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.

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

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 http://www.ProjectTwentyThree.com.

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:

http://www.filmmakermagazine.com/news/2012/04/how-the-jobs-act-will-transform-independent-film-financing/

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!

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)

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.

ENTERTAIN and INSPIRE

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...

http://www.projecttwentythree.com/

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.

http://magazine.byu.edu/?act=view&a=2727

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