Monday, December 3, 2012

What Investors Value

The Capital Cycle - Made with OmniGraffle Pro
Usually I read business plans. Today I write one.

While the specifics of my plan are private for now, my review last week of Kawasaki's and Goetz's processes have me thinking about what investors value.  What parts of my business plan would I value most as an investor?

Here are my top five:

1. Repayment and Profit Mechanics

"What goes in must come out."  How will my investment and experience benefit the company, and when and how will the company return the favor?  Are the pieces in place for the company to take what I put in and make it into more?  Once there are profits, will my equity stake continue to grow or can I take it back out to put elsewhere?  Will there be dividends?  Will there be a liquidity event where I can get money for my shares together with all other investors or by selling them on the open market after an IPO?  If there is no clear path to profit for the investor, why invest?  Other opportunities are sure to offer clear pathways to profit.

2. Risk Mitigation

Are the entrepreneurs aware of the risks and what have they done to mitigate them?  It is often the risks we are unaware of that create the most problems because we do not plan for them.  Are there risks such as tax and healthcare policies that are not business environment friendly, out of their control and mine, and am I willing to accept those risks?

Also, what is the attitude of the entrepreneur toward risk?  Are they going to run the company right to the breaking point before they get a sale or are they planning for cashflow both short and long term?

For companies with burn rates that exceed cashflow, how long before the company can sustain itself through sales?  What are the chances it will take longer than expected to make cashflow exceed expenses?

3. About the Entrepreneur

A car performs based on the kind of fuel in the gas tank.  So does a business.  High octane entrepreneurs make all the difference in execution.  Will a business, like a car, sputter across the finish line or will it roar all the way?  This is something you can get an idea of from the management bios.  The entrepreneur him or herself does not know everything.  Henry Ford did not.  But does he or she know how to pick a good team and lead it to profits?  Likewise, if there is a collision, will the entrepreneur collapse on the tarmac or pick up the pieces, fix the engine, and finish the race?

4. What will it cost?

Will I be the only investor in this project?  If so, is the amount reasonable given my other priorities and the risk it may entail?  Is there any chance I will need to add more capital to make this work and get my original capital back?  Are the likely benefits worth the price of admission?  What are the opportunity costs, especially better deals I may have to pass up to do this one?  What will this investment cost me in time and attention, and will I get a return on my time and attention?

5. Is this opportunity for me?

What factors in this plan fit or do not fit my personality and written rules for investing?  Is this a company I can assist with more than money?  Are there people or processes or contracts I can add that will increase the rate at which I will see a return and am able to invest in the next great opportunity?

Capital is a cycle.  You earn it, you invest it, you receive it back with profits, and you continue to invest as long as there are opportunities that grow your capacity to invest and otherwise give back.

Beyond a good financial fit, will I be proud of this company?  As I help to build its brand, will it build my brand and legacy of success?  What else about this company seems like a good fit for my portfolio and positive ambitions?

Kawasaki and Goetz have been in the shoes of both entrepreneur and investor.  We would do well to get to know both sets of footwear, too, if we are to maximize our investor-entrepreneur relationships and profits, financial and beyond.  Will my plan address my own questions, were I the investor?  As I write, I will keep the perspective of both entrepreneur and investor in mind.

If you would like more information about and resources for writing capital attractive business plans, I suggest the following links:

Business Plan Pro - Professional business plan development software by Palo Alto Software.  There is a new online version for those of us who no longer buy PC's.

The New York Times Pocket MBA: Business Planning: 25 Keys to a Sound Business Plan - Lots of traditional advice in audio format.

The Art of Giving: Where the Soul Meets a Business Plan - Download the free reference guide!

The Social Network Business Plan: 18 Strategies That Will Create Great Wealth - While technically not about business plan writing, this book has great implications for how we write the marketing portion of our business plans.

Monday, November 19, 2012

Great Business Presentations and Plans

Guy Kawasaki, author of "Art of the Start"

Two people whose views I highly respect on business planning are Guy Kawasaki, author of Art of the Start, Enchantment, and other books on entrepreneurship, and Jim Goetz, a partner at Sequoia Capital.

Here is a video of Guy Kawasaki speaking to a TEDx conference at the Harker School:

And here is one of Jim Goetz speaking at Stanford University:

One of Kawasaki’s principles is to have a unique product that provides a real value.  That’s what Apple does, and value does not mean low price.

Kawasaki also says “Some things need to be believed to be seen.”

What I think Guy is talking about here is vision.  A visionary sees something before it exists, and does what it takes to bring it about.  A business plan is part of the visioning process.  You can have an idea, but if you don’t write it down, you are the idea, and the idea can only be as big as fits inside your head.  Entrepreneurs need to learn to delegate their business plan out of their head and onto paper or a computer.  Writing a good business plan is like standing on a mountain top.  It lets you see the big picture and share the big picture with others who need or ought to know.

Think about the term Chief Executive Officer.  What does a CEO execute?  A business plan!  It is not that the business plan should be static, because circumstances, markets, and organizations change.  It does give them something to be accountable for with investors and other stakeholders, and when they make a change, they explain why they made the change and adjust the plan.

In other words, an Executive is the other half of the Plan, and vice versa.  One is not without the other.

Jim Goetz, partner at Sequoia Capital
Jim Goetz suggests reading Inside the Tornado and Crossing the Chasm by Geoffrey Moore.  Both are great books, and Crossing the Chasm is coming to audio in a few weeks for the first time.  I recommend it.

Jim says the important thing in preparing a business plan or presentation is finding clarity of purpose, which is important to investors, the marketplace, employees, and others.  He says we need to, in two to three sentences, say what is unique and compelling, why we are different, and what our unfair advantage is.  (See the seven minute mark of the 70 minute video for more on this.)

Jim says if we can get past this first challenge, his company is very interested in our companies, in this case meaning the Stanford class he is speaking to.  He backs entrepreneurs who attack a personal pain.  He wants to know entrepreneurs’ strategy for creating unfair advantage.  He likes to see products that exploit new markets.  He says if something begins to work, it will exceed everyone’s expectations.

In summary, from these two venture industry mentor-examples, one can isolate a number of key components:
  1. Build a unique product and company that provides real value.
  2. Know why you are different, and be able to express why simply.
  3. Create a strategy for unfair advantage.
  4. Be clear in your purpose (vision) and presentation.
  5. Be the kind of entrepreneur investors will back.  You matter as much as your company and product.
Thanks for reading!

Profitably yours,


Monday, November 5, 2012

Disney, Star Wars, Philanthropy, SuperTeaching

As a kid, I collected Star Wars, Empire Strikes Back, and Return of the Jedi trading cards. I had action figures, and a subscription to Bantha Tracks, the official LucasFilm magazine at the time. I think Empire Strikes Back was the first movie I ever saw after a re-release of Bambi. I also had a personal connection to the last of the three movies because my name is Jed, so one of the nicknames that has stuck with me for life is Jedi.

