Real buyers for films based on screenplays are fewer than ever. For guaranteed funding, distribution and potentially significant marketing dollars, the only serious option is a major studio release. Not all films distributed by the major studios are also financed by them, particularly in the art film or specialty divisions owned by almost every studio.
Most studios have developed partners who rely on foreign sales, multiple channel distribution outlets (such as entrepreneur Mark Cuban, who owns Landmark Theaters, Magnolia Pictures, and the AXS TV cable channel, among other assets), or private investment funds. These are often more likely candidates for partial studio financing, and more importantly, the commitment of studio marketing muscle, which can regularly deliver opening weekend grosses of $25 million or more.
Studios expand and contract their production schedules on a yearly basis, often tied to the performance of the previous year’s slate. If there were big films at Christmas and during the summer, then production will probably see an increase, in both number of titles and budgets per film.
Financial partners also come and go, and the newest entrant is anxious to find a hot property that can make its mark and gain exposure to the highest level of literary material and talent packaging. In other words, at certain times, all the signals can be right to sell an independent property, with or without elements attached, to a studio or a foreign sales/private investment partner.
There is also an argument to be made for always trying a studio or big production company sale with the screenplay unencumbered. The worst situation a producer can find himself in is having a buyer strongly interested in his screenplay and production, but unwilling to do it with the element that was so eager to be attached (sometimes the star, sometimes the director). The attached talent can usually be severed, at least contractually, but at the cost of a destroyed relationship and the kind of lasting bitterness that should be avoided in an industry based on relationships and word of mouth recommendations.
There are other comforts to be taken from one (or two)-source studio or studio/partner financing, much of what runs counter to the meddling stereotypes of studio executives and other “suits” who only care about the budget and the delivery date, and to whom art was a class they took in third grade.
Having to deal with only one person who will yell and scream at the producer could be an advantage, which is a conclusion that might not immediately present itself. But it is preferable to dealing with the inevitable committee of competing interests and agendas that presents itself in the multiple-financier model.
The Ideal: Studio Deal
If a producer can land a studio/distributor deal, the ideal pathway presents itself. The studio provides the acquisition and development financing, develops the project at the studio using the studio’s resources, gives a “green light” to studio production financing and distributes the completed film with the studio affiliated distributor which uses the distributor’s funds.
Remember that when the studio bought the project, it also bought the copyright. If the producer remains attached, he or she does so as an employee of the studio or production entity.
The second, and equally common, strategy employed in today’s mainstream market is for the independent producer to provide the upfront financing for rights acquisition and screenplay development, either with his/her own money or funds from investors. Once a fairly complete package has been assembled (writer, director, stars of significant weight), the studio/distributor’s money is then used to produce and release the film. The distribution deal is made theoretically prior to the start of production, or at least before the end of production.
The most commonly batted-around term for these kinds of deals is the legendary “negative pickup,” which has been used variously to describe studio projects that are trying to film on a nonunion or less expensive basis, projects that studios buy during production, or even projects purchased at film festivals to which more work is then financed and added. Today, most films are shot digitally and my not have a traditional 35mm negative, but the term is still used.
The true negative pickup is the same as the second strategy outlined above: the independent producer finances rights acquisition and screenplay development, goes to a distributor prior to production with his/her package of elements, and gets a commitment and guarantee to purchase the completed picture if it meets specific delivery requirements.
These delivery requirements are a necessity in any deal involving a distributor, and includes all the picture elements; the music and dialogue on separate tracks and backgrounds without titles so that foreign dubbed versions can be made effortlessly; TV coverage, or replacement dialogue of profanity for any version that will be broadcast or shown on an airplane; the editor’s script notes and his/her code book, which identify each slate and take number of each scene; a list of scenes that potentially could be sold as stock footage; all the master recordings for the source music (popular songs of the period used; the music cue sheets for the musical score); a copy of the final shooting script; and all with cleared rights and chain of title.
Given that kind of list, a clear understanding of exactly what is required and when it needs to be done by is essential, and is one of the best reasons to hire a post production supervisor.
The difference with the true negative pickup is that the producer takes the distributor’s commitment to an entertainment lender, usually a bank but currently an investment fund will also play this role. The distributor’s contract effectively serves as the collateral for the production funds, with the producer in effect borrowing the money for the production.
Some deals have the loan repaid when the film is delivered to the distributor and is then formally acquired. In other deals, the distributor’s only release costs are the distribution and marketing for the film, the so-called Prints and Advertising budget (P&A).
If unable to secure a distribution deal prior to the start of production (and that should always be the preference, because it significantly reduces the risk of the film never being distributed at all), the producer has three remaining hoped-for distribution avenues:
One is the pure acquisition deal, which usually follows a private industry screening, or more commonly, a film festival debut, particularly at festivals such as Sundance, Toronto and Tribeca. In this scenario, the producer has again raised his/her own money to not only develop the movie, but to finance all production costs as well.
The distributor buys the film after it’s finished, or “in the can.” More work may be done, frequently in the areas of sound and music (and sometimes, particularly for the Weinstein Brothers, additional shooting and editing), but most festival films are released as purchased.
Studios insist on controlling worldwide rights if they put up all the financing and distribution and marketing costs, but since increasingly they have partners who have made foreign rights agreements, some studios only control domestic (U.S. and Canadian, and usually including all media) rights.
The same logic may hold true if the negative pick-up deal is for domestic rights only – but in that case, don’t expect the studio to reimburse full production costs.
