Movie Beach is coming back

Working on kick-starting our blog Movie Beach and relaunching it here on Tumblr. Seems like a good time to re-start the journey. Hello world!

Optimism In The Air

Optimism is running high at the Sundance Festival, according to the L.A. Times, where the pick of the year’s indie movies are competing for distribution deals this week. Insiders believe this year’s movies are more commercial than before. And with a number of new buyers on the scene exhibitors are expecting a wild time – says one: “People need movies, there’s a really strong slate”.

This is good news for movie-makers looking to sell their projects at Sundance and we think it’s also good news for anyone looking to get their movie financed and produced. The appetite for movies continues to expand worldwide, despite a rocky year at the US box office. The pie is getting bigger in terms of markets with China and others expanding rapidly, and digital distribution options multiplying. Finance is a challenge for film-makers but that’s always been the case. We just sense a feeling in the air that things are looking up.

We’re feeling very positive at the moment ourselves with a few ventures coming along well. We recently had an inquiry from a finance and production house which wanted to take a closer look at a number of projects on our Pitch Page. There are currently over 120 projects on our site and we regularly connect producers with potential funders. So we’re now working with those financiers to see which out of the 8 chosen projects they’ll take up to finance and produce, and we’ll post all progress here and on our site. The Pitch Page is a nice shop window for projects and traffic is steadily rising.

We’re also engaged right now in helping a producer friend fund a slate of movies with an innovative financial structure which has taken some time and a lot of head-scratching to devise. We’ll see results soon and the first movies should go into production this year. And we’re currently finalizing a commitment of finance for one of our own beloved movie projects, which we’re ramping up to put into production this year. Lots in store, and we’ll be posting all the news on that as we go.

We continue to receive a stream of great movie projects through our website, and it was especially nice recently when a friend sent us a warm and funny Woody Allen-esque caper to be shot in beautiful Glasgow, Scotland, with an all-star cast. Good luck guys!

It may be winter but the sun is out as far as we’re concerned, so polish up your project package and find that finance, things are definitely looking up!

The Out Of Obscurity team.

Still No Thanks To . . .

Firstly, thanks for all your kind and funny comments on our last post about movie fundraising. It’s great to hear from so many people not only sharing the same experiences but having a laugh at them too! So, we hope you enjoy our concluding part this week. Please keep reading Movie Beach, and keep the comments coming.

We received an enticing invitation to visit Cairo to meet a handful of willing movie investors. It would also be an amazing chance to experience Egypt and catch up with an old friend, but we quickly found out that our contact, Ms. H, had somewhat exaggerated her assurances of “millionaires” waiting to write us cheques, and we spent a week driving all over Cairo to no avail. There’s nothing quite so sobering as making a presentation to a handful of people politely trying to smile and appreciate your presence, but who have absolutely no idea why you’re there. Some even applauded graciously as they left the room, wishing us well in a quizzical sort of way. One particularly memorable wild goose chase involved three of us squeezed into the back seat of a rickety and hot old Egyptian taxi as we drove a hundred miles into the desert to visit a mad millionaire who had built a golf course and mega-resort. He “just couldn’t wait to meet us”, we had been told, and he couldn’t have been more hospitable. But we were a little misled: he obviously had never heard of us and thought that perhaps we had turned up to buy one of his yet-to-be-built condos! One more notch on the saddle, then, and we did see the Pyramids. But sadly no thanks to Ms. H.

Next up Mr. D, a seasoned start-up investor and hi-tech financier. We had spend a couple of months in negotiation with him and he had agreed not only to invest but also help us develop our investment fund, which we were then in the process of launching with a major bank in Luxembourg, where Mr. D had business interests. He was also a fellow marathon runner, music fan and all-round good guy, so we flew to New York to close the deal. However, we knew when he greeted us with “Hope you didn’t come all the way just to see me” that things might not be going quite the way we had hoped, but we soldiered on bravely. Although he loved everything about us - enough in fact to offer to invest before we got there – well, he just hadn’t really meant it quite that way, after all. No thanks to Mr. D, then.

