Tuesday, December 28, 2010
It was a busy run-up to the holiday season and we’ve been a bit remiss in keeping the news flowing from Movie Beach. We haven’t exactly been lazy, just a little diverted by a few projects that sprang to life in the last couple of months. We’re in the process of tying these up now so rather than the usual post-Christmas belt-loosening and stretching out in front of the fire we’ve been focused on getting some great business done before the year end. But with everyone else around the world in a soporific state that can be hard to do . . .
There are all sorts of year-in-review stories around at present and this isn’t one of them. But we do like to reflect a little at this time of year and 2010 has presented a few challenges as well as bringing great opportunity. While Movie Beach isn’t exactly eye-witness-reporting, we do like to focus occasionally on ground-breaking events in our niche of movie financing. Most positive of those for us this year has been the opening up of the Pandora’s box that is “studio accounting”, whereby several producers have won landmark cases in order to gain their rightful shares of earnings on movies and TV shows. We say this again and again but if you make an agreement to do something in any business you’re generally going to be held to that agreement. It’s taken a long time but the movie business is finally getting that sort of scrutiny where contracts will begin to reliably reflect what should happen in practice, and then if that doesn’t happen those contracts will be relied upon to get a judgment in court.
From our perspective the spin-off from all of this is that producers now recognise even more acutely that if they’re going to get investors to participate in their movies, they have to make meaningful agreements to reward them for taking the risk. For too long investors have been shrugged off as movies get made and rarely make a profit. Yours doesn’t have to be the most profitable movie ever made but there has to be something in it that the investor wants and if you can determine what that is and deliver it, then you’ll be in business.
Relax over the holidays, and we wish you a happy, peaceful and prosperous new year.
The Out Of Obscurity team.
Monday, December 06, 2010
This week Movie Beach is pleased to present another piece by a Guest Blogger, Steve Jasmine of Causation Creation. Steve has a unique perspective on the business of movie-making and movie finance, so please feel free to post your comments.
In 2008 I was fortunate enough to be working with a private equity movie financier in Los Angeles. He engaged me in the process of assessing movie projects based on their creative content. At that time I was in the middle of developing a movie profitability model for box office success based on the creative elements of a movie. This developed into a 3-year analysis of billion dollar grossing movies. My movie financier contact, let’s call him Mr. X, had told me that he had access to $15m of other people’s money to invest in movie projects and wanted a winner. During a 13-month period I assessed 40 movie projects, many with A-List actors attached. During this time I dealt with many movie producers and gained an understanding into what they want. Generally what they wanted was money to make movies without consideration as to whether it would ever be returned to the investor, let alone whether their movies would make a profit. I give some of my experiences from that time as a source of advice and a warning to potential movie investors.
Having perceived access to movie money, I discovered that I became a target of great interest in Hollywood. I set up a website so that producers could find me and Mr. X showed me many projects that he was sent. All of these projects were analyzed by my system hoping to find a winning movie project. Not one passed the test even slightly. Giving producers the news that their movie was not suitable was the cause of real anger.
One such producer had written a movie about a girl escaping a small town cult group with a hero fighting desperately to save her. When I informed him that I would not recommend financing his movie he threatened me, claimed I knew nothing about movies and then urged me to reconsider. A colleague of his contacted me and asked me to look past the threats and finance the movie. They did not seem to understand that direct threats against me were a huge issue to me: and of course the fact that the movie was of no interest to a wider audience.
Another producer sent me a comedy script by a writer for a national TV personality. It was clearly a 90 minute version of a TV show with laugh-a-minute comedy. That type of comedy is not conducive to big screen box office success. I tried to rewrite the script to get it in a form that would work according to my model, and invested two weeks of my time doing this. The producer kept calling to ask if I would be financing the picture. The issue of the movie not being commercial in its original format was of no interest to him, so I arranged to speak to the writer who was also going to direct the movie to see what his opinion of the changes was. He said “I don’t care, whatever,” and handed the phone back to the producer. That was all he wanted to discuss about the project. The movie needed $5.6m in financing and the producer said they had already raised 10%. For some movie investors an initial amount of capital is important for them to invest. For us it was not. When I looked into the budget I saw that the production company was taking a $250m fee off the top and the producers and director were taking $625k in total. In actual fact the 10% they claimed they had already raised was just their fees that they were going to defer until the movie made money.