Years later I was privileged to watch prequel Episodes 1, 2, 3 and look forward to doing so again in 3D.

I knew all about Episodes 7, 8, and 9 because they were the plan all along, but rumor had it George Lucas had squeezed 7, 8, and 9 into the ending of Return of the Jedi, so they might never come out.

Star Wars and Indiana Jones were my favorite galaxies growing up. My uncles watched Star Trek, but I considered it a cheap rip off of the real thing. Star Wars was my Harry Potter, my Hunger Games.

You can imagine my surprise and delight when Disney announced its purchase of LucasFilm for $4 billion last week. Not only does Star Wars have a new owner, but there WILL be an Episode 7 in 2015, with Episodes 8 and 9 not long after.

Was it a smart purchase? Is this a franchise still worth $4 billion after 37 years? Absolutely, and if anyone can make the most of it, it is Disney.

We should have seen the signs already the year Star Wars came out. "Princess" Leia? Then in 1997 we met Queen Amidala. I wonder how Natalie Portman and Carrie Fisher feel about being Disney Princesses?

Meanwhile, George Lucas is moving on to a whole new world of philanthropy. George plans to invest heavily in education through his non-profit

If I could suggest a technology for him to work with and expand on, it would be Super Teaching.

I've experienced the benefits of this new technology myself in the adult, entrepreneurial education forum called CEO Space International. SuperTeaching is a post-space age educational technology that should be in classrooms everywhere. (Get well soon, NASA!)

One of my plans for the next week is to introduce the two organizations. Watch for a call and written contact from Berny Dohrmann, Edutopia!

Last week's deal will go down in history as not only significant to Disney and those who love Star Wars, but to the future of millions of kids, yours and mine. Maybe this week's introduction will add even more to Lucas' legacy? May the Force be with us!

Sunday, October 28, 2012


I've been listening to an audiobook called The Six Laws of Approachability by Laura Stack. You can listen to the audiobook here:

Laura shares six main tips:

1. Broadcast a positive, confident image.
2. Follow proper etiquette in handshake, introductions, and dress.
3. Give yourself confident credit.
4. Model enthusiasm and a positive attitude.
5. The face is the window to your soul, especially eyes and smile.
6. Use a clear, audible, enthusiastic, positive voice.

The story that impresses me the most is an anecdote from Southwest Airlines' hiring practices. The company found that 95% of their complaints came from 5% of their people, so they started to build their interview process around two main factors:

1. Did the person smile at least three times during the first interview?
2. Is the person self centered or customer centered? How do they show support?

Focusing on these two attributes cut the level of Southwest's customer complaints by 98%.

How might such attributes help you 1) get hired or 2) hire the right people?

If you haven't already read them, I recommend two other books for developing strong social skills and speaking ability:

How to Win Friends and Influence People in the Digital Age by Dale Carnegie

Speak Like Lincoln, Stand Like Churchill by James C. Humes

If you are hiring at a studio or as a producer, here are two questions to ask that might make a multi-million dollar difference in your business:

What if the actors in your film smiled a bit more. Would that impact people's perception of your film?

How might your film make the audience smile?

Remember, the audience is paying your salary and your bonus check.

The bottom line is an inch or two above their chin.

Pleasantly and profitably yours,


Saturday, October 13, 2012

How to Get Your iPhone, iPod Touch or iPad App Into the Top 25

A year or two ago, I created my first iPhone app, Private Money App, as a way for real estate investors to get hard money for their real estate deals. I learned a lot from the process, and the app continues to see downloads and create business to this day.

Last week, my brother Ben Merrill released his first app for the iPad called Concepts. The app is far more ambitious and expensive than mine. He spent many months and at least $75,000 to develop it.

Here's a video of the app in action, directed by movie director Dave Skousen:

Rewind two weeks.

In late September, I was at CEO Space International's Free Enterprise Forum in Las Vegas. A few days into the week-long forum, I overheard someone talking about what it takes to get into the Top 25 on Apple's App Store. The person directed me to another table where Wes Chapman of was leading a discussion. The table was full, but I caught up with Wes later in the day and we talked for half an hour. On Saturday, he taught a workshop on building and marketing apps, and I passed on the information to my brother.

The result? While my brother's app is not in the Top 25 yet, within a week of release and without doing half of the steps, Concepts was chosen as New and Noteworthy by Apple.

I'd really like to say what the steps are to get into New and Noteworthy (as opposed to the Top 25), but that is really more of an art than a science. My brother deserves 100% of the credit for putting together a really top quality app that appeals to Apple and will be fun and useful for millions of people.

Getting into the Top 25 is both simpler and more expensive than getting picked for New and Noteworthy. Give away or sell apps! You have to get a lot of downloads in a single day, about 26,000 at present, to break into the top ranks.

There are a number of ways to do this, most of which cost money. One that I have seen work over and over again, especially with free apps, is TapJoy. There are many other models, like offering your paid app for free for a day via and other promotional pages. Getting noticed by the media also helps drive downloads. Getting noticed by major media often begins with paying to be featured on an app review site like 148 Apps. Here is a link to more than 150 other blogs that might feature or review your app:

If your app is for the Mac App Store rather than iOS, I suggest to rocket your app into the top 50.

If you have an iPad, I strongly recommend trying out my brother's app Concepts, currently a free app, and upgrading for $2 to precision mode. It's really a steal at that price, and I am telling Ben it should be at least $5 for what it offers. There are some really cool updates planned that Apple doesn't know about, but will really show off what the iPad can do.

Profitably yours,


Music, Marketing, and How to Get Your Music on Pandora

Two years ago, I helped a friend get his first ten songs on iTunes using TuneCore. I think most people hope that iTunes and other new forms of digital distribution will open up a whole new base of fans and listeners, but that did not work out for my friend. While he definitely sold music, he never got a check, and most of his sales came from his own referrals, people he told to look for him on iTunes. Today he prefers to sell a CD face to face so he doesn't have to worry about getting a check in one, three or six months.

Getting on iTunes, or any digital distribution platform, is only half of getting your music into the hands, in front of the eyes or inside the ears of a consumer. The other half is marketing.

In the old days, we would buy our music in a store. We could touch the CD, or at least its packaging, admire the artwork, and sometimes even listen to the music before buying, depending on the store's technology level.

Today we can distribute our music online for almost nothing, but it is easy to forget that availability, even in an online catalog the size of iTunes, does not mean visibility. If you are not on page one and if people don't know to search for you, you may as well be on page infinity. Your music is not going to be found, let alone purchased!

How does one overcome this obstacle? How can one get one's music into the ear buds of a music hungry consumer if one is not in the same physical space? Paying big bucks for a billboard won't tell a consumer how good a song sounds. What is a talented, but unknown artist to do?

