Small Indie: Who controls the money?

[Tom Lowe]

Everything I've shot so far has been my own money (and lots of it! :)), but I have a producer raising the $200k for my RED feature for next summer/fall -- the SAG ultra-low cap. He has a few wealthy clients who want to invest in a small film.

So, my question is, who actually controls the money? In theory a producer has some kind of control, but since I wrote and will be directing this, no one else can have control over the money, otherwise they'd essentially control my picture.

How does this normally work?

[donatello b]

what ever the contract states who owns what & who controls what will control the $$ ...
in general Producer controls the $$ ... many times a executive producer just raises the $$ ...

also in general writer has NO control over the $$ ... Director spends - spends and the Producer tries to keep it all within the budget ...

perhaps you want to Producer too ... bottom line is put it in writing who owns & controls what ... from my experience putting $$ into low budgets - i insist that there be a finish editing date .. if it is not finished by that date the investor can take control to finish the editing ... No completion date in contract = get $$ from somebody else ...
IMO when you take on INVESTORS it is now a business .... whatever position one has then do the JOB ... and YES there should be somebody keeping the Director within budget and schedule ... i've seen too many Directors that have total control on a project not keep to budget and schedule and the projects never get finished ..

[PaulClements]

On a smaller budget the director might well be the producer too or one of. That's half the problem for directors though isn't it; having control over the money.

If it's not your own you have to answer to someone else. If it is yours then you have the bigger burden of losing a tonne of cash if it goes pear-shaped. The guy raising the money is likely the one who will answer to the investors, therefore you answer to him, or at least between the both of you, you'll answer to them.

I'd say on a smaller budget movie such as the one you are talking about you'd probably discuss spending with the producer (The guy raising your money) at each stage. His job is to keep you in check the whole time!

On a big budget you'd have a whole accounts team working for and with the producer/s/Exec Producer/s. Requests would go in through them. Typical expenses approved on a daily basis and larger ones going to the top for a decision.

I'm no expert though. Hopefully someone who is can chime in and give a better take on it.

[Tom Lowe]

I don't mind having a producer make sure I stick to the budget (actually I need it!), but I don't want anyone to have the power to turn off the money flow halfway into the picture over some argument or something. In other words, if there are disagreements, god forbid, I cannot be in a position where one person holds all the purse strings, because at that point, it's that person's movie, and not mine -- they might as well be directing.

I guess the bottom line is, I need to be able to fire the producer, if it comes down to him or me. :)

I'm 100% not anticipating any battles, but i have been on enough indies to see DPs and directors actually duking it (actual fisticuffs), and producers trying to fire directors.

[Tom Lowe]

Yes, there will be an agreement regarding what happens with the investors' money. What I am interested in learning is what type of stipulations I can insist upon in the contract/agreement that will prevent any one person from cutting off my access to the money that is already in the bank.

I do have access to an entertainment lawyer, and I will probably will pay him for advice later this year, but I was looking for some free advice from people here who might have experience with this.

[Jim Exton]

I don't mind having a producer make sure I stick to the budget (actually I need it!), but I don't want anyone to have the power to turn off the money flow halfway into the picture over some argument or something.

The producer is not going to shut the money off. The investors are investing in a film, if there is no finished product you are opening yourself up to a lawsuit. You have to deliver a product to your investors.

[Tom Lowe]

Maybe, maybe not, Jim. I have seen tempers flare on many sets, and I don't want the fate of my picture controlled by any one person. The amount of money I am talking about is relatively small -- 200k. If a producer or anyone else has 100% control over the money, then he has 100% control over my picture, bottom line.

[donatello b]

if you want total control and you think 200k is relatively small then forget the money guy and get the $$ from friends, relatives, credit cards etc then you hire a production manager/producer that helps you bring it in on budget/schedule but cannot shut off the $$$ ....


the investors usually put up the $$ before the start of production ..
you could simply put in the investment portfolio thing that investors have NO say or control over the project ... they simple put up their $$ and they get back X $$ return if it makes any $$$ ... make sure you explain in writing what their RISK is going to be and then you mention what their REWARD will be IF the movie makes a profit ...

[Tom Lowe]

the thing is, i don't want the producer credit or responsibilities at all.

my friend who is rounding up the money has the whole prospectus put together. once the investors put their money in, they have no say in anything at all. it goes into a sort of escrow. that's not to say that i won't welcome their involvement, as long as it's informal.

but even though i know this guy and trust him, there is no way i'm going to turn over control of the picture (the money) to anyone else. what i'm going to have to do is make it so only i have ultimate control over the money, and i have the ability to fire anyone, including the guy who raises the money and is listed as the producer. otherwise, if he controls the money, he controls everything.

[donatello b]

ok the $$ is from investors .. was there a company set up for this one project ?

or do you have your own company and it is producing the movie ?
if your partner is the producer in the company ??

be very careful ... if your producer went to his friends - then they might have invested more because he is involved vs. your project .. they know and trust him ... you fire him you may have un happy investors which maybe in the end they have NO control over the project but they can perhaps stop production for a period of time ??

well, i saw 2 friends start a company ... raised 1/2 mil ... then one wanted to fire the other in middle of production ... we are talking law suits .. several months down time ... $$ frozen ... in the end cost alot of $$ to have that person leave ( quit) ...

[Tom Lowe]

see, that's exactly the type of thing i am hoping to avoid. i think right now the idea is to form an LLC just for the purposes of this one film.

yes, my friend who is raising the money is going to people he knows, and yes, in a sense, some of them will be investing because they trust him. and yes, he will be a real producer and have control of the money on a day-to-day basis, and actually i am hoping he will help me exercise financial restraint.

but.... what i am worried about is a nuclear meltdown, like what you are describing, in which case i would need to have the ability to fire him, flat out, and still retain the 200K in the bank so we can keep shooting.

keep in mind that my picture is going to be shooting on location for 30 days up in the sierra mountains, so that makes me extra paranoid about things going wrong with personalities and such.

does that make sense?

sure, i could raise the 200k myself and maintain 100% control for sure, but i hate fundraising and don't want any part of it.

