Background

As I spend many hours scouring the internet (I may have a problem…), I see many different services offering advice or services on how to budget a film. So how do you tell who knows their stuff? Believe it or not, you can’t believe everything you read on the internet – I know; it was a harsh realization for me too.

Criteria

1. Professionalism
At a minimum, you should hire a someone who actually works in the industry and has been on set. I”m sure your finance major buddy is great at bean counting, but no amount of academic study makes up for someone who has the real world experience of budgeting and scheduling a real film.

2. Cost
If it looks too good to be true, it probably is. If someone says they can provide a line item detailed budget and schedule for $400, be extremely wary. They are most likely using some sort of template and will not devote the proper time and effort into understanding your film and budgeting properly. It can easily take 40 hours to put together a project specific budget and schedule for even the most experienced professionals. At this rate, those “professionals” would be working for $10/hour. …I can get a better wage working at Starbucks.

3. Deliverables

• Budget Top Sheet: Your budget top sheet is the first thing your potential investors will look at. If they see an improperly budgeted film at the highest level, they will dismiss your film immediately.
• Detailed Budget: The detailed budget must go down to the gritty detail level (duh). This means scheduling each actor, crew and piece of equipment down to the day and even to the hour.
• Detailed Shooting Schedule: Anyone can split up the number of scenes and put them into a schedule. The hard part is doing in such a way that is sensitive to the actor’s process, does not violate Union turn-around requirements, and does not send your or your crew into exhaustion.
• Cash Flow: This is an often overlooked piece of the financing puzzle, but an extremely important one. This schedule will tell you when you need your cash in order to pay your crew, reserve your locations and rent your equipment. Financiers will often parse out their investment so you don”t blow it all in the first couple weeks. This cash flow will be an important document for them to understand when you need the money and why.

4. Trust
Believe it or not, this is still a people industry – and a very small one at that. You have to trust that whomever is putting together your budget, schedule and cash flow is doing so in an honest effort to get your film financed. Even the best indie films can take YEARS to find a financier, but it all starts with the initial financing package. Make sure it is a good one and you will be on the fast track.

5. Timing
As professionally prepared budgets, schedules and cash flow documents are expensive to have done, it is important to only make this step when your script is at a very late stage. It will almost certainly change by the time you shoot the script, but it should not change that materially. i.e. If your budgeted/scheduled script takes place in Nebraska, you shouldn”t later change the location to Paris. That would completely trash your original budget/schedule estimates.

6. Revisions
A good line producer will give you one or two revisions once they have delivered the initial budget. Perhaps you have a bigger star in mind and need to adjust the talent allotment or you want to shoot on James Cameron’s Stereoscopic cameras and have to change the Camera Equipment allotment. These types of revisions should be handled by the original line producer as part of their package.

7. Payment
Never pay everything up front. Who is to say they won’t take your money and run?? Pay an agreed upon amount up front – never higher than 50%. A common payment schedule would be 50% up front and 50% upon delivery. Another schedule may be 30% up front, 30% upon initial delivery, 40% upon final delivery. Just make sure that full payment is somehow tied to the actual completion and delivery of the products desired.

Easy-peesy-lemon-squeezy
Seems like a lot to look for, eh? But think about it – this is your baby – your passion. Demand professionalism and be professional. You may be one of the lucky few that makes a great film and makes a great career.

So it doesn”t take a genius to state the obvious:

The future of film and television distribution is over the internet.

How can I be so sure? Several very good hints:

1. Hulu.com
I don”t think there is anyone computer-literate that hasn”t heard of Hulu.com. Hulu currently streams films and television content over the internet on a completely ad based system. Kinda like broadcast tv… but there is more. Hulu is currently investigating a paid-subscription service much like what cable tv was to broadcast tv.

2. Netflix.com
The pioneer DVD delivery service, Netflix.com, has substantially increased its available streaming film holdings and is aggressively adding more every week. They are partnering with services like Roku, Xbox, PS3 and various Blu-ray Player manufacturers for seamless delivery straight onto your HDTV.

3. EpixHD.com
EpixHD.com is a newcomer to the digital distribution network, but has some great promise. They offer higher quality streaming films than the other platforms currently available. They operate solely on a subscription basis and are priced slightly higher to accommodate the higher quality of video.