The thought came to me, what would it take to get my friend's masterpieces on Pandora? Pandora Internet Radio helps listeners explore music starting with one song, with the following songs bearing some subjective or logical relation to the palate required to like the first song.

I took my search to the Internet, and there are actually a lot of people willing to give answers, but the best advice is by Pandora’s "Music Curator" Michael Zapruder who has a blog on

I won't regurgitate everything he says, but I will point you to this well hidden link on Pandora's website where you can have your music reviewed if you meet basic qualifications, like a valid UPC code.

Searching further, I came across a survey that asks if you would like to see an easy, perhaps paid, way to get on Pandora. While easy pay for placement is not currently an option, I suggest making your voice heard if you want a shortcut way to submit!

Thanks for reading!

Sunday, September 23, 2012

Entertainment Law Podcasts

This week I discovered Gordon Firemark's Entertainment Law Update Podcast series.  I've listened to three episodes so far:

Firemark, G. (2012, February 1). Episode 28 - Political campaigns, combat helicopters, and Batmobiles. Entertainment Law Update Podcast. Podcast retrieved from iTunes.

Firemark, G. (2012, March 29). Episode 29 - 360 deals, rights of publicity, and more. Entertainment Law Update Podcast. Podcast retrieved from iTunes.

Firemark, G. (2012, April 29). Episode 30 - JOBS Act, crowdfunding, limited editions. Entertainment Law Update Podcast. Podcast retrieved from iTunes.

One can learn a lot from experienced entertainment attorneys like Gordon. Several lessons stood out from the three podcasts.

While my company has not been involved in production of the Batman films, I did meet the person who built the Batmobile for The Dark Knight. He was very proud of the design, and said he would let me see it. He also created the Speed Racer car, which I did get to see in person. In Episode 28, Mr. Firemark discusses legal issues that arose when a company made and sold Batmobile lookalikes. The company claimed it was a fair use because the vehicle was functional and therefore not subject to trademark law, but the courts decided certain features of a vehicle’s design could be trademarked. Therefore, it is necessary to license a unique design before producing and selling a lookalike vehicle. My question is, who owns the right to the Batmobile likeness, the comic creator or the person/vehicle artist who made the Batmobile car for the movie? This is a question I should consider if I hire this person to build cars for future films.

Episode 29 deals with 360 deals. Some record companies are in trouble for charging fees for putting together an entire 360 deal, when their contracts only entitle them to commissions on part of the deal. In one case, charging the fee led to canceling of the entire contract and loss of all fees, but this does not appear to be the trend. It is important for my company to make sure any fees are fully outlined in my contracts, so I don’t invalidate my contract by charging a fee that is not allowed. This is just one more reason why a good entertainment attorney should be involved in any major transaction.

One option my company has looked at for funding certain projects is crowd funding. Episode 30 discusses the JOBS Act (Jumpstart Our Business Startups), which is intended to jumpstart businesses through crowd funding. Mr. Firemark goes through the many challenges that are currently affecting implementation of the law. It appears that he is planning a conference later this year to teach people how to prepare to take advantage of the new form of funding the moment it is available. It costs just over $300 to attend the conference, and I look forward to attending.

I also look forward to keeping up with future Gordon Firemark Entertainment Law Update podcasts. A total of seven are available on iTunes right now, and I’d love to dig up archives for other episodes applicable to my business interests.

Thanks for reading!

Profitably yours,


Sunday, September 2, 2012

Three Controversies

1. One of the latest legal controversies in America is the design patent battle between Apple and Samsung that came to a close last week.

A number of analysts and investors have weighed in on the result, one that favored Apple in an American court:

Professor Michael Risch of Villanova University, brought up one of the most intriguing points of discussion. While most analysts focus on the impact of the verdict on competition like Google’s Android platform and Microsoft’s Windows mobile platform or on Apple’s ability to safeguard its valuable intellectual property, Risch seems to think “Not being able to copy may make [Samsung] do better things than Apple.”

I agree, and believe that, while companies should be able to license certain aspects of technology to promote healthy competition, they should also have to rely on their heads somewhat and innovate new value into the “conversation” of a competitive marketplace. Where would video games be if Nintendo had not reinvented gaming with the Wii? Both Microsoft and Sony have been forced to put out peripherals called Kinect and Move just to compete.

The design patent victory by Apple, while a seeming victory today, may actually hurt them in the future when competitors come up with innovative and mass market designs before those features occur to Apple. For now, investors seem to think Apple got the better end of the stick.

2. By way of contrast, a second legal controversy occurred between the same two companies in a very different forum with a different result. While Apple won the fight in North American courts, Samsung appears to have won a separately filed, but less important verdict against Apple in Japanese courts:

According to this article, Samsung using “the synchronizing technology that allows media players to share data with personal computers” does not infringe on Apple’s patents.

While a relatively minor victory for Samsung, it could be a positive victory for consumers who really ought to be able to find that feature in any mobile device, just implemented and coded in a unique way.

I am curious whether the forums the two companies chose to file in had anything to do with the disparate results. Apple’s victory came in a court just miles from their headquarters. Japan certainly seems like it might be a more friendly forum to a Japanese company, even though people in Japan are big fans of Apple products.

Were these cases really decided on their merits or are geography and national loyalty the reasons major legal precedents have just been set? Only the courts know for sure.

3. In other entertainment news, this time from the publishing industry, a Navy Seal may be about to be sued by the Pentagon for writing a book, No Easy Day, that tells a different story about the killing of Osama Bin Laden than that told by the White House:

The Pentagon claims breach of contract because the soldier, Matt Bissonnette, agreed in writing not to divulge classified information, and a few copies of the book have already been distributed and paid for. Whether there is classified information in the book or not, it seems like a valuable service to let the American people know what really happened. If Barack Obama or his staff is lying, we ought to know about it even if someone at the Pentagon wants to call it Classified.

As a Veteran myself who had a Top Secret security clearance while in the military, I understand the importance of operational security. We don’t want soldiers still serving to be compromised in any way or put in danger. I also believe strongly that certain information should be in the hands of the people who are paying for it, the American taxpayers.

Is classified information a type of trade secret of the US government? Should we view classified information and trade secrets/other intellectual property as analogous or completely different things? Where should the government’s right to keep things secret end and the public’s right to know begin?

The author of the book is a patriot and war hero, not simply someone trying to make a quick buck off a book at the expense of fellow Navy Seals. He should be treated as such. Unless there is something really important (force protection issues) about what is divulged in the book, the Pentagon should let the author go and even support his book. A cooperative approach might even help them recruit new heroes.

If Hollywood is not prosecuted for making movies about fake Navy Seals fighting terrorists, why should we go after this Navy Seal who fought real ones? Don’t Tom Clancy and John Grisham fiction give terrorists at least as many ideas as the truth? If anything, the patriotic exploits in No Easy Day might discourage terrorists from messing with our sharpest soldiers and the people and ideals they support and defend.

