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,
Jed.
Sunday, September 23, 2012
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:
http://www.bloomberg.com/news/2012-08-25/analysts-investors-comment-on-apple-samsung-verdict.html?cmpid=taboola.tech.art
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:
http://news.findlaw.com/ap/high_tech/1700/08-31-2012/20120831002001_09.html
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:
http://news.findlaw.com/ap/a/w/1152/08-31-2012/20120831065000_06.html
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.
A number of analysts and investors have weighed in on the result, one that favored Apple in an American court:
http://www.bloomberg.com/news/2012-08-25/analysts-investors-comment-on-apple-samsung-verdict.html?cmpid=taboola.tech.art
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:
http://news.findlaw.com/ap/high_tech/1700/08-31-2012/20120831002001_09.html
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:
http://news.findlaw.com/ap/a/w/1152/08-31-2012/20120831065000_06.html
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 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!
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!
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.
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