[donatello b]

LLC are very good ... you can decide who becomes members ( but i'm pretty sure investors would want to be members) ... perhaps you don't want investers as members ? ... you can define what are the responsibilities of members and who has the final say .. you can state a persons percent of ownership in the LLC without regard to how much $$ they have put in.. IE: a person puts up 100k (1/2 budget) but may only have a ownership of 5% ... Nolo press has a good book on LLC and a book ( w forms on CD) on how to set it up ...

" i could raise the 200k myself and maintain 100% control for sure, but i hate fundraising and don't want any part of it."

well then you may have to live with a partner(s) that you can't fire in a moment ..you might have to call a meeting of the LLC members and take a vote on firings ? all depends what you put in the by laws of the LLC ...
IMO if you think/feel that you might have a problem with that person then think before you leap into a partnership ...

the friends i mentioned above had nothing on firing, nothing on who had control .. they both were directing ... one of the persons ( say bill ) is the one that had the $$ contacts ... the $$ persons/investors stated the $$ goes where ever bill goes .. the $$ persons/investors had placed specific dates that the production had to meet in order to get the next $$$ . if they didn't meet the date then they had to have a meeting to state why and at that time the $$ persons could pull out .. so in the end bill gave mr screwup ( ok, i took sides) a choice - either quit or they will quit and take the $$ with them and that in the end would mean the project too ... so mr. screwup went out the door with $$$ ...

IMO 200k is not easy to raise or for that matter 20k ... this is $$ that you pretty much can KISS goodbye ... there's a 90+ percent it will never make a dime of profit ... i have many friends that have projects in the can and need 5k-20k to finish and many are now 2-6 years later ...

[Jeff Kilgroe]

Tom,

You really should speak with a good attorney on this one. But I think you're on the right track with the dedicated LLC. The LLC and its officers and assigns need to be the ones controlling the money. The producer can most definitely be an employee (and not necessarily an officer) of the LLC. He becomes the front man, the investment broker or sales representative. Investors will rely on a certain level of trust with the producer as any high-profile sales or investment broker with other businesses. I think that some responsibility should fall on the producer as well -- he needs to sell investors on the production and those involved, not just their trust in him.

Set up the LLC and give him (producer) control over investments and finances, but if you're president or controlling officer of the LLC, you still have the ability to override him or fire him if the need arises. What happens to the invested funds will depend on agreements made with investors. You will probably need an investment agreement combined with a non-disclosure. Afterall, the investors will probably want a cop of the script and other information about what they're investing in and you probably don't want them spreading it around town to all their friends. At the very minimum, the LLC should be able to retain funds necessary to at least cover all accrued expenses to date and any costs associated with clean-up and shut-down of the company. At that point ownership of any material created probably reverts to investors and an arbitration may be needed to divide it up or work out some sort of settlement or recovery agreement. Ideally, the funds should be secured by the LLC for a certain period of time. And after production passes a certain percentage of completion, the LLC should have the right to retain all remaining funds to complete the project. Because once you hit the half-way point or so, your best bet at recovering any losses or even still making some money is to keep on trucking and finish a product. Like any other business investment, the investors should know that there is associated risk and a substantial portion of their investment could be lost if the production fails. All the more reason for the producer to sell the investors on the production itself and the people involved rather than using his friends' trust in him as a means to borrow cash. If that's the only marketing approach, you may as well just borrow from a bank with the knowledge right up front of how much it's going to cost and when it has to be repaid.

But I think the best advice I can offer is to have a well laid out plan for the production and make sure everyone is on the same page. Keep investors out of the production loop. The last thing you need is someone trying to influence the production directly just because they think their investment entitles them. Spell out the limitations of their investment in their agreement. They should be placing their money, trust and faith in the production.

[Tom Lowe]

Thanks for that info, Jeff. I know we are using a standard film business investment agreement, so I assume the stuff you talked about, with regard to hitting the halfway point and all that, is included in that agreement, but I'll be sure to double check. My brother will be the other producer on the film, and he's a business guy.

So it sounds like what I need to be concerned with is having control of the LLC, and then I can fire whomever I want and maintain control of the film if all hell breaks loose.... which I don't think it will! :)

[James T Mather]

nd then I can fire whomever I want

I don't think I'd like to be your producer - lets hope he doesn't read this - or he might opt to put his "money raising" into another project and another director - one who isn't preplanning on firing him.

[Tom Lowe]

heh. no, he doesn't read here.

[Jeff Kilgroe]

One other thing though.... Typically the producer is the one forming the production company and fronting the money, hiring the director, etc.. Perhaps your friend shouldn't be "producer". Maybe you're the producer / director and he's the director of finance and investor relations. Titles and implied purpose can change a lot of expectations you know... Or perhaps you hire him as an independent consultant who secures investments for a small fee. His main payoff comes when the project completes, so it's in his best interest to do everything to help your production succeed.

Anyway, I'm just speculating here... I don't know your whole situation and there's so many possible ways to structure such business deals. Hence the suggestion for seeing an attorney. A good sit-down with one could really help iron a lot of this out. You say this guy is a friend, but you're talking about being able to fire him. In my experience, business and friendship usually mix very well or not at all and it's the in-between relationships that can kill you. Do what you can to secure your friendship while protecting both your interests in a fair and legal manner.

[Tom Lowe]

One other thing though.... Typically the producer is the one forming the production company and fronting the money, hiring the director, etc.. Perhaps your friend shouldn't be "producer". Maybe you're the producer / director and he's the director of finance and investor relations. Titles and implied purpose can change a lot of expectations you know... Or perhaps you hire him as an independent consultant who secures investments for a small fee. His main payoff comes when the project completes, so it's in his best interest to do everything to help your production succeed.

Anyway, I'm just speculating here... I don't know your whole situation and there's so many possible ways to structure such business deals. Hence the suggestion for seeing an attorney. A good sit-down with one could really help iron a lot of this out. You say this guy is a friend, but you're talking about being able to fire him. In my experience, business and friendship usually mix very well or not at all and it's the in-between relationships that can kill you. Do what you can to secure your friendship while protecting both your interests in a fair and legal manner.