We were optimistic as we flew into Dubai on a trip arranged by N, a good friend of ours. His local contact Mr. M assured us that investors and banks were waiting to see us, on the say-so of one of his royal connections. We weren’t complete fools and we already knew how many mugs had spun their wheels in the desert sand waiting on so-called “royal” deals to close. But we took it on faith, especially since N was doing business there himself. The first meeting set the tone as we drove to the first bank we’d been told would surely invest into our projects. But instead of heading to the glittering downtown skyscrapers we dropped in on a local branch manager who simply looked confused. Getting back into the car Mr. M said it had been a simple misunderstanding but, sadly, it went on. One out-of-town bank after another, a gala dinner attended by a so-called influential financier – which we were pressed into paying for, belly dancers and all! – culminating in lunch at the home of one the Sheikhs. As we fled from our hotel room to the lunch date, with N shrieking hysterically down the phone “The Sheikh’s waiting for you!” we reflected on his assurance that we would surely now “close the deal” . . . but, we didn’t. You get the picture? - lots of time-wasting, meaningless meetings, dinners and lunches and not a word about business. In fact it was all going so well, said Mr. M, that we should stay on another couple of weeks. We thought about it, pinched ourselves just to be sure, and cut our losses. Lesson learned and no thanks to Mr. M. Until . . .

Until, that was, we got a call a few months later from Mr. H, who we had met in Dubai. He said he had a client who had already committed to invest, and could we please help him arrange the deal? In the space of just a few days we exchanged papers and received a bank confirmation that a substantial sum was on its way. This would be the start of a stream of business and we envisioned slates of movies unfolding before us. But, and oh yes there’s a but, despite receiving a bank confirmation the funds somehow never did arrive. We don’t know if the investor changed his mind or if Mr. H had been just a little keen to earn his commission but it had flickered brightly and only briefly, with no thanks to Mr. H.

We got a call from Mr. B while we were developing our movie fund, to say that he wanted to invest $1 million and work with us to build up the fund. He loved our concept so much that he had formed a company to work with his private bank to raise funds for us and develop our own slate of movies. However it quickly became apparent that Mr. B and his two partners each wanted to be the boss, and moreover they each wanted to be our boss. They believed that if they raised any money for us then they would run our fund. That was to be only the first of many warning flags. But we never did get as far as having to clarify our ownership issues because, despite having a great concept and the contacts to make it happen, Mr. B and his partners ended up raising nothing, and fighting over control of their unproductive entity. They quite literally sued themselves out of business, leaving us disappointed but relieved that they had shown themselves the door. So, no thanks to Mr. B.

By the time we met Mr. P we already were in business together. He ran one of the largest private industrial conglomerates in the UK and was seeking to elevate his fledgling film distribution company by accessing our Hollywood partner’s contacts and experience. After several conference calls we had a signed contract in place for Mr. P to contribute substantial funding. He had arranged to meet our partners in Los Angeles, and committed to put in place the first $25 million of our joint film fund before meeting them face-to-face. All sounded well and, sitting in his London office he repeated his assurances of funding and business success. But during the entire meeting his gaze was fixed on two TV screens on the wall behind us, and when we shook hands to cement the deal, he contrived to look in some other direction altogether. You may have spotted a pattern here: in last week’s post we mentioned a couple of shysters with shifty eyes. Well, we judged Mr. P by the deep insincerity of his over-the-shoulder gaze and so it proved. After a half-hearted attempt to latch on to our L.A. partners without honouring his own commitment, Mr. P drifted off the scene. Another big-promising talker and we were better off without him of course. But for wasting all of our time, no thanks to Mr. P.

So, we have been around the world a bit in our search for the right movie investors. From the feedback we’ve received this last week it’s obvious that we’ve all kissed our share of frogs on the way to meeting the one or two business partners who really matter. We firmly believe that to find opportunity you need to go looking for it – and that results often come from unexpected places. Someone commented last week that maybe we should have saved our (miniscule!) travel budget and made a micro-budget movie instead. Fortunately someone else then pointed out how important it is to make every effort and meet your prospects face-to-face. We couldn’t agree more, as you can only really get the measure of someone when you meet them yourself, and preferably in their own back yard. Unless you demonstrate that you’re committed to doing whatever it takes to get your job done, and your movie made, well you might as well stay at home.