4. Apple”s iTunes
Apple is looking to make a major push into the digital distribution game with a paid subscription service through their iTunes platform. They are currently (news broke this morning) in talks with Disney and CBS (Check out the WSJ article.). Apple”s market share combined with it’s advanced distribution network have it perfectly poised to make a run on cable tv networks today. Keep a close eye on this one. It”s exciting.

5. Network Enabled HDTVs
There are already some network enabled HDTVs on the market today. The problem is that no standard exists. The must depend upon a third part software (like Windows Media Player, Quicktime, Flash, etc.) to display the content. As this software is licensed on external boxes (like, Roku, Xbox, PS3 and some Blu-ray players), they are currently the interface for streaming online content to your HDTV. However, as things progress. Don”t be surprised to see fully network interfaced HDTVs in 2010 and beyond.

So what does this mean for Indie Film?
This is GREAT news for Indie Film! This means that we are going to have a distribution model again! Without this, the entry barriers are just too great. Indie Film has an advantage in that we usually have much more control over the rights and can get our content streaming on-line faster and easier. But watch out! This does not mean you give your film away for free. Identify which platform(s) you are willing to work with and use this information to build a compelling business case during your financing stages. Put a solid distribution plan with a solid budget and schedule and your film has a much better chance of getting off the ground.

I have been getting a lot of questions from people asking about how to even start in the indie film industry (non-acting avenue). While there is no one right way to do it, there are a couple of avenues worth pursuing:

Write a Script

This is the old “Good Will Hunting” method. Unfortunately, many people don”t understand how a good script is made. It is extremely rare to sit down for two weeks, bang out a script and expect it to be a blockbuster. Scripts are meticulously constructed and dialogue is vetted over and over to find just the write phrasing. It is not unusual for a script to be written and revised over a years time.

So good writing is not for the faint of heart. If you choose this route, I highly suggest you take a couple classes on story and character creation. It”s not a bad idea to find a writing partner either – someone you can bounce ideas off of. There are many great writing teams in Hollywood. Once you have a great script, either produce it yourself, or find a producer who believes in your script and will champion it up a very steep hill.

Option a Script

I”m a big fan of optioning scripts. I have fleeting fantasies of sitting down and writing a screenplay, and then I remember what I just wrote above! It is a LOT of work! So I like to look for scripts that are currently completed (drafted). There are as many ways to option a script as there are lawyers. However, there are a couple of key items you want to make sure you have in the option contact:

1. Option Price
2. Option Expiration
3. Option Extension (if any)
4. Sequel Options (if any)
5. Writer buy-out (if produced)
6. Ability to alter the script if being produced

Very rarely is an optioned script in shooting format. If you like the original author, you can hire them as a writer on the production team. Otherwise, make sure you are buying the rights outright so that you can hire a different writer to change and adapt the parts of the screenplay that need work. When in doubt, consult an entertainment lawyer. They will save you headache after headache. They are worth the money – believe me!

Join a Production Company

There are about as many production companies as there are producers. If you are completely novice and not sure how to even start, look for internships at existing production companies. You will probably start with fairly menial tasks like script coverage, but you will learn about what makes a good script (and what doesn’t!). Not only will this help in your writing, but you will see how indie films are made.\n\nLook for opportunities to work with EP Scheduling and Budgeting and how a film is scheduled and budgeted. After all, this is the very first step in getting investors interested in your film. Without a proper schedule, you can do a budget. And without a proper budget, you can”t do a proper business plan. And without a proper business plan, you can”t get investors. Investors are not donors. They expect to get their investment back with interest.

Keep Hustling

So be smart in whichever method you choose to get into the industry. Just know that no man is an island. You will have to learn and partner with others at all stages of your Entertainment Industry career. And be nice to everyone. It”s a verysmall town.

About Louisiana

Let”s start by saying, Louisiana is much more than New Orleans. Louisiana is quickly becoming the “other” L.A. With settings ranging from swamps and marshes to historical cities and southern towns, LA is quickly making its mark on the entertainment industry.

The Program

Qualified Spend

• 30% tax credit on all in-state qualified expenditures.
• 30% tax credit on all ATL and BTL labor expenses.
• Additional 5% tax credit on all LA resident labor expenses.
• 30% credit is fully transferrable and has no cap.
• Fringes are included.
• Per diems are included.
• Minimum spend of $300,000

Tax Credit
Remember, this is a tax credit. If you live in Louisiana, you can use it to offset your income taxes over the next 10 years. If you don”t want to use it to offset taxes or really just need that cash, you can sell it on the secondary market for 80 to 90 cents on the dollar. However, Louisiana will now give you 85 cents on the dollar if you want a check immediately and don”t want to sell to a third party.