Yeah. Well he's really a friend of a friend, though we are planning to meet up this summer at Burning Man or Moab and do backpacking and stuff. So it's kind of an unknown at this point. It really doesn't matter to me, though, because no matter who the person is, I could not get myself into any situation where any one person had the power to pull the money from my project or cut off funds in any way, because I would essentially be at that person's mercy.

Maybe what I should do is make him exec producer, and share producing credits with a tough-as-nails line producer who really handles the day-to-day producer work?

My whole production is meant to be super simplified, with only three actors and a streamlined, mobile crew, all of whom are working professionals and longtime friends of mine. The only missing link for me is the money and a producer.

[Jonathan L. Bowen]

This has been a great thread, as far as reading what everyone wrote and the advice given. Some good advice here, I think, Tom, definitely stuff to consider.

I personally would not make this guy a producer if I were you, if it's your project, then he wasn't really a producer, he is more of a fundraiser for you, I think you're the producer and director, he's just an investment consultant of some sort. These guys are right to say that usually a producer's job, under a standard production company, would be to put an entire project together from the start. The producer is in fact (normally speaking) the only person who works on a project from start to finish. Even the director's involvement pales in comparison. The producer looks over scripts, chooses something he believes in, and looks for investors to produce it, either before or after having signed talent for the project. Obviously it could be the case he attaches some talent, then goes to investors to look for money based on who he has doing it, that probably happens most commonly I would imagine, then from there the investors are buying into this project based on the idea, the strength of the script, and the strength of the people involved. The director comes aboard sometime in pre-production, and finishes sometime in post-production, but there are five phases to film production, only three of them in which the creative professionals are generally involved (pre-production, production, and post-production), then two others (development before those three, then marketing and distribution after those three) the producer and his company / team manage. So it sounds to me like in this case you are basically involved from the start, it's your project, you have developed it, written it, and basically are producing it yourself because you've put together the talent. You are just looking for investment capital.

I'm going through a similar situation on a movie I want to make for even less, about $50,000, and although I know I could seek outside investment (lots of wealthy connections), I want complete control of my project in all phases up until distribution, and then I will decide whether to work with a third party (I would prefer this, obviously) or whether I'll have to go ahead and distribute it myself, too (much harder, more work, more profit per DVD sold maybe, but much less exposure and a tough uphill battle I'd say; a backup option). That being said, I don't intend to take producer credit on the project, I don't think, I will list myself as executive producer, maybe co-producer I suppose, but I'd like my friend and business parter David to produce the film if possible, which will not involve raising capital but it will involve setting up the entire production, an LLC for the production, a bank account from which we can make payments to cast and crew, and I'd expect him to find a distributor and do basically all of the business work. If he wants a 25% cut, anyway, otherwise I'll do it myself glady and take 100%. I consider it somewhat of a gift because I'm very confident in my project and wouldn't offer anyone else 25%, but I believe in his ability to give me opportunities to make cash at other points, too. That being said I can't have a producer who doesn't know what he's doing, so if he isn't really up to snuff about everything that being a producer entails it's not going to work.

From what I have read, which is a bit discouraging, about 90% of feature films that are made at any level never get distribution. I was kind of shocked by that. Obviously if something is made for $60 million by Paramount or something it's going to be distributed, but overall 90% of features don't see the light of day. Then you're stuck with an expensive paperweight basically, but the backup option is to distribute it yourself, something I think is possible if you spent a very small amount of money on it. Your break-even point is low.

Investors have to understand with something like this that they are taking a big risk and they will either lose everything they invested or perhaps make a large payoff if it works out. That's my attitude, but it's a heck of a lot easier to invest money in yourself and your own talents than someone else's talents, unless you really believe in them. I get calls very often from production companies asking for capital because I'm an accredited investor ($1M net worth or $200,000/yr income), but I always turn them down for now because I'd rather invest in something I'm doing myself since I'm in the same industry. The only way I'd "invest" in someone's project is if it were basically like, "Hey I want to shoot this movie, I got a friend who is going to DP it, I'm directing it, I wrote it, I'll give you 20% of the profits if we can use all of your equipment for the shoot without charge," and I read the script and thought it was a wonderful idea. Then I can see me doing that, but that's because I feel more actively involved than just giving money away to be spent.

Best of luck to you with this, Tom, I'm sure you'll figure out a way to make sure all goes smoothly. It may not sound nice, but I understand your desire to have the power to fire your producer. Not many directors have that ability, but if it's your project it's possible. George Lucas didn't produce any of the Star Wars prequels, but it was all his money, and lots of it, so he could have fired his producer (Rick McCallum) at any point. That's how I like to operate, too, not that I would ever want such a scenario to arise, but if I'm directing a movie I want complete control -- one reason I have virtually no interest in ever directing a mainstream movie with someone else's money for a major studio. It makes me sick what happens to many films when the suits get control. I was reading about Sliders (the TV show) the other day, and how Fox execs not only overran the story idea and forced the creator off the show in the third season, but from the very first season they were airing episodes completely out of order (ruining plot continuity and embarrassing the creator and the directors involved) on a regular basis, just to boost ratings during key periods. That's bogus to me. I have no interest in being treated that way. I'd rather just direct small movies that limited audiences see, so long as I make them my way. That's how I am.

[Curran Giddens]

daaaaaaamn, LB, you make $200k/yr! :greedy:

I actually set up my company (Solar System Studio) as a C corp. instead of an LLC. My company was issued 1500 shares of stock. Depending on how much money I need to raise for my first feature, say $200k is divided by 1000 shares ($200/share). The remaining 500 shares will be divided between my crew. When the completed project is sold to a distributer for a profit, then investors can sell their stock. If that $200k turns into $2M, well, you do the math. Investors can also hold onto their stock, which works out better for them if the next production is even more expensive. Investors can sell their stock at any point. There will also be monthly meetings (iChat?) where we update the shareholders on our progress and let them know what the current stock price is.

[Jonathan L. Bowen]

Wow, very interesting Curran, I like that idea.

For our production company, I'm pretty sure we'll make it a subchapter S corporation, not an LLC, but for any features we do I think they will be separate LLCs, for the primary reason that if I write and direct something it's my project, it won't be split the same way that profits from the production company are divided. If David writes and directs something and wants me on board to help revise the script, be a first A.D., etc., he can give me a percent that is more reflective of my effort rather than give me 50% under the arrangement of our larger production company. That's all in the future, though, I don't think we'll file corporation-forming papers for another two months, we'll see.