That said, Bissonnette should have included the Navy in the book publishing process much earlier in the process, and the military should in general keep soldiers aware of their obligations to keep certain information secret for the good of those serving and the country they serve.

Saturday, August 18, 2012

Adventures in Product and Consumer Development

Most people in business have heard of Customer Relationship Management (CRM) software that helps vendors sell to and keep track of the needs and profiles of their customers and potential customers. Such tools give vendors significant power in tailoring marketing messages to prospective users and purchasers of their products. There is a new trend developing in response to this targeted and one sided power, VRM.

Since the advent of Google, customers are increasingly picky about where and when we (they) are contacted and would prefer to be reached only when we (they) are looking to buy. Vendor Relationship Management (VRM) is a growing suite of tools to help consumers control and communicate preferences to vendors.

One example of this is like "do not call" lists on steroids. Just as you go to the post office and request a change of address card, these tools make it easy to do the same with your email, shipping preferences, etc. A single update allows all of your favorite companies to switch simultaneously to a new communication channel with you. Customers are going from being herded like cattle with advertising and marketing prods to being in control, and its the next big thing.

What if when you buy a car, you get to decide on the features before it ever gets to the dealership? Some companies already offer this, but what if you also get a say in price, without dealing with a sketchy salesman? Product managers of tomorrow get to deal with the (welcome) headache and opportunity of dealing with a thousand variant requests and sets of terms. As customer advocates, they also get to help bring this customer-in-control culture to their company cultures, or risk getting left behind.

Dominos already has a system in place that allows you to order truly custom pizzas online that are far more personal and tasty than what a traditional menu could have room for. I can buy a wheat-free pizza with pepperoni, steak, fresh tomato chunks, three kinds of cheese, and four other toppings, and have it delivered with a mouse click. I'll never walk into a Little Caesar's again!

What does this mean for Hollywood? Studios already commonly hold focus groups to determine the perfect ending, but what happens when customers can selectively filter out trailers unlikely to appeal to them before even seeing them, from the whole Internet? For example, I might select "no movies with strong language." (Expect this control to be built right into your Chrome browser or Google account.) Will this begin to shape how Hollywood movies are made and what content is included? What if I only opt to hear about a film after three of my friends have bought tickets or "liked" the trailer?

As a consumer who has been bandied about by all sorts of advertising, I welcome the change, and, given the option, might even opt out of all advertising altogether.

Of course, I wouldn't mind more customization in my movie ticket purchases. What if when I buy my ticket on Fandango I can also order my popcorn and non-soda drink? (Maybe a Vitamin Water.) Of course, the whole purchase and redemption will be managed by my virtual wallet on my iPhone 6.

Some people even think the pricing system for tickets will change. For example, you might bid on tickets to get into a first screening. Prices may go up and down to maximize theater seat use, which helps theater owners the most since they have more people to sell popcorn to. What if you bring five people to a theater and each buys a drink? Could your ticket price change?

There is a great book that I just downloaded that appears to delve into some of these broad issues. It was just released in audio yesterday and is called The Intention Economy: When Customers Take Charge by Doc Searls. Find it on You get the book and someone to read it to you!

Another trend: Have you noticed that as Apple's products have evolved, so have its consumers? This is really the case in all industries. Apple both anticipates and responds to changes in consumer demand. Consumers don't always know what we want until some visionary shows us. Three months later, it's tough to go back!

If you trace the development of any product or category, it evolves in response to or in anticipation of people evolving. Not only have products evolved, but we have changed, too.

I'm not saying we are soon going to have three thumbs to help us deal with a new controller from Nintendo, but our sophistication seems to break new ground every time supply and demand play another round. I look at pictures of actresses from the eighties and wonder how anyone ever fell for a girl with hair like that! Apparently men were just as bad.

All of this leads me to one more question: Are consumer preferences doomed to change forever, or are there certain principles and styles and choices that are and will remain timeless? Audrey Hepburn seems to have avoided the eighties type hair disaster altogether, and is still considered stylish. Is there a golden mean of product development that industry may someday reach, or are people as hungry for change as we are for perfection? A walk through the woods or on a beach suggests that we are all fickle, and perhaps nature alone understands timelessness. At least there will always be something new to blog about!

Sunday, August 5, 2012

Artist Management

I’ve spent the last week reading up on artist management, a discipline I am fairly new to...or am I?

I’ve previously mentioned the CEO of Paramount, Brad Grey, who worked in casting prior to forming enough A-list relationships to create a successful career as Executive Producer of television shows such as The Sopranos. Brad also created a company called Plan B with Brad Pitt and Jennifer Aniston prior to being chosen as Paramount CEO.

In my opinion, Brad’s secret to success is artist management. He knew how to speak to talent so as to involve them in his projects and companies on a level that is higher than a paycheck. In a very real way, the movie industry is not about making money or movies so much as it is developing artists who then make better and better movies and bigger box office, DVD, television, and international revenue, and I believe that is one reason why he was chosen to lead Paramount. Paramount is an organization of artists, and Brad speaks the language of artists who are gaining skill and momentum and the significance and stardom they crave. He also knows the people who can get them what they want next, or at least eventually.

If that is not what actually happened, Brad, my apologies, but I think it is exactly the way a studio should be run, and applies just as much with non-studio productions. Indy producers may not be able to offer top artists exactly what they want in pay, but they can offer them work that keeps them in the public eye while allowing them to play higher stakes, creative roles studios rarely green light but always admire (not to mention their peers admire.) Producers who learn to speak artist learn how to grease the wheels of business with their most important asset, creative partners who make their movies magic.

In other words, artist management is about more than managing one person’s career. It is about helping manage the careers of everyone you meet, especially the people who will make you and your entertainment endeavor successful. It is about collaborative relationships, which are the DNA of every successful film venture, whether it has a six figure or nine figure budget. Just look at the credits of your favorite film. The public may not need to know who the key grip was or may not even know what a grip is, but the key grip’s career is advanced by having his name in silver screen ink and correspondingly on IMDB Pro. A-list actors are even pickier about where their name shows up, whether in a title card or in a prominent place at the start of credits.

A Scarlett Johansen sized paycheck ($20 million for Avengers 2) is a destination that every film along the way can enhance the probability of, and every producer and artist should know it. On the road to that number is not only box office success, but critical success, which often requires a price tag detour or two (or ten), not just an eight figure look. It requires appeal to international audiences, which comes from making movies that appeal to more than just home grown America. It requires development of an artist as a brand of cross cultural, international, yet personal appeal.

Artist management, in short, is the core of a successful Producer’s education and philosophy, whether your goals are financial or fame or simply and deliciously art. It should also be a key desire of any smart artist to benefit from the artist management talent of not just their own personal or business manager, but of others in the industry who can help them advance.

How many and what caliber of artist’s creative teams are you directly and indirectly a part of? That is a measure of your influence and present potential in the entertainment arts industry.

