BY ROBERT J. LABATE
Several times a week I receive a phone call or an e-mail from an aspiring film producer who has the rights to a script, some money and lots of talented friends willing to help put together a feature film. He has a business plan and he wants to start filming just as soon as he can raise enough money to pay for the production which, he estimates, will be in about four to six months.
His question? Well, normally, it is something like: "Is there anything else I need to do right now?" or "Do I know how he can raise the money he needs?"
The Four Phases of Production
Most first-time producers have no idea that film production is more engineering than art. As one of my friends (who is an established producer) says, "There are only two good days in a producer’s life–the day that the project is fully funded and the day when the project is completed. The rest is pain."
Put in a more positive way, film production requires an enormous amount of planning, close attention to detail, more than a little determination and lots of fundraising skill. To be specific, there are at least four essential phases of independent feature film production: Formation, Financing, Implementation and Distribution. These phases are "essential" because, if you miss one, you likely have made a very expensive home movie to share with your investors, typically your family and friends.
Formation
Film production is risky work and early attention to your business structure can save you headaches (and liability) if something goes wrong. Creating an Illinois corporation is fairly easy and inexpensive and, provided that you observe appropriate corporate formalities (such as keeping proper corporate books, opening a corporate account and keeping corporate obligations separate from personal ones), you should be able to limit your personal liability.
Normally, each film project should be organized separately so that successful projects are insulated from unsuccessful ones. Some projects require the formation of a limited liability company and some may be best organized as a nonprofit corporation with (or without) a separate filing for tax-exempt status.
Because filmmaking is a collaborative effort, you may need to enter into co-production agreements with individuals or entities who can bring significant skills or funding to your project. Good fences make good neighbors and your co-production agreements should spell out who is responsible for what aspects of the production, who gets what credit and who owns (and negotiates for sale of) the final work.
And do not forget to speak with the Chicago office of the Screen Actors Guild to discuss what SAG requirement might apply to your project. Establishing a good relationship with SAG early in the process will pay dividends when agents call to complain about late payments or conditions on the set.
Finally, you need to create a preliminary high-low production budget which can be increased (the "high") if you obtain better funding or decreased (the "low") if your funds are limited. Remember to build in at least a 10 percent cushion, because everything will cost significantly more than you think and unexpected expenses will arise. If you are unfamiliar with film budgeting, get help from someone who has budgeting experience.
Financing
This is, perhaps, the most essential and least understood aspect of independent film production.
As I’ve discussed in prior columns (see "Independent Film: Taking Money, Taking Chances" and "The Seven Deadly (Legal) Sins of Independent Film Production, both available at www.defrees.com), there is a widespread, but totally erroneous, belief among independent film producers that they can take tens of thousands of dollars from investors without complying with state and federal securities law and regulations. However, if you take funds from people who are not actively involved in the management of the project, you may be required to register with the appropriate agencies and to prepare full disclosure documents for distribution to potential investors.
There are many ways to fund an independent film and there are lots of people who, for a fee, are willing to "find" money for your project. Some "finders" are perfectly legitimate, but others are not. Sometimes (but not often), studio funding may be available and sometimes foundations or individual donations (rather than investment) will be the best source of funding. This is a complex area and even contributions from friends and family should be documented appropriately. If you do not understand your options, get help.
The other two aspects of independent film production, Implementation and Distribution, will be discussed in my next column.
During the next three months, I and two other lawyers (Tim Kelley and Nancy Fallon-Houle) will conduct a three-part seminar entitled "From Concept to Film Festival — A Series on The Business of Film Production," which is co-sponsored by the Independent Feature Project and by the Chicago Academy of Visual Arts. More information is available at CAVA’s Web site www.smsprod.com or you can contact the Independent Feature Project at 312/435-1825.
© 2000 Robert J. Labate. This column is provided as a source of information and is not to be construed as legal advice or opinion. You may contact me through my firm's web-site (www.defrees.com), via email at rjlabate@defrees.com or, via mail, to Robert J. Labate, Defrees & Fiske, 200 South Michigan Ave, Suite 1100, Chicago, Illinois, 60604 (312) 372-4000. All individuals depicted or described are fictional.