When we're ready, we'll move on everything fast. The Website will be up this week, anyway, and once we have our first few paid projects, hopefully by the end of August or start of September, it'll be time to file the papers, get an office in Hollywood, all of that good stuff.

[Sean]

I say, as artists, you gotta be bold and ask for whatever you think you need and want. And if you need to control the money, then it's worth going for that. But without a certain degree of tact and strategy, your project could "blow up" before you get your first dime. Because usually the guy who writes the cheque, controls it.

But I wonder whether being this concerned about a blow up suggests it's not the right marriage to begin with. The threat is ALWAYS there, even for very big name directors. A studio can pull the plug and replace them so long as the studio is footing the bill. But experienced producers and filmmakers know that there's more to be gained by working out a difference than replacing a director or having the project fall apart. So, if you can get away with it, try and control the money. But you might find it's more appropriate to have final approval of certain creative concerns, and that can be cemented in writing, so that if there's a dispute, you have the final say over casting or whatever. The money (or some representative thereof) will usually want to be consulted on such matters, but it's not unheard of for a director to have final say in certain things like script or casting or final cut. Do you really care who controls the money as long as you have control over the key creative concerns? An agreement would have to be in place to ensure no one could arbitrarily withdraw the money once production has commenced. Otherwise, you just want to make your movie your way, right?

Finally, unless you're an experienced line producer too, wouldn't you want someone who had a track record of managing expenses and sticking to a pre-approved budget? The investors might feel there was tremendous peace of mind in that too. So if the budget, and all the line item expenditures in that budget, are pre-approved by you and the investors, and an experienced professional guy is going to administer the paying of those line items, then at least you know what you're getting into before production begins.

[Jeremy Torrie]

I have always taken at the very least an exec producer credit...what I've learned is to hand off the producing responsibilities as it allows me to be more focused on what I do best -which is to tell the story.

That said, when it comes to budget -considering I have produced in the past, I know what things cost, and I take other people's money seriously...what this means is that I find I am more diligent with my planning because I want the project and all it's partners to have every chance for success, and that if things go sideways, it's my fault because I didn't plan well enough.

What is the level of friendship here? Are you prepared to sacrifice that friendship if it comes down to it? Unless it's an Entourage story line in Columbia, I would expect that if the PM (or UPM in the US) accepts and endorses the budget, it's their job to keep things on track in conjunction with the 1st AD, and a diligent accountant also helps generating the DPR's. As director you come in knowing your budget limitations and how many hours you're allowed to shoot each day. So if you aren't prepared then really it really becomes your problem.

Creative control is more important to me. Fundamentally the investors are supposed to be buying into me/you as the filmmaker. If they didn't have to confidence, then they shouldn't invest, so there's a tacit trust. You need to know what you want given the budget limitations -how much coverage is acceptable, how many setups, whatever...a DP who can move quickly and efficiently is key. I always ensure the gaffer has as much support as possible because moving lights ALWAYS sucks time, and laying dolly track, so more man power in these depts is worth the expenditure.

Also, based on private offerings, I have seen and used the proviso that overtly states the riskiness of this business and that the investors should be aware they can lose their entire investment. It's a little different here in Canada of course as far as corporate law, but much is the same in the end -it's mainly the ability or percentage of the tax write off an individual is entitled to in our respective nations.

[David Mullen ASC]

It's not unusual in the indie world for a first-time producer to look for the money -- otherwise, what's their motivation? Finding money is perhaps the hardest thing about movie production; without money, you rarely can make the movie.

Unless you are using your own money, to some degree, you have to play ball with other people to get the money. It all depends on how much you want to make the movie -- there are rarely perfect situations where you are given a lot of money and complete freedom to spend it as you wish. With some funding situations, you may have to walk away because you don't get enough control to make the movie properly, but if you take a stance of absolute control or nothing, odds are higher that you'll get nothing, especially if you have no track record.

The questions always come down to whose money is it and who owns the creative idea, the property. If the producer is providing neither, just facilitates getting the money, that's certainly one aspect of producing (no money, no movie) but they are not in a position to take over since they don't own the property. They could screw-up the money situation, but that's the risk you took when you found someone else to get the money for you.

If I were a producer finding hundreds of thousands of dollars for you, I'd be looking for ways of protecting my credit on the film and making sure my areas of control are contractually expressed. Otherwise, I'd have no motivation of doing all that work. Quid pro quo. You have to put yourself in the minds of these producers and investors -- they aren't altruists.

Get a lawyer and come up with a contract that you all can live with.

Check out the main credits of "Twin Falls Idaho" if you want to see how complicated it gets trying to fund an indie movie. You have something like six producers and four production companies mentioned.

[Jonathan L. Bowen]

That's true, and good advice. That's one reason I want to start with something small that I can afford, where I have use of a great location for free, my own equipment, etc. That way let's say I am able to make it for $50,000 as planned, if I make $500,000 off distribution even, maybe it's not huge money, but it would not only give me some extra capital to invest if I wanted in my next film, but it'd give me the start of a good track record to show I can make a profitable movie. That way if I asked for money in the future, and I have a few good ideas who I'd ask (lol), I would have shown at least I have a concept of how to make the money back and make a profit. But I want full control on the first film, and the best way to do that is to fund it myself. Otherwise, all bets are off.

[Tom Lowe]

Yeah, the guy is a friend of a friend. He's a very successful young financial adviser, but he's already bored with that and is interested in film and wants to use this a chance to do something. He has no experience in film at all, but he does have access to money people and he's very smart. He's putting together our business plan, and it's just superb work. The guy really has his act together, and I think the whole thing is going to be awesome, but then again, I have seen so much turmoil and drama go down on indie sets that I want to be cautious and cover my ass. God knows what might happen out on location.

So it's kind of a tough situation for me, because I want to keep him happy and involve him, but I'd rather not make this picture than have anyone hold ultimate control over the project but me. We're only talking 200K here, so worst case scenario I could just finance it myself.