It’s also just one of the most important things in the world to travel, and you owe it to yourself to take every opportunity to travel, whatever the circumstances. In our case, as an accidental side-effect of our catastrophic Cairo comedy tour, we actually raised quite a lot of money later on through contacts we would never have met otherwise. And, if we hadn’t gone out on a limb and relocated last year, we wouldn’t have met our friend Captain R., who introduced us to Mr. M, who’s just pledged to fully finance our next movie. Coincidence, maybe, but a lifetime of dedication to the cause got us there. As George Clooney’s character in “Up In The Air” says: “Moving is living”. And if you can do business at the same time as travelling, well that makes it all worthwhile.

The Out Of Obscurity team.

No Thanks To . . .

We happened to see a little-known movie on TV the other day called Made In Romania, a comedy about the making of an indie film. It was a light-hearted little thing with plenty of inside-the-movie-business chuckles and the central premise of the producer being ripped off by the financier, who insisted the movie be shot on location in Romania. But the funniest thing about the whole movie was the final credit, which read:

NO THANKS TO . . . all the miserable buggers out there who said no.

If you’ve ever been involved in raising money for movies – or any other entrepreneurial venture for that matter – you’ll recognise the sentiment in that one line.

Having been up the sharp end ourselves we were reminded of a few times we had been told “yes” by prospective investors, only to find that the money never arrived, the cheque bounced, or they never again answered their phone. And rather than dwell on the mind-numbing questions of why people do that sort of thing and how much pain you need to go through to get something worthwhile done, we thought we might share a few episodes we’ve encountered along the way. Miserable buggers, all of them!

Shortly after we started our company we were raising funds to look after our early business plan goals when we met Mr. G through one of our start-up investors. Over coffee in Singapore Mr. G regaled us with tales of his formidable investment company and uttered the magic line “Is $5 million enough?” Well that was that, we thought, we’re off to the races - as he promised to get back to us to discuss his company’s investment. But we should have paid more attention to his shifty eyes and crooked teeth, as we never received a dime from this guy. No thanks to Mr. G then, and we were off and running on the fundraising roller-coaster.

We were introduced to Mr. M by a mutual friend who said “He’ll take care of all your needs” which indeed seemed to be the case when we flew to London to meet him. After dinner in his Mayfair townhouse and being welcomed into his family, we heard the magic words “You won’t have to go anywhere else, I have all the contacts”. A genuine billionaire, Mr. M also had an actor son who wanted a supporting role in our debut movie, which we were happy to accommodate. OK then, and all’s well. However in the following weeks and months it became obvious that Mr. M liked the sound of his own voice more than he was prepared to do something about it. He retreated gently from our “main man”, through “camp follower” until he became a thin voice on the horizon uttering platitudes about “considering the situation” in a couple of years’ time. Funny and sad, especially as his rich-boy son never did develop a movie career for himself. No thanks to Mr. M.

We met Dave, a relative of our good friend S, in a bar in Singapore. As the beers went down, and as David began to glaze fondly at my beautiful business partner, he offered to finance a new venture between ourselves and S, which would finance our company’s future success. We would have loved to work directly with S, however the conversation lasted another couple of beers before David’s commitment became a little fluid, and it didn’t take long until he’d forgotten it altogether. We remain firm friends with S, but Dave? – never heard from him again. Beer money wasted and no thanks to him.

