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 Audible.com. 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!
Saturday, August 18, 2012
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,
Jed.
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,
Jed.
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,
Jed.
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,
Jed.
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,
Jed.
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,
Jed.
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,
Jed.
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,
Jed.
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, ProFounder.com, 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 ProFounder.com 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:
http://www.profounder.com/
http://blog.profounder.com/2012/02/17/profounder-shutting-down/
http://legalizecrowdfunding.org/
http://www.startupexemption.com/
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.
http://www.CEOSpaceInternational.com/
http://ceospaceinternational.com/wp-content/uploads/2012/05/512-Schedule-7.0sm-.pdf
Profitably yours, Jed.
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, ProFounder.com, 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 ProFounder.com 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:
http://www.profounder.com/
http://blog.profounder.com/2012/02/17/profounder-shutting-down/
http://legalizecrowdfunding.org/
http://www.startupexemption.com/
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.
http://www.CEOSpaceInternational.com/
http://ceospaceinternational.com/wp-content/uploads/2012/05/512-Schedule-7.0sm-.pdf
Profitably yours, Jed.
Saturday, May 5, 2012
Mission and Impact of the MPAA
According to MPAA.org, 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:
http://mpaa.org/about/history
You can also meet Will Hays here:
http://www.youtube.com/watch?v=wtOKCQY58VI
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:
http://mpaa.org/about/history
You can also meet Will Hays here:
http://www.youtube.com/watch?v=wtOKCQY58VI
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