My other quandary is that with no experience, even if I make him a producer, I'm going to need a strong line producer and AD.

My biggest challenge is to keep from trying to do everything myself. I have a lot energy, but if I am concerned with securing locations and making sure the check clears at Fischer and pulling my hair out because the makeup girl's car broke down, etc, I won't be able to direct.

[David Mullen ASC]

As you say, hire a good line producer and good AD and a lot of your distractions will diminish, though not go away unfortunately. On my first feature, I asked my director why he looked so tired and he said that the actors were calling him at 3AM in the morning to discuss their personal problems, or complain that they were out of contact lens cleaning solution.

I think that was the moment when I started realizing that sticking to DP'ing was a good thing -- I get most of the fun of moviemaking and few of the politics, and I don't have to deal with money.

[Tom Lowe]

Haha, yeah. My DP on my last shoot had a blast. He was smooth sailing, and enjoying all the great aspects of shooting, while I was busy doing really important stuff, like trying to keep the leading lady and makeup girl from gouging each others eyes out.. heh.

[John Moores]

Hi Tom,
If you want to be able to fire people, you need to be a producer. Anyway, if it's your film, your idea, story etc, why wouldn't you be producing it as well?

A director doesn't fire a producer. A producer hires a director. You need to produce *and* direct this film.

You also need to specify in your contracts, that you have final creative control of all aspects of the film. SO, if you want the main character's house to be green, but your "producer" friend wants it to be blue, you can say, no, it's going to be green, and he can't then shut off the money until you decide it would, in fact, be better blue. If you want 50k for a new car, then your producer can shut you down. As so he should.

Just make it clear and be upfront; you control all aspects of the creative, he controls the investor's money.
I have to say from personal experience; partnerships get ugly. The money people won't trust you, they'll scrutinize every last spend, look over your shoulder the whole time, and generally stress you out. And then it gets worse.

If you can at all avoid it, don't take other people's money to make a project you feel strongly about. If you're like, "Yeah ok, this would be a fun film to make, whatever..." Then it might not be a big deal. But if you're heavily invested in the film, I mean if it's your baby and you don't want someone messing with your baby, don't take on a partner.

So, how about this; save this film of yours. Make another film with the investor's money. Make it good, make it solid by all means, but don't heavily invest yourself in it personally. I know that's easier said than said than done, because why work so hard on anything if you aren't 100% behind it? I don't know. If it's a case of getting the first project under your belt, you *are* going to have to suck it up, and have people watching you and telling you what to do. You might still even make the film you always wanted to at the end of it, but it'll be so much harder with other people's money.

Sorry for such a long post. Last thing;
First project I produced we managed to raise all the money ourselves. Half a million for a one hour drama-doc. I was in complete control, had no one to answer to, no second guessing. Was the best experience I've ever had making a film.
Project number 2 comes around, 2 million, 4 hour doc series. We had to partner with "the money people" to complete financing. Absolute nightmare, despite our contracts. Managed to finish the project the way I wanted, and was a success in the end, but the process almost killed me, and made me realize I'd never partner with the money people again.

You're probably more confused than ever now. Hope some of that makes sense.
Jm

[Tom Lowe]

Thanks, JM. The more advice the better.

[Adrian T.]

Let's see what Orson Welles has to say about the topic of money and moviemaking:
http://www.youtube.com/watch?v=fdG8fd2vNjI

[Dan Blanchett]

Hey Tom, I know where you're coming from. In this situation, it's hard to have your cake and eat it, too. You want absolute power and you want other people's money (and associated risk) to bestow that power. What a great deal for you! Hopefully you can contractually arrange an approximation of that so that in the end you get to make the movie your way.

I may soon be in a similar boat. I'm all set to self-finance a feature in early 2008, but may not have adequate funds for sound design and VFX in post. So I may need to get investors to buy into my LLC (set up for this one project). But they will be silent partners and I will be the president/managing partner. My own production company will be lending me out as writer/director/producer and I plan to hire a co-producer, LP and AD to do much of the heavy lifting during production. Of course, if I grossly mismanage the production, there could be consequences. There is often both an implied and explicit fiduciary duty that comes into play, as it should be.

As others have suggested, having a good lawyer who specializes in this kind of thing will be the wisest investment you can make.

[Tom Lowe]

Thanks for the advice, guys. Keep it coming.

I will probably put like 50k of my own money into it, as well. Perhaps that will give the investors a little more confidence. *shrugs*

[Dan Blanchett]

Thanks for the advice, guys. Keep it coming.

I will probably put like 50k of my own money into it, as well. Perhaps that will give the investors a little more confidence. *shrugs*


If you are also investing your time (unpaid) and equipment, I'd be sure to take that into account in determining your own vested interest in this enterprise. Cash is not the only way to invest. You may find that your share is equal to or greater than the other partners.

[Gunleik Groven]

Agree with thinkbug, BUT make those terms clear in advance.

These are conflict handling tools. When you are in a conflict and have not made those terms clear, you most probably will not be able to play those cards, whatever you've invested (time/equipment/cash)

A good approach (to get other peoples money) might be that you make clear what your price pr hour/day/week/whatever is and your rental price, and offer that you value those investments @ say 75%-33% against hard cash.

That way you can get controll from your time/equipment investments, goodwill because this is after all your project and your invested $$ (as in hard cash) will have the same value as theirs. Fair deal.

It's crucial to establish a mutual dependancy. If it's not there when you go in, it sure as hell won't be there in a conflict situation.

What you do not want, is to end up in a situation where you and your partners count "favours, loyality and thankfullness for what has been done". Those are important values, but immesurable in a conflict. Get it down as numbers before you start.

And contact that lawyer... in advance ... -;)

Just my 2c

Gunleik

[Tom Lowe]

It does seem for sure that I should contact that entertainment lawyer before we set the terms of our LLC and investment agreement. He comes highly recommended to me through my book and screenplay agent, a guy I have been with for over ten years, and would trust with my life. How much should I plan on spending to have the entertainment lawyer help me out in determining the best strategy for me?

Will a grand do it? $1500? Or will it cost me more?

[Michael Schrengohst]

Will a grand do it? $1500? Or will it cost me more?