We were by now close to launching our movie investment fund. So when we were introduced to Mr. A and his large Japanese financial conglomerate – which coincidentally was getting into financing films and wanted to set up a film fund – it seemed like a perfect match. And so it seemed when we flew in to Tokyo to greet our new partner and Mr. I, its venerable founder. Our plan was agreed by the firm’s board, and we arranged to host a premier of our fund’s first film at the upcoming Singapore Film Festival. On their part Mr. I’s group promised to seed the fund with its first $2-3 million and sell it widely among its client base, the largest in Japan. We would be in charge of international distribution and Hollywood connections for the stream of movies we would make together. It all sounded too good to be true and sadly it was. The movie premiere was a success, but our partners had neglected to arrange distribution for its crucial Tokyo launch which scuppered our chance of making any money on it. And, they somehow forgot to contribute the all-important first $2 million in capital, and their legions of thousands of investors never quite got to hear about investing into our fund. To be completely fair our Mr. A had tried manfully throughout the whole episode to turn our agreement into reality but found himself swimming against the tide of his board. So, no thanks to Mr. I.

Mr. K, ahh, Mr. K saw himself as a bit of a dandy. When we flew to Hong Kong to meet him he had just published a book about himself and bought a football club in England. Of course he wanted to get into the movie business but, we should have known . . . Things went well over dinner with my beautiful business partner again the focus of the conversation. Mr. K offered to send his car to pick us up in the morning and assured us that his people would be in touch to close the deal the following week. But in the morning there was no car, and next week no deal. At this point we began to conclude that perhaps it’s easier for some folks to hear themselves say “Yes” then slither out the back door, than be honest and say “No” and move on. Definitely no thanks to Mr. K, who perhaps loved himself a little too much.

Mr. P was an interesting case, a solid international businessman with existing movie business experience. He met us on one of his trips to Singapore and, after smiling and nodding over breakfast, he committed to investing a decent amount into our business. However he did shift a little in his chair and look slightly askew as he shook hands . . . Maybe we should have picked up on that little bit of body language but, hey, we’re trusting folks. We next met him in London where he presented us with a signed formal offer of financing, as agreed. But then the trail began to go cold, he became harder to reach and eventually citied the flimsy excuse that he was prevented by his executive committee from investing his own money, hmmm. No more Mr. P and it was becoming clear to us that although we didn’t get any money or help from this cavalcade of charlatans, we’d be better off without them in the long run. No thanks to Mr. P.
-One healthy postscript to our dealings with Mr. P was that we had committed to ourselves, as you do, that if we got his offer of finance we would run the Singapore Marathon. So on our return from London, offer in hand, we signed up and ran the world’s hardest and most humid road race, enjoying every sweaty mile of it in the “knowledge” that our money was on the way. Oh yes, innocence can be sweet.

Next time we'll be back to conclude with a few more tales from our own personal front line. Meanwhile feel free to share your own experiences with us, good or bad and hopefully funny.

The Out Of Obscurity team.

What Does It Take?

For one reason and another we’ve been musing a lot lately on the question “What does it take to get your movie made?”

The Los Angeles Times reported yesterday that a well-known producer recently failed to get a movie greenlit by a studio because he wasn’t able to reduce his budget from $60 million to $50 million. Times have changed and DVD sales are slumping so studios are looking to lower their exposure and spend less on movies such as comedies, which don’t necessarily play well everywhere. However, what caught our eye was the producer’s comment that although he believed he had a potential hit movie with two big stars, he couldn’t lower the budget “because of the talent involved”. Basically that means that two highly-paid A-listers weren’t prepared to work within a budget to get a movie made and would rather – or their agents would rather – they didn’t take a project for a lower payday. It was also reported this week that Cameron Diaz took a substantial pay-cut for her role in Bad Teacher, no doubt in exchange for a profit share should the movie succeed. In any other business that’s common sense – working within limitations especially when times are lean. In truth most movies these days have this kind of buy-in from the creative talent and if that helps get more movies made then it’s got to be a good thing. But you have to shake your head when you see nonsense written in black and white such as projects getting shelved because of an egocentric lack of will to get a movie made.

Obviously there’s a lot of hard work, dedication and blind faith at various points along the way to making your movie. But on top of having a great script and the will to put it all together, there’s often an element of craziness that creeps in around the edges. It’s like holding your hand over a flame, or wondering how long can you keep going into the dark before you see the light appear at the tunnel’s end. You find yourself working crazy hours, doing everything that needs to be done . . .OK, that’s par for the course. You don’t get paid while you’re in development . . . OK, par for the course again. You find yourself missing out on important events with family and friends . . . OK again, sometimes sacrifice is necessary, and who needs a life anyway? These are all everyday symptoms of a writer/director/producer’s life, I hear you say, and of course that’s true.