Artistically and profitably yours,


Saturday, June 30, 2012

Negotiating for Cast

Richard is a well-known local filmmaker who, like most Producers, deals with deal making on a daily basis. Some of his deals are based on prior relationships. Some depend on his charisma in the moment. Some are a result of his proven track record. A few come because he has great relationships with press, a number of film commissions, and crew.

This Thursday, Richard described to me a few of his negotiation techniques when it comes to casting. In April, Richard traveled to Burbank to meet with top acting talent and models who would play key roles in a film we produced in June.

What are Richard's deal-making secrets? Here is what I found out:

Many filmmakers, both beginning and advanced, balk at budgets. When it comes to negotiating a cast member's pay, however, a budget can be your best friend. If you know what SAG has allowed you (objective criteria) and you are clear on where every dollar of a budget is going, you can make a take it or leave it offer. If an actor or crewmember is crucial to your film, which is rarely the case, you can sometimes make adjustments if you are willing to take the difference from someone else. This is not good practice. It is better to use other objective criteria to explain why what you offer to start with is a reasonable amount to pay for this role, then show other ways in which this role will benefit the actor's or crew member's career.

Another technique is to use a third party like an accountant to back you up on the exact amount available (budgeted) for the part. This may not be objective per se, but it is a good way to reinforce that what you are offering is all you can reasonably offer without taking from someone else.

When dealing with talent's management, one might build a relationship before asking for anything. A manager of some of the models Richard interviewed had sent him headshots of some of his girls fifteen years earlier when Richard made his first film. Remembering this common history made the manager more willing to work with Richard on price on this film.

Occasionally you can take advantage of someone not knowing the current value of scale, although this (kind of a dirty trick) is not advisable if you are trying to build a long-term relationship and long-term career. What happens when they find out? It is better to be honest in your dealings, and build a reputation for integrity and doing exactly what you say.

There are dozens of ways to negotiate, but the bottom line is to be prepared, be confident, know your job, know what you need from them, and just be a leader that they can trust to keep your word. The more they like you and respect you, the more they will do what they can to make you successful. Filmmaking is all about teamwork, so fairness is vital. If you can't pay talent what they deserve, make it up in intangibles and how you treat them on set.

Thanks for the advice Richard! I hope this is useful to you, my readers, as well.

Profitably yours,


Friday, June 8, 2012

Break-Even Analysis for Investors

As an entertainment executive, I think a lot about break-even analysis, not only for my own company but for the investors whom I serve.

First, let’s talk about break-even analysis for a company. An entity should always be aware of its fixed costs, variable costs, sales volume (current and predicted), sales price, and how these factors and changes to these factors influence each other. If you know what your fixed costs are and add to that your variable costs at a predicted volume, you can easily figure out how many units you need to sell in order to cover your costs and break even. You can also determine how many additional units are needed to reach a specific profit.

This is important data, but is often not enough to make a final decision. What assumptions are being made? What are the opportunity costs? Are there alternative media that have lower variable costs where you might have to sell less product to make the same profit? Do you ever really know how many items you will sell of a music CD or DVD or Blu Ray? Are consumer buying trends moving toward one’s medium or away from it?

My father, a one time Yale professor, now retired, often talks to me about the difference between facts and opinion in investing. While it is always preferable to invest on the basis of facts, it is rare that one has many real facts in most investments. If I get three calls a week from people who want me to invest in oil and gas wells in Texas, Kentucky, and Oklahoma, do I even know that the people on the other end of the line are legitimate without a trip to visit the well?

Investors who I speak to are interested in two things, return of their investment and return on their investment, and how that return and risk compares to other opportunities that come to them each day. In some cases, they are also actually passionate about the project itself or the filmmakers themselves, but that passion should take a back seat in investment analysis.

So how can an investor, couple or investment company predict how much money he or she will make from a film, let alone whether that film will break even? Here are six ways investors I know figure out whether a film will be profitable for them or not.

1. They value and properly weight my opinion. If you were a real estate investor who invested in the first project that came your way, would you make a profit? Smart investors look at many projects. I look at up to 700 projects a year and pick the top ones based on specific criteria. That research, expertise, and expense on my part does not substitute for due diligence by an investor, but it’s a big head start over doing it all yourself!

2. They get educated. Most investors prosper in areas where they know something about the process. Few people with money are experts in film, but the industry parallels a number of other investment types, such as oil wells, and the filmmaking process is extremely predictable compared to other entrepreneurial endeavors. Pre-production, production, post-production, distribution, exhibition, ancillary sales and licensing, etc. are pretty consistent in every film made by professionals. If an investor loves learning and asking questions about new industries, they are likely to do better in film than someone who invests with a passive understanding of the industry. Knowing that G, PG, and PG-13 movies make substantially more money than R films may also help an investor safeguard his or her money. If a filmmaker is presenting you with an R script (two or more F-words), it’s a hint that they have more artistic ego than business sense or loyalty to you as an investor. To succeed in the entertainment business, one needs to be both artist and businessman or woman.

3. Smart investors work with people who have made films before. A funny thing happens when you make your first film. You discover what in your budget was a fact and what was just opinion! You also find out how disciplined you are as a Producer or Director, because a good Producer is able to negotiate to keep costs down that are constantly trying to rise. Did those $266,000 lenses get returned on time? If not, you may end up paying thousands extra if you can’t talk the rental company into sticking with the original contracted price. If some of your equipment is coming from out of state, did FedEx charge you an unexpected $1,600 as a “stated value fee?” Did the production go over one day, and addendums suddenly need to be prepared for all cast and crew agreements? Did you factor in payroll company expenses, and if not, is the filmmaker going to spend weeks doing paperwork that should be spent in post-production or marketing the film for profits and waiting for the SAG deposit back? These are realities in film that a first time Producer is unlikely to recognize and factor in. A smart investor recognizes a first time Producer’s naivete and at least makes sure they are working with people who have experience on the business end of film. Better yet, don’t work with beginners who may be passionate about making a film, but forget they have to sell it afterward! This happened to a friend of mine who blew $10,000 on below B-rated film Vampire Biker Babes, the first film that came his way. Work with those who have successfully produced and marketed a film, who have their feet on the ground, and you’ll be much better off. Hint: People who have made films before can also show you the quality of work they have done before. Is it marketable? Can it compete with movies in theaters? On DVD? On TV? On Pay Per View? Other downloadable, paid and advertising supported content like Hulu or Netflix?