From the same producer I was shown a $6 million movie with an A-List actor, which needed $4 million as the A-Lister had put in $2m of his own money. From my analysis work I gave them a review of the first 44 pages of the movie indicating all the reasons why we would not invest. The producer was so impressed he asked me to do a review of the whole movie - for free of course. I declined. The movie was made with another investor and managed to make about $6m at the box office. With Prints & Advertising costs of say $2m and a $6m budget that movie has to make about $16m. in revenue to return its investors one cent. I didn’t see the movie but from what I have seen of the trailer I believe that none of the changes I suggested were made. What mattered was that it got made and the producer got paid his fee. The investor was not on his mind. Up-front fees were all this producer cared about.
I received a movie from a writer-producer who claimed his project was going to be the next Crocodile Dundee. As an Australian who saw Crocodile Dundee as an exchange student in the USA I know that movie well. His movie was about an African American living in NYC who plays roller blade hockey really well. He is transported to Canada where he plays ice hockey and initially fails at it then finds his rhythm and succeeds. What has that got to do with Crocodile Dundee? The producer could see the similarities because this meant he could say that his $6m movie was going to make $300m in the box office. He also mentioned the actor David Spade in the proposal and indicated that movies with David Spade have grossed almost a billion dollars in box office revenue. He did not say that David Spade had actually agreed to be in the movie, just that he was someone they would want to have in the movie. He was shocked when I passed on his project, explaining that it was like a TV show episode and not a box office story.
I dealt with one producer that had written a movie he felt was the next Pulp Fiction. I am a big fan of that movie and I know about the subtle mystical elements of Pulp Fiction and what they stand for. He told me that he had been offered $100k for his script but he felt that he should hold out as it would be worth millions when Hollywood got their hands on it. I read the script and it was terrible. I explained to him some key factors in the first 30 pages that made it terrible. He said “You have to read the rest, the movie really gets going after the first 30 pages.” I explained to him that a movie has to get the audience interested in the first 3 pages otherwise they will hate the movie. He said the mistakes I saw were minor and could be changed. I explained that they were built into the structure of the story and to change them was to change the whole story. He then said “Well it’s never going to be as great as Pulp Fiction.” At least he had the balls to admit it when confronted by it. Mind you that was after about 20 emails back and forth discussing the story, most of which involved him arguing with me about how great his movie was.
I once heard George Clooney say that when he became an A-List actor he was excited as he would be able to read the truly great screenplays that he had been denied access to. He then discovered that there were none. I felt the same. After a year of reviewing projects I gave up. I had not seen one movie project that would appeal to any audience. I saw projects with some really big talent attached, sometimes for a small fee and a big piece of the box office gross. I saw contracts with the inclusion of their assistants and their housekeeping and their hotel rooms. Some with their food requirements. I even saw two movies written by big Hollywood stars with careers spanning over 20 years and they were two of the worst movies I reviewed. One had managed to get some other A-List actors to sign letters of intent to be in the movie to help it get funding. I asked Mr. X why these stars would sign up for such terrible movies. He told me that most actors will sign anything that has dollars attached. The great movies go on to the box office and advance their career, the bad movies go straight to DVD and no one remembers them. All the while the producers, actors and agents get paid. The only one that does not get paid is the investor. I went to my local DVD store and flipped through those “Ex Rental” DVD’s for sale cheap. I saw so many titles with A-List actors in movies I have never heard of. Then it became clear to me. I was being asked by these producers to help finance those DVD’s. For every one was an investor who had hoped, but failed, to find the next Pulp Fiction or Crocodile Dundee. At least the producer and his director friend got paid. And the A-list actors of course.
When a movie fails the investor gets told the standard Hollywood lie “No one knows what makes a movie make money. Sorry.” The old story that Hollywood is a gamble. Having invested over 3 years in scientifically studying movie profitability and creative factors of billion dollar grossing movies I know this is a lie. If only the producers I spoke to were more interested in making their movies have great stories instead of hiding their extra fees in the production budget we might all enjoy going to the cinemas more than we do.
The Out Of Obscurity team.