But, If you’ve ever found yourself asking the question “Am I really going down the right road?” or “What more would I sacrifice/sell/give up to get this done?” then you’ll recognise that things can get a whole lot crazier. We see a lot of projects from lots of producers and some of them have made great sacrifices to get their movies made. And in some cases they’re still sacrificing in the hope of getting their movies made. Where you draw the line is definitely a personal thing as to how much you’re prepared to beg, steal and borrow to achieve your goal. If you’re burning with a passion for your movie, and it’s your life’s mission to get it made no matter what crappy job you have to take or how long you have to wait, then go for it. There’s no substitute for sheer passion and belief. But if you’re not absolutely sure, either about the merits of your project or about your own life-or-death devotion to the cause, then take a long look in the mirror . . .

Most entrepreneurial ventures are challenging, but it seems that making movies is a quirky bit harder than the rest, since you’ve got to raise money from sceptical people to enable you to make something artistic and financially very risky in order to have a chance of succeeding in getting your product out in the marketplace . . . and that’s all before you run the remote risk of making money for yourself and your backers. In some cases the best you can hope for is that your investors respect your artistic vision and enjoy the movie as contributing pioneers to your voyage into the unknown. Of course if you make a great movie and get yourself a proper distribution deal then you’ll gain respect both for your artistic vision and your financial acumen, and you’ll be set up for your next bunch of movies.

As well as running our fund and assisting film-makers find finance for their projects in other ways, we recently received a firm offer of finance on a movie project of our own. It has taken many sacrifices and leaps of faith to get this far, but things are falling into place and we can only hope they continue to do so. More on this anon.

Lately we’ve been helping out a friend, an experienced producer who’s packaging a great movie for a $5 million budget, and he’s aiming to bring in an Oscar-winning A-list star to headline and direct. A tall order, surely, when big stars get millions per movie from the studios. Mr D., our friend, believes he can get Mr. W, the star, because he loves the material and wants to do the movie. But D’s trying frantically to keep the project out of the hands of W’s agents, who will inevitably talk up the budget, Mr. W’s fee (and their 10%), and scupper Mr. D’s project by taking it to a studio where it will be endlessly rewritten into a pulp. Right now it’s finely balanced and if Mr. W says yes, then D can make his movie his way. We’re hoping Mr. W shares our belief and decides to participate in a great movie that won’t keep him out of the studios’ clutches for too long.

What it takes to get your movie made only you will discover. How much are you prepared to give to realise your dreams?

The Out Of Obscurity team.

Cannes Shows The Way Up

It’s Cannes time again and things seem to be looking pretty rosy. When we last visited the festival the mood was decidedly sombre, and at the press conference for the new business we were helping to launch the questions were almost universally about when the gloom would end. There were fewer film-makers on show and buyers weren’t buying. This year, however, it looks like there’s a lot of good movies generating buzz, and a reinvigorated appetite from buyers all over the world. That can only be good for business, and we’re hoping to take advantage of the sentiment ourselves as we’re taking a few initial steps with one of our own projects that’s being repped by a colleague at Cannes. More on that later, but the “development” hat is definitely getting dusted off this season.

Good news that the buzz is back among film-makers and we’re looking for evidence that the money is coming back also. We’re currently helping a couple of friends package their projects and there might just be more funding sources to go to than for some time. Producers are always looking for new, reliable sources of finance and we’re being told that there actually is a lot of new money out there these days looking to invest into films. It sounds obvious, but it’s now more important than ever for a movie project to be presented with a credible budget and a top-notch business plan. The most important elements by far are the investment structure and distribution strategy. If you can show your investors that they are taking part in a legitimate business venture with a credible and likely payout then you’ve got a great chance of getting the money for your movie.