4. Smart investors require completion bonds and production insurance on every film they make. (With proven directors who stay within budget, you can sacrifice completion bonds, but at your own risk.) In most cases you can’t get location permits and vehicles, let alone rent those $266,000 lenses, if you don’t have production insurance. Smart investors make sure there is enough insurance in place to cover the cost of major damages to the set and equipment so the production is not on the hook with insufficient funds to complete the film because a Production Assistant knocked over four Red cameras. Completion bonds are also useful, as they guarantee a film will be done on budget. Completion bonds are only available for so-called “bondable” Directors who have shown the ability to get things done under budget. If the film has already been shot and you are being approached about completion funds, one should still make sure insurance was in place when the film was made, as also someone who makes sure releases have been signed for featured brands, artwork, crew work, actors, and extras.

5. Take your investment amount and figure out exactly where the sales are going to come from to recover your investment. These days about two-thirds of profits come from DVD sales and International sales and pre-sales. Of course, these could also be your only profits. Find out what the distribution strategy is for the film. Is it realistic, or do the filmmakers claim they are releasing at Sundance, where at best 1 in 100 films are accepted? (Usually far less!) How do these estimates compare with past films by these filmmakers? Can any revenues be expected before the film is even released, as with pre-sales? In reaching a break-even figure, you might also discuss tax benefits of film investing with your accountant. We have two CPA’s you can talk to about advanced tax strategies, particularly if you own a company that pays high tax bills each year.

6. Communicate! Establish a communication plan up front so you always have an idea of where the production stands. You need to give the filmmakers room to do their jobs, but regular updates should be expected and pre-planned. Volunteering to be an extra on the film you help finance gives you another way to keep an eye on how things are going while also contributing to the production and learning the process. Try not to spend too much time with the Director while on set, if invited, as you are paying for not only his or her time, but the crew’s as well. Find filmmakers who are good communicators and you will have a far more pleasant time. If you are on the same page up front when it comes to expectations, they can work for you as much as you believe in them. Finally, don’t neglect written communications, including the PPM or Private Placement Memorandum that is common in film finance. This tells you what the risks are, if you read it, and the Subscription Documents you sign should also accurately let them know this project is a good fit for you, even though it is not as liquid as publicly traded stock. Don’t invest in a film without proper documentation and a comfort level with those making the film. You don’t have to invest on your first meeting, but don’t waste their time either. You are probably not the only investor in the project, and the sooner production can start the better.

Investing in film can be very rewarding, both intrinsically and when the film does well. Plan for success, do your due diligence, and you could see returns far higher than what your mutual fund advisors can offer you. In the end, are you willing to help sell the film if it helps you make money, or if necessary to get your money back? That’s another thing to consider, especially if you have connections. The business acumen that made you successful enough to invest in film may also help the filmmakers maximize the profits of the film.

In the end, break-even analysis numbers help you make an informed guess about the profitability of your film investment, but you have to make the executive decision, and it may be just as much about gut feeling about the team making the movie as the comfort of numbers. Filmmaking is a team sport. Find a team to play on that needs the capital and expertise you can offer, but that also meets your goals as an investor and contributor to the success of that team!

Unlike Wall Street, film investing is anything but a zero sum game. You are “producing” something of value that will hopefully entertain and inspire people worldwide. That alone is a reason to invest with pride in film over many traditional investments. If you are just starting, get your feet wet, but don’t go in so deep you have to worry about drowning!

Got a great story about investing in film? Let us know!

Profitably yours,


Saturday, June 2, 2012

Crowd Funding 101 with Roel Campos

Last Friday, I listened to a speech by Roel Campos, former Commissioner of the SEC. Roel was speaking to hundreds of entrepreneurs and Chief Executive Officers at CEO Space International’s Free Enterprise Forum in Las Vegas on the topic “Crowd Funding 101.”

As former Commissioner of the Securities and Exchange Commission, Roel has an inside ear to what is going on with the April 5th JOBS Act (Jumpstart Our Business Startups) and its implementation by the SEC.

What we all wanted to know is how soon will the law go into effect. While minor provisions are already technically in effect, full details of how it will be implemented are not expected until November. Roel further stated that come November, the SEC may ask for an extension as they are already understaffed due to having to implement Dodd-Frank financial regulations and no additional funding has been provided to implement the crowd funding portion of the JOBS Act. On the other hand, they recognize that this is intended to help grow small businesses that will eventually be responsible for creating the millions of jobs this country needs to reemploy 23 million unemployed and underemployed Americans. The small business sector really needs this bill.

The SEC is notoriously tight belted, as one might expect from an organization of lawyers, and it sounds like in practice they will not give entrepreneurs many of the capital raising freedoms intended by the law for fear of fraud. However, they are planning to increase the number of private investors who are unsophisticated that can sign on to a private placement, and may create loopholes to allow very small investments without complex reporting. Roel referred to this as “Reg A Plus.”

I am not happy with the news of delays and restrictions, but Roel stated it is very important for entrepreneurs like us to communicate with the SEC about what we want the implementation of the JOBS Act to look like and what will help us create jobs and do our jobs. Feedback really does make a difference in how openly they tailor laws.

I recently watched this two hour video of the House Resource Committee discussing issues related to crowd funding prior to the signing of the JOBS Act, which I strongly recommend for anyone looking to finance a business under the new law. With debt markets still pretty much frozen, this lower end equity loophole option could change the future of your entertainment project or business! The video:

Crowdfunding: Connecting Investors and Job Creators.

Learn more about CEO Space.

A link to the JOBS Act in PDF format.

How to contact the SEC.

Profitably yours,


Tuesday, May 8, 2012

Crowd Funding is the Future

One of my favorite topics this year has been crowdfunding. Searching old TED addresses on YouTube, I came across two seven to eight minute talks on the subject, one delivered at TEDx USC and the other at TEDx Victoria.

TEDxVictoria - Victoria Westcott - Crowdfunding 101
TEDxUSC - Dana Mauriello - Crowdfunding to Turn Ideas into Impact

The first talk by Victoria Westcott is about the basics of crowdfunding. Her primary principle and message is the power of going straight to your audience to fund your goals. Victoria discusses lessons she learned as a child selling her sister's cupcakes. She also gives three case studies of successful crowdfunders like Scott Wilson of Chicago who raised almost a million dollars offering iPod nano watch bands to his funders. Scott only asked for $15,000, but got $942,578 from 13,512 people who wanted the bands before anyone else. She also talks about Tall Tale Books, a small mom and pop bookstore in Canada in need of cash flow who asked people to send them $10 a month by PayPal automatically and every few months they can come in to pick out books for their kids, nieces, and nephews using the credit. Finally, she told her own story about raising $20,000 for a movie called Locked in a Garage Band. While they just barely reached their fundraising goal, she got all kinds of media coverage that helped draw even more important resources to her project, including name actors who worked for far less than their normal rates! Victoria concludes by summarizing five lessons from her childhood that apply to crowdfunding: Make it awesome (don't sell until it is ready), sell directly to your audience (and know who they are), don't ask for charity, get out there, and follow through! "You just might get tips!"