Ha Ha Ha, much more my friend - much more!
I talked to my lawyer for one hour and he wrote
a one lousy paragraph letter and charged me $500.
Most E lawyers work on retainer and you cannot
get in the door for less than 5 large.
On a 200K budget you are talking $10,000??
Plus you will need an E lawyer when you start
working out distribution deals.

[Tom Lowe]

haha, well the fees for the entertainment lawyer are going to come out of my own bank account, before I agree on what the contracts and agreements and the LLC should look like, so if I can get some good advice for around $1,000 or $1,500, that would be ideal!

[OwenR]

If Im the producer raising the budget then i want to control it...

[Tom Lowe]

If Im the producer raising the budget then i want to control it...

http://img222.imageshack.us/img222/9186/trumpdj3.gif

:)

[David Mullen ASC]

so if I can get some good advice for around $1,000 or $1,500, that would be ideal!

Maybe we should convince Jim to build us an affordable RED lawyer... :wink:

[Tom Lowe]

Maybe we should convince Jim to build us an affordable RED lawyer... :wink:

Yeah, plus RED FINANCING.... :)

[Michael Schrengohst]

I am sure Jim has a whole fleet of lawyers on staff.

[Dan Blanchett]

While I agree that legal advice and services can be very expensive, there is usually no cost for an initial consultation where the fees and scope of services are negotiated. And you may even get some good free advice in the process.

However, if a lawyer wants to charge you just to chat about what you need, then you may want to look elsewhere. I'm sure there are some decent entertainment lawyers in the LA area who are not yet fully established, maybe working in a firm where they can draw on the resources of more senior partners, and willing to give you a break. It won't cost you anything to inquire.

[Dan Blanchett]

Also, I picked up this book at NAB and found it to be a decent primer. It may help you focus your questions when you do finally consult a lawyer.

The Pocket Lawyer for Filmmakers (http://www.amazon.com/Pocket-Lawyer-Filmmakers-Independent-Producers/dp/0240808428)

[Tom Lowe]

Like I said, I'm very confident that my agent is recommending a great entertainment lawyer. It's someone he has been working with for over 20 years. I trust my agent Mike with my life.

But if any of you guys know someone, that might also be helpful.

I can afford like $1,000 for advice.

[Dan Blanchett]

Like I said, I'm very confident that my agent is recommending a great entertainment lawyer.

That's awesome... assuming you can afford him. :wink:

[Jonathan L. Bowen]

A director can fire a producer, that's not correct to say it never happens. Yes, it's much rarer for the director to be above the producer, but that's not to say it doesn't happen. Just look at the credits of the Star Wars prequels -- Rick McCallum is the sole producer, Lucas is the director, but do you think McCallum could fire Lucas? That might not go over so well considering that Lucas funded the films entirely out of pocket and owned the companies doing post work on the films, too. If Lucas had wanted to fire McCallum, he could have done so at a moment's notice.

It just depends on the setup of the production. A producer has certain duties and jobs. I may very well want to write and direct a movie, but not want to produce it, even though I'm funding it. There's no reason that can't be done. If Lucas can do it for $100M per movie, I can certainly do it for a small budget film.

[Jeremy Torrie]

Hey Tom:

Was away working all last night so I'm getting caught up on this.

For what it's worth, I've been through the same scenario you are describing about your friend/financial advisor who is bored and wants to get into film...I've actually been through it 3 times, and I may have finally achieved lift off with one guy, but I won't know for sure until I see the proof of funds in an account I can verify.

It isn't easy. Many of these types are motivated by money and chase the bigger deal, the more lucrative one, but there are better (and more reliable) ways to make real money. Sure the film business is real sexy for outsiders looking in, but when it comes to producing and financing, it's anything but. If this is something he's doing on the side, you may be disappointed -get him to commit real time and work to timelines...otherwise he'll chase something else that will make him the money he needs to pay whatever bills he has.

[Tom Lowe]

Thanks, Torrie. Actually the ball is in my court now, because I will be writing the script in August and Sept, then the ball will be in his court in Sept/Oct/Nov to raise the loot.

[Dan Blanchett]

I will be writing the script in August and Sept

Wow, I've been working on my script since last summer :ohmy: and I'll be damn lucky to have it done by August. I envy the guys who can bust these out in a weekend or couple months even... (that takes the kind of focus I guess I'll never have)

[mdo]

Typically, a completion bond is required by whoever is putting up the money. The bonding company then has the contractual right to come in and take over the film if it starts to go off the rails. The aesthetic suffers, but a completed film with problems is better than an incomplete film that is out of funds. Arguments about creative input exist at one level, and you'll probably be able to get what you want there. But I would think money people can be expected to insist on the final say when it comes to the make/break of completing the film. I'm told there are some production managers that are bondable because they are tough as nails and can bring a film in under budget no matter what. If you can find one of them and make him part of your team, you should be in a position to retain full control of the project through all scenarios.

[Tom Lowe]

Wow, I've been working on my script since last summer :ohmy: and I'll be damn lucky to have it done by August. I envy the guys who can bust these out in a weekend or couple months even... (that takes the kind of focus I guess I'll never have)

A script usually takes me a month or so. But I have had this script idea batting around in my head for about a year now, so much of it is already written in my mind.

Stallone famously wrote the Rocky screenplay in 3 days.

[Jonathan L. Bowen]

Wow, I've been working on my script since last summer :ohmy: and I'll be damn lucky to have it done by August. I envy the guys who can bust these out in a weekend or couple months even... (that takes the kind of focus I guess I'll never have)

Yeah I'm planning on mine taking much longer as well. I have been thinking over my idea and working out issues in my head for the past year or so, roughly, but I still expect that I'll require six months to write it, off and on, not like 8 hours a day by any means, but writing naturally as I like to put it. I really can't sit and write screenplays very well when I'm just trying to push it out. That works just fine for non-fiction usually because the structure and material is already there, it's really dictated by what research materials I have, etc. So I can do that. But with fiction I need a long time to mull over every important facet of the script.

