure their track record is what it needs to be to justify their price point. I’ve been trying to start one between my various projects with angel groups, Mutiny Pictures, Producer Foundry, and other ventures.   It’s clear that the industry is changing, but quite frankly it needs to.  The best way to effect the change in practices that need to happen in the industry is to change the way the industry is financed.  The entrance of a film fund that operates on principles more akin to the aspiraations of a venture capital firm would do just that, and is exactly why it needs to happen.

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Black Box - a Call for Transparency in Film

A Black cube on grass in a yard, with the Title “Black Box” in the upper left corner and the subtitle “An In Depth Analysis of ‘Hollywood accounting” in the lower right corner, and logos for Guerrilla Rep media and PRoducer Foundry in the lower left corner.
Photo Credit thierry ehrmann Via Flickr, Modifications made to add title, subtitle, and logos

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 the 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 the 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 movies, and I’ve been making films 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 the 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 70s 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 60s and ’70s 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 what 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 a 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 ’60s and early ’70s 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. 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 we as individuals can band together to have an impact.  Those tactics are some of what I tried to implement at Mutiny Pictures, and what I address in my content, groups, and consulting. One of the goals of porting over my website was to greatly lessen advertising and sales, but check the links below to learn more about ways you can impact not only your career but the industry as a whole. More details on each of the buttons found below.

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