The second talk by Dana Mauriello was far less personal, but also had important principles to share. She compares crowdfunding to passing around a collection plate at church to fund a new roof, and says the principle is far more efficient today thanks to technologies like the Internet. She describes Kiva, KickStarter, and Prosper as best of class examples of how crowdfunding currently operates, then talks about her own website,, descended from a project called WikiMart in her Stanford University class. More on ProFounder in a moment... Dana notes that crowdfunding arises from a huge market of friends and family investment that exceeds $150 billion annually. Dana describes the word "crowdfunding" as a misnomer. The real term should be "community funding" because it allows communities to take ownership in an idea and the resulting business.

After listening to Dana's talk, I checked out and received the disappointing news that the business is being shut down, because the current regulatory environment is not advanced enough to allow for crowdfunding that actually offers a return on investment, not just tangible rewards like on KickStarter.

Fortunately, the site does link to a number of pages where one can petition Congress to create a crowdfunding exemption, which appears to be going through as of March and simply has to be implemented by the SEC between now and November.

Learn more about the cause of crowdfunding at these websites, and how you can help:

Both Victoria and Dana are very passionate about the subject of crowdfunding, with Victoria telling more personal stories and Dana making stronger analogies. Their presentations are engaging and both women look straight in the eye of their audience while speaking. While the concept of funding from family and friends is not new, the implementation the Internet offers is new, and the insights from experience both women share can help us prepare to take advantage of new laws and opportunities for ourselves and our communities, whether we raise capital or invest it or both.

Later this month I will have the opportunity to hear from one of the people who wrote the JOBS (Jumpstart Our Business Startups) Bill (2012) that grants a crowdfunding exemption, Mark Jones. We've known each other for five years, but I was not aware that he was involved until this week. I am proud to say he is part of the entertainment industry, which means the bill is likely tailored to help people like you and me. Mark will speak Tuesday, May 22, 2012 at CEO Space International's Free Enterprise Forum in Henderson, Nevada.

Profitably yours, Jed.

Saturday, May 5, 2012

Mission and Impact of the MPAA

According to, the Motion Picture Producers and Distributors Association of America was first formed in 1922 by heads of major studios concerned that government would regulate them if they did not regulate themselves. In 1945 the association was renamed the Motion Picture Association of America. Today, the association enjoys its sixth director, Chris Dodd, its most famous being its first, William Hays. Hays authored the Hays Code, which helped ensure responsibility in film content up until the 1960’s. In that year, Jack Valenti, the third director of the association, instituted a voluntary rating system that allows for greater creative expression while also allowing parents to safeguard their children from inappropriate content.

The modern function of the association continues to expand, mostly for the better. Sometimes I wish the Hays Code were still in place, but I also am not looking to see 2,000 different versions of The Wizard of Oz. I like the diversity of modern cinema, even if I think some of what we see on screen rots our societal foundations and sensitivities from the inside out. Is life really a commodity? Is language really more artistic when it is dirty or blasphemous? Are we cheapening sex by selling it on the silver screen? Have we traded in our natural images of healthy family life for fun house mirrors?

Thankfully, the MPAA does help parents and kids make better choices about what is suitable to watch. That is only one of its roles, however.

Besides film ratings and advice to parents, the MPAA helps protect copyrights of filmmakers from piracy. They help promote an industry that provides 2.2 million jobs in America alone. They promote film itself, both domestically and globally, in theaters and online.

The official mission of the organization is “to advance the business and the art of filmmaking and its enjoyment around the world.”

I actually don’t like that mission. It's incomplete. I think like the 1960's, it ignores responsibility for the soul, both of filmmaking as a medium and the people who watch and those who make them. Wasn’t it Spider-man who said, “With much power comes much responsibility”?

On the other hand, the MPAA does what it thinks it is supposed to do well, and the rest is up to us.

For more about the history and mission of the MPAA, visit the official website:

You can also meet Will Hays here:

Thursday, April 19, 2012

Funding Project 23

I am currently taking a Movie Producer Master Class with Richard Dutcher, the very successful independent director, producer, actor, and writer who in the year 2000 made the fourth most profitable film in dollars returned compared to dollars spent, approximately $9.61 for every $1 spent. In context, Star Wars Episode 1 was in 17th place for the year at around a 4 to 1 return. In Richard’s own words, when you looked at the dollars per screen report in the trades, “there were the studios, the secondary distributors, and then there was me.”

As class members, we are also all Producers on Dutcher’s year plus long experimental project, which is codenamed Project 23. As details emerge, you can find them at

While the number of producers means we each have relatively little influence on the nature and final content of the film, we are all participating in each step of the creative producing process. My own experience to date has 90% been on the business side of film, excluding some film school, so this is great experience. I am the Production Coordinator on this film in addition to being a Producer.

While I have experience funding and investing in films, many of the record twenty-three Producers on Project 23 do not. It is fascinating to see in other people’s experience what I’ve gone through in learning curve over the last seven short years.

While I cannot discuss specifics of the offering associated with raising funds for SEC reasons, I can say it is a complicated process, one I expect will be simplified for future projects between now and November by the JOBS Act passed in late March. New SEC rules are being written to help implement the law, which was encouraged by a Republican Congress and signed by the President in hopes of easing access to capital for small businesses and creating jobs.

For more on the JOBS Act (Jumpstart Our Business Startups Act) and how it will affect film financing, click here:

Director Richard Dutcher says the skill that makes or breaks one as a Producer is finding investors, whether within the studio system or the world at large. Project 23 is seeing great success, and should start filming in May.

While you can learn film in a school, the deeper lessons are learned on the street and on the set. Knowledge is nothing without relationships in this industry and of course relationships with investors willing to believe not only in profit but art as a product and the commercial or creative artist. Cheers to them!

Wednesday, March 28, 2012

Who is Brad Grey?

"We fail more than we succeed in show business, but every now and then we really succeed." ~ Brad Grey

Brad Grey is CEO of Paramount Pictures since 2005, but I've known about him for longer than that. Members of my family worked for him for years when he had a second or third home in Deer Valley, Utah, and I picked up on legends of his success that have become part of my own success story and entertainment philosophy.

A quick review of Brad's filmography on IMDB suggests he has had an anything but ordinary career in Hollywood. In 2002, three years prior to becoming CEO of Paramount, Brad Grey partnered with Brad Pitt and Jennifer Aniston in Plan B Entertainment (Troy, Charlie and the Chocolate Factory, The Time Traveler's Wife, Eat/Pray/Love), and had a first look deal with Paramount.

In an interview with Charlie Rose on February 3, 2000, Brad Grey suggests that his focus has long been talent development, which is likely part of what attracts partnerships with stars like Pitt and Aniston. At Brillstein-Grey, the successful talent management organization he co-founded and later bought out, he developed a philosophy of talent advancement that helped skyrocket him and others to success. Prior to Brillstein-Grey, Brad got his start doing concert promotion with Harvey Weinstein, before either got into motion pictures.

