Edition 1: Entertainment Financing Today
How to successfully finance, produce and distribute content
Many of my course participants at UCLA, and other workshops and industry events I was invited to speak kept asking me to recommend books about in’s & out’s of the industry and the various finance options. While there are very many good books written by smart lawyers and producers, there aren’t many books written by producers who are also financiers. Living this complex balance daily allows me to offer a different perspective of the industry, it’s “Hollywood” accounting.
For several years I have been teaching Entertainment Finance at UCLA and in other courses and workshops around the globe. Course participants often come to me and ask where one can read up on how to finance film and TV content today, what steps to take and what pitfalls to avoid. While there are some great books out there, I was not able to pinpoint the one that dives into the subject matter in as much detail as I do it here in this book — by providing hands-on guidance combined with up to date feedback on how film and television financing has changed in the industry today. Financing components and other changes have occurred in recent years, and more will likely come as time marches on. My book considers these changes and challenges in the Entertainment Industry while providing solutions on how best to maneuverer around them and stay ahead of the curve. I’m sharing what I would consider important industry insights, some of which have never been revealed openly by anyone. This book offers step-by-step guidance to get a film or television content made while avoiding potential pitfalls. My focus with this book is reducing risks relating to the development, production, distribution and financing phase of a film or television project while eliminating potential profit killers.
This book covers the financial aspects of each step of the motion picture and television content value chain (from development through distribution, through profit participation) in much detail and considers the implications of all the financial choices made along the way. My point in writing this book was to reach anyone who is interested in jumping head forward into the Hollywood business with the goal of creating a movie or TV content and achieving a profit. No matter if you are a writer trying to sell your script to agents, managers, producers, networks or studios. Or if you are a director in search of that one project that will “make you.” Maybe you are a producer looking to develop projects that can get greenlit or financed. Or maybe you are an investor, or an accountant interested in the financial aspects of the industry, hoping to avoid costly mistakes so many others have made. Maybe you are a lawyer looking to learn more about the financial aspects of entertainment that can help your clients. Maybe you are a network executive who wants to understand the financial ins and outs of the industry better, to offer up added value to your company. Or maybe you are an actor aiming to understand how you can make something happen yourself, rather than waiting for a casting call. The entertainment industry of Hollywood is complex from each of these points of view. Maneuvering through the intricacies of this industry is best learned from those who have experience and a meaningful track record. This book does not just feature my view of things, but it includes meaningful insights from some of my distinguished colleagues who have been working on the front lines of independent film and TV producing for several decades and via hundreds of produced projects.
That’s not all. The devil is in the detail of the agreements you enter. Understanding the right terms to apply to optimally structure your agreements, including option and writer’s agreements, director agreements, cast deals, finance agreements, profit participation, and inter-party agreements as well as distribution agreements and many more. The focus is on transparency and profitability. Comprehend the risks of being a producer and/or investor and how to limit your risk. As a content provider and producer, it is essential that you relate to the needs of an investor and limit the investor’s risk. Appreciate how you can go about putting your project in a way that is attractive to an investor and in a way it can be successfully distributed. As an investor, you learn how not to secure your investment and how to detect. Limit and ideally avoid downsides. As you go through the chapters, you notice that I share personal experiences of the challenges I myself have faced on my path as a financier and producer and financier.
Here are a few obvious mistakes that unfortunately happen every day in this business and can lead to loss of capital for an investor and loss of profit for a producer:
- The budget is too high
- The budget was too low, overages occurred and were not insured
- The production started and the producer ran out of money
- The production was stopped, and the project was abandoned
- The production started and the lead actor doesn’t show up, or is sick, or injured
- The director is driving the production over budget
- The director is changing the script because he/she has a “new vision” for the film
- The film is finished and has no distribution
- The film is finished and is unwatchable
- The project was produced, it has distribution, but no revenues are received
- The project was finished, it was distributed, but the distributor doesn’t pay
- The film started shooting when the producer decided to take the money and run (instead of finishing the film)
- The project was produced, delivered to the sales agent to sell, and he/she doesn’t perform
- The project was taken over by the bank for non-payment of the loan
- The project was taken over by the mezzanine lender for non-payment of the loan
- The project was produced, and the underlying rights are not cleared
- The project was produced, distributed and revenues are received, but no profits are being paid.
…. I could go on and add more. These are just some of the very real issues one can be faced with in this industry. The question is how to avoid them.
This book focuses on solutions and points out what to do about these and many other issues one faces in this industry.
The diverse financial models, terms, and conditions which I have used (and still use) throughout my career turned out to work well for me., and my investors. However, they may not always reflect what other producers and financiers would do, and they may vary depending on the project. There is no 100% set in stone rules in the entertainment industry. People go about things differently, and a lot of things are fluid and constantly changing. However, by the time you finish this book, you will be aware of all the key elements of financing a successful movie or television project and you will know how to position it to make a profit.
This book opens the door for you to walk into the Hollywood industry with open eyes.
Through the chapters of this book, you embark on a journey which helps you gain a true understanding of…
- how to create a globally viable project
- how story development impacts profits
- what green-light criteria are essential
- how films and TV projects are financed
- how to feasibly budget a project
- what the various financial models entail
- how to reduce/eliminate risks for producers and investors
- how the various models of financing can change the bottom line and what pitfalls to avoid
- what contractual terms and conditions are important to ensure proper protection, funding, and profits on any given project
- how to differentiate between a major studio and independent films
- how to deal with low budget projects versus higher budgeted films
- how to attract talent
- how to secure talent
- how to decide which talent optimizes a projects value and its profits
- how to secure distribution
- how the US and foreign markets work
- how and why the market dictates what projects are made and for how much
- when and how to approach investors
- how to secure investors
- how to prepare a business plan for your project that entices investors and distributors
- how to manage revenues
- how to make profits
- how to protect profits
The book provides you with a solid understanding of how financial deals are structured today.
My goal for you is to obtain a clear understanding of how movie and television project financing is secured, connecting the production budget to the financing to make a project feasible, avoid budget risks and understand the various types of domestic and international distribution arrangements.
Realize how profit participation structures work and learn about the important and practical aspects and procedures that underlie them; including terms and definitions that impact the bottom line.
Understand what kinds of projects are green-lit and why, how to budget your film or television project feasibly and produce it with quality, and how to establish a reasonable budget as it relates to earning profits.
You find out why and when a completion bond is needed and what a completion bond insures.
Learn how to structure a solid financial plan, that can lead you to profits, and understand what deal structures are required to allow a project to complete the funding process in a way that leads to profitability.
I make complex stuff digestible for you.