I just finished the final proof corrections on my second book, which I started researching last June, then started writing early July, continued through half of January with only about a two week break in October, then I was working on editing throughout much of February and March (after working with an editor who read it over several times, besides I was already doing another draft while the editor was reading it the first time). Then the book's cover was designed, marketing text written (by me) and revised (by a marketing professional), then the final proofs were sent to me, I had to fix the index (they screwed it up pretty badly), then make some last-minute corrections, and finally today I got the word that everything looks good to go and the book will be in production shortly. Should be published by late July. More than a year-long process! I can hardly imagine doing a feature film start to finish, script, casting, pre-production, filming, editing, promoting, etc. That I am sure will be an even longer process!

[Dan Blanchett]

Congrats on the book, Jonathan. Can you divulge anything about it?

I also write short stories and those can take anywhere from a week to a month for a first draft. But this screenplay is kicking my ass...

And yeah, it can be daunting to think about the whole scope of making a film, start to finish. You have guys like Woody Allen who seem to make one a year, and other people who take up to 10 years. The energy it takes alone is mind-boggling. I need a B-12 shot just thinking about it.

[Tom Lowe]

I wrote my first novel in 30 days (289 pages, but it's only so-so), and my second novel took about 3 months, on and off.

My best script, which was optioned by AMG back in their heyday, was written in about 10 days.

[Dan Blanchett]

My best script, which was optioned by AMG back in their heyday, was written in about 10 days.

We are at opposite ends of the continuum. I'd rather be at your end. :biggrin:

[Jonathan L. Bowen]

haha, yeah no kidding, the kind of non-fiction I write is really not possible to do very quickly. It's just so research-intensive, such a pain in the butt, that there are days where you work for 6-8 hours and only end up writing about 800 words, or a few pages. Other days you might put in 4 hours of work and have 3,000 words, it just depends. The editing seems never-ending, though. I'm a perfectionist when it comes to my work, and the thought of having a book out with my name on the cover that has embarrassing mistakes is a nightmare, so I usually end up reading what I have written excessively. I still found errors in the final proof, which was surprising, but they were mostly minor and I think there could not be many left if any. I won't say I definitely found them all, but I'm guessing I came close. Sometimes you have to let it go, though, you can't just keep doing that for the next five years. I messed up a few peoples' names, like I had "Steve" instead of "Steven" once, and had called this guy both Steven (whatever) and Steve (whatever), so I had to fix that. Not a huge deal, but shouldn't be like that. The worst one was Leslie Stahl instead of Lesley Stahl, I had both, that was a potentially embarrassing mistake for sure. Other changes were mostly word choice, just found a better way to put something I didn't like when I read it over again.

thinkbug, the book is a sequel to my first book Anticipation (AnticipationBook.com), which was about the excitement, anticipation, business, and technology aspects of the first Star Wars prequel. This book is a follow-up focusing mainly on Revenge of the Sith, and it is called Revenge. Both books have subtitles, "The Real Life Story of..." (movie). I try to explain to people that the books are not primarily about the movies themselves, as in the content, but about the massive popular culture impact, the business, the marketing, the fan devotion, all of those angles. The first book was shorter, though, 90,000 words (250 pages), the second book is 150,000 words and 386 pages. I expect that page count to change by a few after I fixed the index. This last book does mention the second prequel, too, but I didn't feel that it needed its own book, so it got its own chapter instead. Both films, the first and last prequels, no matter what one thought of them artistically, advanced cinema technology or business and marketing practices in the industry in really interesting ways, so for me it was fun to research and write the books. They are of course primarily for big Star Wars fans, but I wrote them as film history books of general interest to people who love movies or are interested in popular culture. Nothing in the books assumes knowing nerdy Star Wars references, for instance, it's all plainly put so that my dad could understand it! haha.

[Dan Blanchett]

Thanks for the description. Sounds like a fun project! I was a kid in the 70s and thus a huge SW fan-- but less so of the prequels. But I agree they did have a major impact on technology and pop culture.

[donatello b]

"Typically, a completion bond is required by whoever is putting up the money. The bonding company then has the contractual right to come in and take over the film if it starts to go off the rails"

i don't think they do 200k budgets ?..

many studio's and investment company's do require a bond .. the production pays for a completion bond .. also many will require ( or the production company may decide on it's own ) that you have insurance on your lead actors/actress and some key personal ....
there are many persons that fine tune their skills Directing , DP'ing, PM etc by being on the completion bonds crew list as persons to call when a project gets into trouble ... many do not work under their own names ( many contracts will say Joe Smuck gets Directing credit even though he was tossed out somewhere in the project ) ...

[Tom Lowe]

yeah i don't think there are any completion bonds in our 200k prospectus.

[Keith Nealy]

That's not a bad idea curran bu shouldn't yu have made the actual production a "C corp" instead of your studio?

That way the investors only have a piece of the film and not your studio assets, etc.

just a thought.

Keith

[Mark L. Pederson]

yeah i don't think there are any completion bonds in our 200k prospectus.

you would not use a completion bond on a $200K budget.

The lowest film I ever saw bonded was $500K and I think that's kind of insane. I have made films up to $2.5M without completion bonds.

If it's under $4M and you know what you are doing, and have the right team, and the financiers do not require it - don't do it. It is expensive, and they approve all key crew, schedule, budget, etc.

But anything under $1M in my opinion shouldn't be bonded unless you have no choice - and for a $200,000 budget, it's not possible anyway.

[Keith Nealy]

Tom there are many ways to work this. You may want to go on record as being producer but then hire a line producer to do all the work. Or you take on the role as Exec Producer responsible for all the money. You set up a corporation with investors and stipulate that you have complete creative control.

This usually a stcky point based on how much clout you have and how savvy your investors are.

Steven Speilberg has a lot of clout and can demand almost anythng he wants. You and me... less so.

You can make your investors Executive producers in title only with no voting rights on creative decisions. This is a vanity title and can be very effective at attracting investors. After all, everybody wants to be in movies. So give them a credit - just not control.

On Broadway they are called "Angels."

Contracts get interesting and creative when it comes to profit sharing. You may opt to take a larger share but take it off the back end if it is successful - deferring your payment to allow more money for production. For taking that risk, you demand a bigger share.