In a separate interview with Deadline Hollywood, Grey said he grew "up in the business representing talent and nurturing talent and surrounding myself with the best in talent." It occurs to me after reading what he has to say about talent that the industry is really not about making movies, but about promoting exceptional artists via their work (and making money for stakeholders doing it.) Talent is the raw creative material from which movies are made, and if you don't respect that, you won't get far in the business and you won't know how to do your job, especially as CEO of a studio as big as Paramount.

Brad Grey is most famous for producing the HBO series The Sopranos, but has also been Executive Producer on hits like Happy Gilmore and The Wedding Singer, all prior to joining Paramount.

Since joining Paramount as CEO, the studio has gone from last place to first in box office, in spite of controversial staff cuts. However, who better to decide who to keep and who to cut than a talent expert? Paramount has had 18 to 22 Academy Award nominations each of the last three years, and in 2011 had two nominees for Best Picture. They've also had a string of big box office hits such as their top grossing film Transformers III: Dark of the Moon, with more coming.

I look forward to studying more of the talent side of the business, and will keep an eye out for more entertainment business intelligence from Brad Grey. In the meantime, here are a few links and interviews for those who want to learn more about this once boy from the Bronx, now movie mogul.

A conversation with Brad Grey (Video), Charlie Rose, February 3, 2000

An interview with Brad Grey (Video), Charlie Rose, March 2, 2001

The official bio of Brad Grey from Paramount Pictures' website

Remaking Paramount by the Seat of His Pants, New York Times, January 13, 2008

OSCAR MOGULS: Brad Grey Q&A, Deadline Hollywood, February 13, 2011

Brad Grey's IMDB filmography and bio

Hollywood Hit Man

Paramount Pictures Finds Long-Sought Balance

Brad Grey, Wikipedia article (not a major source, but I found some article leads here)

Thursday, March 8, 2012

Could 1 + 1 = $$$?

Watching Vimeo this week, I came across a video titled "Film Finance: an overview" published by Own-it London.

While the video is billed as discussing how to navigate the complexities of the British "lottery" for government film funding, it also notes an interesting new trend arising from cheap digital film making. Some filmmakers no longer use a script to develop their films!

Alan Moss of Harbottle & Lewis says, “The edges of development are being blurred into production. There is a new breed of filmmaker coming along that is beginning to develop ideas on film and on camera rather than going out in a traditional sense and writing a script.”

This convergence of low price film making and creative, real time development both simplifies and complicates the funding process from an investor's point of view. A script, combined with the track record of the filmmaker, is traditionally how one predicts if a project is likely to be high quality and commercial or just someone's pet art project. On the other hand, seeing inexpensive, short versions of a film can be a more powerful and moving experience for the film investor or financier than a black and white 90 to 120 page document that leaves real detail to the imagination.

Last week's episode of the TV show Smash (season 1, episode 4, The Cost of Art) features a conversation between a boy investor and the once wealthy Producer of a Broadway play based on the life of Marilyn Monroe. They haggle over terms, but the deal ultimately comes down to the investor seeing cast members at the party quickly throwing together an unfinished musical number from the show to convince him the show is going to be good.

I know filmmakers who say a script is not enough, and recommend Pixar-style animatics for projects with budgets above $2 to $5 million. (Simple story boarding is more cost effective for lower cost productions.) They argue that this costs money short term but allows a production company to save time and money in the production process, while also gauging in advance audience reactions while changes can still be made without going over budget. Animatics, they say, are what allow Pixar to know a film will be a success even before a single frame has been completed.

You might say a script is a blueprint for a house and a movie is the full house, but there are many structural steps in between. Animatics meet half way in the translation from words on a page to moving images, supporting sound, and actor to actor and screen to audience chemistry.

The right answer for filmmakers and investors is probably to see a bit of both. Combining a traditional script with an experimental trailer (or alternately animatic) showing the look and style suggested by the filmmaker is far more useful to an investor or studio than either element individually. I've seen experimental trailers that really got my attention due to quality and production value, even though the theme of the film (abuse) was not interesting to me at all commercially. I've also read scripts that were well written, but did not translate well to screen. Author Stephen R. Covey teaches a concept of synergy, whereby 1 + 1 can equal 3. For aspiring filmmakers who combine both script and experimentation with low cost digital media as part of the development and fundraising process, could 1 + 1 = $$$?

Even reality TV shows are at least somewhat scripted, the situations if not the actual words used by participants. The dates on The Bachelor and the challenges in Survivor are not thought up at the spur of the moment. Then there are the scenes of a film that cannot be properly scripted, such as physical humor and truly visual transitions.

The cheer leading film Bring It On has a battle of two teenagers brushing their teeth without words that really makes me laugh.

The 1967 film Wait Until Dark is one of the few films that actually makes me jump, not because of something an actor says, but because of an artful use of silence and suspense that transcends typical scripting. The audience knows that a woman who can't see is not alone in an apartment. Juxtaposing identification with her lost sense of sight (and enhanced other senses) with our screen omniscience as an audience, Director Terence Young builds suspense until suddenly...the screen cuts to a detective being noisily rammed against a chain link fence by a truck, over and over again!

Not all of what connects with an audience should or can come from a script, and the low cost of digital film making should encourage a deepening experimentation with the non-scripted elements of film production, even before a film is made.

One other statement by Alan Moss will be useful advice to all film Producers who seek funding:

"As a Producer, if you can identify your audience early enough, potentially you can get funding from your audience."

Alan notes three reasons they might invest:

1. The audience/investor thinks it is a viable investment.
2. The audience/investor supports the message of the film.
3. The investor wants a role or credit in the film.

Thanks for reading Entertain and Inspire. I'll write again soon!

Profitably yours, Jed.

Wednesday, February 29, 2012


Welcome to Entertain and Inspire, the professional blog of Jed M. Merrill!

Here I will publish thoughts on the entertainment business, along with research that will help you and others make more profitable films.

I have a BA in Communications, an MBA in Finance, and am working on an MBE, or Masters in Entertainment Business, at Full Sail University in 2012. I am also taking the Movie Producer Masters Class from Richard Dutcher, and am part of Project 23, details of which will be revealed later...

Do you make movies? You may be interested in this study that shows that G, PG, and PG-13 films make substantially more money than R films, on average.

From the study:

G > R

$47.6 million is the difference in revenue at the box office, on average, between a G-rated movie and an R-rated movie, according to an analysis of movie ratings and revenue by BYU economics students Craig O. Palsson (BA ’10) and Jared N. Shores (’12) and professor Joseph P. Price (BA ’03).

$81.3 million is the average revenue for a G-rated movie.

$65.5 million for a PG or PG-13 movie.

$33.7 million for an R-rated movie.

45 percent of the movies made each year are rated R; 3.5 percent are rated G.

Do you agree? Disagree? What really makes a movie profitable? I'd love to hear from you!

Jed Merrill