Louisiana Crews
There is a pretty good crew base in Louisiana. With shows like True Blood, & K-ville and films like Green Lantern (2009), Cadillac Records (2008), Ocean”s Thirteen (2006), and The Informant! (2009) Louisiana has a very experienced and usually very friendly crew base.

Conclusion?
L.A. vs. LA? The distinction is becoming more blurred… Louisiana (LA) has taken the necessary steps to make a permanent mark on the Entertainment Industry”s map. And with the incentive just made permanent, don”t expect this great incentive nor great place to film to go anywhere soon.

I get this question all the time. So let”s take a look at your various producer credits. While there are no limits to the number of producing positions, they are valuable industry credits and should not be given out too hastily.

Executive Producer (EP)

The EP is usually either the money guy or the connection guy. If you put $5M into a film, chances are you are an EP. However, you could just as easily put a production company together with 10 investors that each invest $500k and you would still be an EP.

Producer (and Co-Producers)

The Producer(s) is the project manager if you will. They are the ones that take a film from inception through delivery (and sometimes beyond). Sometimes they are broken into Creative Producers and Production Producers. But on indie films, the producer usually takes on both the creative and production tasks (if not the line producing tasks too!). This includes:

• Finding/Optioning a Script/Story
• Hiring a writer to write/rewrite the screenplay
• Hiring a director.
• Hiring talent.
• Hiring below-the-line crew.
• Guiding all personnel through the entire film life cycle.

The Producer(s) can best be described as the CEO of the company. The buck stops with them. All things go through them and they are responsible for all things. Sounds like a great job until you do an hourly wage calculation. Oftentimes, you end up making less than minimum wage when all is said and done.

Associate Producer

The Associate Producer position is often derided in the industry. Many joke that it is given to girlfriends, agents and managers and has no real value to the production. While this is often true (“Get so-and-so on-board and we’ll give you an Associate Producer credit!”), associate producers can also be producers in training that are still learning the ropes. When in doubt, take the Associate Producing credit if it is offered and offer the Associate Producing credit if it helps your film.

Line Producer

A Line Producer handles the initial budgeting and scheduling of a film. Once funds are being spent, they will match accounting cost reports against their proposed budget and make sure the production is tracking correctly to the funds available. The initial schedule is usually given over to the 1st A.D. for revisions and corrections. Unless days need to move completely, the line producer no longer changes the schedule.

Once the production is green lit, the line producer will hire (with Producer”s approval) all department heads (1st/2nd A.D., D.P., Set Dec, Props, Gaffers, Grips, etc.). Usually, the department heads then give recommendations on crew they have worked with and like to work with. The Line Producer continues to handle the day-to-day production and cash flow issues. They are usually buried in paperwork in the Production office and pull some VERY long hours.

So what does a Producer do?

They are responsible for putting together every single element of a film. If it weren”t for producers, directors couldn”t direct, actors couldn’t act and crew couldn’t crew (…ok that was a stretch). But you get the idea. Make sure you have good and hardworking people in these positions and you will have a much better production experience and final product.

(originally posted 12/13/09 – updates coming soon …)

About Puerto Rico

Puerto Rico has a generous Film Tax Incentive for filmmakers – 40%. But the first thing to notice is that this is a tax credit. A credit is not the same as a rebate. This credit must be sold on a secondary market. Usually, filmmakers are lucky to get 80% of their designated tax credit amount when they sell it on the open market. The film office states this nets to usually about a 35% rebate after the sale. Still not bad, but not as liquid as some other states with tax rebates.

The Program

Qualified Spend

The 40% credit counts on qualified production spend in Puerto Rico. This qualified spend includes Puerto Rican based equipment rentals, purchases and Puerto Rican resident crew salaries. Additional expenses like travel and hotel will count as long as they are booked and used within Puerto Rico. Per diems are credited on a percentage basis. To spice up the incentive, government locations can be booked for no fees.

Other Requirements

• At least 50% of principal photography must be in Puerto Rico or a minimum qualified spend of $1M.
• Acquire Film Entity License – License fee is 1% of total budget (50% up front, 50% upon audit completion)

Credit Cap

The credit is capped at 50% of the equity used to fund the project. i.e. If you funded a $4M film with $3M cash plus an additional $1M in debt or pre-sales agreements, you would only be eligible for a maximum credit of $1.5M. However, you can advance up to 50% of the tax credit directly from the Puerto Rican treasury department. This advance does require a completion bond attached to the film, but would only require you to finance $250k in debt or pre-sales agreements.