Many name actors work that way in indie films knowing they can't command a big salary up front but that their name alone may be the thing that makes the movie a success - therefore they take the money off the back end at a bigger share.

What ever you do, don't sign any contracts with any investors or production group that says you are "work for hire." If you sign that, you sign away all rights to everything. You're just a hired gun.

You may have to accept more responsibility than you want just to get what you need. Remember, you can - and probably should - hire experienced line producers to control everything and help you get things done in a timely and business like fashion, leaving you time to make all the creative decisions.

Producers get involved in creative decisions when it involves money.
You: "Can we afford that effects shot?"
Producer: "Hell NO."
You: "Ok I'll rewite the scene so we only blow up one car and we just IMAGINE that the Golden Gate Bridge collapses. We can do that with sound efx and cutaways of people's faces. See, i just saved us 100 Million. Now can I have that 10K for that crane?"
Your producer smiles.

Hitchcock would be very proud of you.

It's all about negotiations.

Good luck, Tom

Aloha,

Keith

[Jonathan L. Bowen]

haha, nice Keith, very good advice.

Heck we had a car crash scene in a no-budget short and we recorded a car swerving (from the back of another car), veering off, then fade to black and some great sound effects for car crashes we mixed together (from an SFX library I have) and it sold it well, I think. Yeah of course it'd be cool to have the actual crash, but plot-wise it wasn't necessary at all. It was an afterthought, really, just to tell audiences how this guy died. Sometimes you have to be more creative without a big budget.

[mdo]

i don't think they do 200k budgets ?..

It would not make sense to pay $100K for a completion bond on a 200K budget. I should have been clearer about the point, which is that one of the factors that makes investors reluctant to give up control is concern about whether or not the film will be completed. This concern is typically addressed with a completion bond. Since your investors can't indemnify against that concern through a completion bond, you can make them more comfortable about giving you full control by bringing someone on board who can virtually guarantee completion. Just a thought.

[Tom Lowe]

Yeah, I won't be taking any money at all for myself in terms of pay. In fact I plan to be one of the investors. I will be providing the script, a professional crew willing to work cheap and travel, location scouting, direction, and editing.

I think its a good idea to list myself as a producer, then hire a badass line producer and AD. Letting top investors have Exec Producer credit is a good idea, as well.

I plan to be very generous with sharing the revenue, particularly with investors, because money is not what motivates me in this case. Making a beautiful motion picture and finishing it is what drives me. I plan to give out lots of points to cast and crew as well. Why not? I mean, without them, and without the investors, I don't even have a picture.

[Curran Giddens]

That's not a bad idea curran bu shouldn't yu have made the actual production a "C corp" instead of your studio?

That way the investors only have a piece of the film and not your studio assets, etc.

just a thought.

Keith

I have thought about that Keith. I decided to purchase all of the equipment, accelerate depreciation for tax write-offs, and then transfer all the assets out of the company to myself, before I let anyone become a shareholder....

[donatello b]

yes INVESTORS want a finished project .. a unfinished project is unfair to cast , crew, investors, everybody involved ...

after throwing $$ into several projects and none completed that is when i started demanding a completion date be put into contracts - not finished by X date - investors can step in to finish or agree to a new completion date ...

points or deferred pay ... here's the way i look at it ... there's a 95+ chance the project will never make a dime ... so if i'm going to get nothing - GIVE me alot of nothing !!

are you going to carry liabilty insurance ? or workmans comp ?

IMO if crew works for free then you must protect your crew and investors from liabilty and protect the crew/cast if any get hurt .. they're working for free so if they break a leg who pays for it ? ...

Calif. is very strick on employee - employer relationships ..you cannot have persons sign a contract that take away their rights under CA state labor laws ( you can have them sign anything but it will not be a legal contract)... speak to a attorney ... from what i recall from a project back in 2000 you can have persons work for free ( internships , volunteers ) and you must carry workmans comp on them ..
then there's the whole other area of when those working own shares etc ( very complicated) ...

[Michael Schrengohst]

I have thought about that Keith. I decided to purchase all of the equipment, accelerate depreciation for tax write-offs, and then transfer all the assets out of the company to myself, before I let anyone become a shareholder....

Check with your accountant on that one. I wanted to do the same
thing but my accountant said can't do it.

[donatello b]

"I decided to purchase all of the equipment, accelerate depreciation for tax write-offs, and then transfer all the assets out of the company to myself"

it may not be that easy ...
you take the write off that equipment is now a asset of the company ...
if you transfer it out of the company then it is suppose to be at current value.. you'll have to list the transfer/sale on tax returns ...

i just looked into this .. i wanted to take the full write off in the 1st year ... i do business as Donatello DP therefore according to my taxman i qualify for the fast write off ... i own the RED .. i now rent/loan it out to any company formed to do a project .... the other way form a LLC .. LLC buys RED .. LLC transfer/sells to you as individual becomes complicated ... see you taxman for specific advice on your tax situation ...
based on my tax situation -accountant advise = write off RED over 5 years ...

[Curran Giddens]

Thanks for the heads up guys. I guess instead of purchasing the equipment under my company name, I should set up an LLC to purchase the equipment. This way I can rent/loan the equipment from the LLC to my company....

I guess I can't use my corp. to accelerate depreciation on the equipment, and then sell it to myself for $1, and then rent/loan it back to my corp. heh heh :whistling:

[Rodney Recor]

Hi, boys and girls.

As a producer for over 35 years, this one is an easy one for me. The "producer" (or one of "the producers") usually "controls" the money. The only "control" that I am aware of is the authority to write checks to pay the bills. The producer usually actually signs them himself or just hands the bills to another person who does it. If you are the producer, then you are normally in control of the money. When the checking account reaches "zero", so does your picture. If somebody besides yourself is going to be writing the checks, you must certainly have every detail of your financial responsibilty, and the check writers' responsibility in writing.

If the money is not in a checking account and ready to to spent in this fashion, it means simply that your picture is not really "in production" at all but "awaiting further financing".

[Jonathan L. Bowen]

Although we plan to form our corporation soon, and already use a company name, David and I are buying all of our equipment personally because we don't want the company to have any assets right now. It makes more sense for us to have them ourselves.