There are two desperate strategies left to the enterprising producer who owns a seemingly unenterprising film. After all, someone is on the hook for all that production money, and whether it’s the producer’s private funds, or money raised from friends, relatives, local businessmen or a combination of all of the above, there should be a sense of responsibility in trying to recover that investment.
One is bluntly called the Rent-A-Distributor deal, in which the producer begs and grovels a distributor for the pleasure of paying him a 15-20% fee (rather than the usually 30% distribution fee) to use the producer’s money to distribute the movie. That’s the harsh reality, and if theatrical distribution is a necessity of a VOD deal, this strategy may have to be employed.
It’s a no-win for all parties involved: the distributor has no significant motivation, since none of its money is at risk, and the producer is usually only frustrated by the distributor’s minimal efforts on the film’s behalf.
The final option left if no distributor can be persuaded to release the film is for the filmmaker to “four-wall,” or literally rent the theater him/herself. This practice actually has a proud history, with independent filmmakers like John Cassavetes booking theaters by himself for A Woman Under the Influence in the mid-1970s, and grossing more than $11 million at the box office. He then started a distribution company, Faces International, that released his and other indie filmmakers’ films. Sadly, it soon failed.
Many exploitation films also started out this way, and there are Christian film distributors who still frequently exploit this traditional method, with the agreement usually covering an allowance for the theater owner’s costs and overhead, and the producer keeping the rest of the box office.
Theater owners make the vast majority of their profit from concessions, and if four-walled films fill up their theaters with no risk to them, all the better. But independent filmmakers often have trouble collecting their share of the take from theater owners, over whom they have no leverage. One of the reasons studio distributors are so successful is that they can legitimately threaten to cut off an exhibitor’s Christmas or summer releases unless the money is remitted.
In any given year, the scenarios outlined above will typically be represented on the release schedules of each of the major studio-distributors. The proportion will vary year to year, but basically the studios want to make sure that their hoped-for blockbusters and therefore their most profitable films, are in-house productions where they own all rights. Given the number of in-house production deals with financing entities that the studios are now establishing, the production-financing/distribution, negative pickup and acquisition deal combinations will probably represent 60-70% of a studio’s annual releases.
Where does the other money come from? The days when a producer could go and sell home video rights to one buyer, domestic distribution rights to a second company, and then parcel out foreign rights territory by territory are long gone. To be sure, there are still thriving foreign sales companies, and much foreign financing going into the coffers of those studio in-house producers.
The foreign sales business is not the driver it was once in film financing, in part because production has also jumped in many foreign territories, where local films are once again taking a larger share of the box office (and ironically, the major studios have set up production entities in many of these countries, such as India, China, Taiwan and Egypt, and are thus competing with themselves).
Just about the only American movies that are significant economic successes internationally are the blockbuster movies, primarily revolving around action and special effects. There is still an art film market in Europe in major metropolitan areas across the continent, and in the United Kingdom and Australia.
Using a Sales Agent
A sales agent, who specializes in both domestic and international agreements, can be a great help if they can be persuaded to see as completed a version of the film as possible, and if they like what they see. Companies like Cinetic help prepare and submit films to festivals, orchestrate festival auctions, and understand the tricky terrain of rights deals in various territories. Issues of Variety and the Hollywood Reporter that come out around the time of the Cannes and American Film Market (AFM) are usually filled with the ads of these sales agents, some of whom are more trustworthy than others.
Sales agents traditionally take a 30% commission on any deals they make, but it is best to read the fine print carefully and make sure they do not also take 30% of all revenues the film earns in all markets. There have also been sales agents known to exact 50% fees from unsuspecting or desperate filmmakers; most of these individuals are known, and therefore can be successfully avoided. There are great informal networks of filmmakers available through Indiewire and the Independent Film Project.
The Bottom Line
There is no easy way to finance a film. If there was, even more films would be going into production. Yet films are financed all the time, as myriad submissions to myriad film festivals all around the world can attest. Each filmmaker ultimately has to find his or her way through the tangle of opportunities, illusions, false hopes and real promises.
What really sells a film is the passion and belief of its makers, and enough commercial elements or artistic merit to make an investor comfortable. The level of comfort investors seek varies widely, and each film project has to find its own definition of what makes it sellable. The fact that this lesson is often painfully learned by discovering what does not make it sell does not diminish the value of the lesson.
The search for a magic formula to find financing, or the secret tip or password that guarantees no financial struggle, is a gigantic waste of time for most filmmakers. This effort would be far more productively spent in pursuing realistic leads, or in getting the script to talent whose “attachment” can make all the difference.
The pursuit of movie money by filmmakers is quite similar to the pursuit of political money by politicians. Money is only a means to an end, but its wooing takes far more time than the actual act that’s being funded. Filmmakers can use the time they spend waiting for money to prepare their projects down to the last detail: making storyboards, shot lists, prop and location requirements.
Everything can be made ready so that when the movie does finally come through a well-oiled production is ready for the challenge of making the best of what is often a low budget and a tight schedule. The producer and director who have made good use of their endless waiting time will have greater odds of success if they are calm and prepared rather than rushed and frenzied.
If no one is ever willing to invest in a project that has made the rounds, been read and considered widely by investors, producers, directors and actors, then it’s best to just walk away. Not every movie can be made, despite the fervent wishes of its creator. The marketplace does exact a toll, and no matter how good the writer or director thinks his or her project is, if no one agrees, it’s time to move on.