Puerto Rican Crews

While crewing up in Puerto Rico can be an issue (especially if there is another film in town), the crew base is increasing in talent and in number. The film office states they can support 4 full crews for independent/low budget films.

Conclusion?

Shooting in Puerto Rico can be very rewarding. With a net tax rebate of 35% and an advancement of 50% of the rebate, it can be easier to put together a film without 100% equity financing. Plus, you get to shoot on a beautiful tropical island. Beats shooting a film in Detroit in January, huh? Like most things, it comes down to your film. If you film calls for cornrows and farmland, Puerto Rico probably isn”t the best choice, but if it calls for beaches and jungles and a latin flair, this place can be a Mecca! Just make sure you do your homework and don”t forget about the costs of travel for both ATL and BTL. Get a professional that can accurately forecast these costs and make sure the benefit outweighs the hassle.

What”s an IATSE?

IATSE is to crew members, what SAG is to actors. They provide standard working conditions, wage rates and pension/health benefits to their members. They are also the union that covers the most experienced production crew members. Like SAG, they are expensive, but can be well worth the expense when your production proceeds on time and delivers a better looking film.

Working with IATSE

IATSE provides standard working conditions and wages according to their local scale. So the LA/NY locals will have different rates than the Florida/Puerto Rico local. This makes sense if you take into account the difference in standard of living and the experience of the crew members at each location. In addition, the fringe rates vary according to the contract employed and the geographical area worked.

IATSE Contracts

IATSE has several contracts that will make their members accessible to the independent film production. Like SAG, their contracts are limited by the production budget. Be careful, if your budget is on the upper end of an IATSE contract and you go over budget, you will have to make up the difference in wage rates to the higher IATSE contract.

2009 Area Standards Agreement (August 2, 2009 – July 31, 2011)

• Budgets above $10,209,000.
• The Area Standards Agreement breaks down the rates for each type of crew member position. You can get a quick cheat sheet of these rates at EntLabor.com. As you can see, the rates vary for each position but generally fall within the range of $24.20 to $32.87/hour.
• Pension & Health (P&H) Contribution is $3.8975/hour.

Tier 3 Low-Budget Agreement (New Low Budget Contract Coming 2010…)

• Budgets between $7,220,000 and $10,209,000.
• Tier 3 Rates are located in Appendix C(2) of the Low Budget Agreement. They vary from $23.99 to $29.27/hour, but also include Camera Op rates of $42.23/hour.
• P&H Contribution within production city locals is $97/day.

Tier 2 Low-Budget Agreement (New Low Budget Contract Coming 2010…)

• Budgets between $4,230,000 to $7,220,000
• Tier 2 Rates are located in Appendix C(1) of the Low Budget Agreement. They vary from $24.01 to $27.81/hour, but also include Camera Op rates of $40.11/hour.
• P&H Contribution within production city locals is $93/day.

Tier 1 Low-Budget Agreement (New Low Budget Contract Coming 2010…)

• Budgets between $1,500,000 to $4,230,000
• Tier 1 Rates are located in Appendix B of the Low Budget Agreement. They are a little more straightforward in that there are three rates: (1) Key Rate: $21.24/hour, (2) 2nds Rate: $19.09/hour, and (3) 3rds Rate: $17.05/hour
• P&H Contribution within production city locals is $76/day.

Ultra Low-Budget Agreement (New Low Budget Contract Coming 2010…)

• Budgets under $1,500,000 AND must have at least 15 days of scheduled principal photography.
• All covered crew positions are negotiable, but must be at least the minimum federal wage (currently $7.25/hour).
• P&H Contribution within production city locals is $69/day.

As you can see, working with Unions can be confusing, but is certainly worth the money. I suggest working with a producer/line producer (like me!) that knows these contracts and can correctly work them into your budget. You can be sure IATSE will enforce all wage and P&H contributions, so ignorance is not an excuse. In addition, it is important to read your selected agreement. There are many stipulations regarding turn-around time, meal times, overtime, studio vs distant location, etc. that can severely affect your budget if you ignore them. Always ask questions, IATSE is more than happy to answer them.