Movies rarely get greenlit or rake in investment dollars these days simply on content, but if you’ve got a convincing business case and can demonstrate how and when the investors will see their money back, then you’ll be taken seriously by the money. Emphasise the return to equity investors – those guys that take the most risk and are likely to be getting paid out last – and if you can convince them you have a great deal then other elements will fall into place. There are many ways to offer incentives to investors: compensating them from tax credits or distribution deals as they get done, or guaranteeing repayments of funds in stages as revenues begin to flow can all help lower the investor’s total exposure to loss.

Helping investors make money is the ultimate goal, but in the movie world if you can show your investors a way that will ensure they don’t lose their money, then you’re ahead of the pack. Structure your presentation properly, focus on achievable returns, and you will cultivate loyal investors for your next movie as well.

The Out Of Obscurity team.

In A Perfect World

A new guest piece on Movie Beach, this time from our friend and film finance guru Jeffrey Taylor.

He recently published a great piece on film finance trends and strategies which he has kindly allowed us to mash-up here:

In a perfect world, a winning movie transaction would look like this: equity investors receive a multiple of their initial investment within a prescribed time frame; mezzanine investors get all their interest and principle paid; senior debt is fully serviced—and possibly re-cycled for another favorable round of financing. Deals like this have been done for years, frequently involving hedge fund managers, investment bankers and private equity fund managers.

Like cinematic movements, film financing seems to come in waves. 30 years ago Japanese money was prevalent; 20 years ago, insurance companies; 10 years ago, German film funds with tax reasons for investing in films; and this last decade major US hedge funds. Each wave has its own characteristics:

• In the early 1980s, much of the investment was tax driven: investors could purchase films as they were being completed and effectively lease them back to distributors. They could accelerate the depreciation and amortization of the asset to defer income and other taxes. In the 1990s insurance companies offered to insure gap loans on films. Banks would provide gap financing to producers, then insure the loans in case sales targets were missed and producers couldn’t make good. Emboldened by their insurance policies, banks increased the gap loans to as much as 50% of film budgets. Many films failed to reach their sales targets, many insurance companies were called in to repay loans, and litigation ensued.
• Past cycles have also included periods of public underwriting, such as those in Australia, the UK and the German government’s development of a public market in tax-shelter vehicles - the Neuer Market - to raise money from wealthy investors. German film funds invested hundreds of millions of dollars in independent production companies like Newmarket and New Line Cinema. Then in 2001 the Neuer Market melted down, a victim of bankruptcies and insider-trading scandals, and with it went the money. This collapse left major studios and large independents looking for new sources of production financing.
• Most recently, between 2004 and 2008, an estimated $15 billion was invested in so-called “slate funding deals”. Players like Merrill Lynch, Credit Suisse, Deutsche Bank, Goldman Sachs, Citigroup and JP Morgan Chase all arranged co-financing deals with Hollywood studios, raising money from U.S. hedge funds and private equity firms.

Through all financing cycles, one group of investors can always be counted on. These people invest for emotional reasons, such as, "my daughter is in the film, my son has always wanted to be a film producer, my son wrote the script, my wife wants to be a movie star." Such investors tend to lose their entire investment.

Producers have a number of ways of financing their films

• First, and most basic, is equity: this is the early-stage financing that turns a script into a film in progress. As with much venture capital, angel and other seed capital seeking high returns against high risk, most equity investors in independent movies fail to see returns on their money. On the bright side, most equity investors in independent movies don’t expect their money back - they’re the ever-dependable investors mentioned above, frequently the family and friends of the filmmaker.
• Next is senior debt, which accounts for a significant portion of the film’s total financing. Traditional providers of senior debt (banks like JP Morgan Chase) require a security interest in the film and all revenue streams associated with it in priority to equity. So, before a film is completed, a producer might sell the distribution rights (including theatrical, home video/DVD, pay TV, free TV and other rights) for various countries. The producer can then use the value of these contracts as collateral against a production loan from a bank.
• Another form of financing, which is an important part of the funding for independent films, is ‘soft dollars’ or tax credits for shooting a film in a certain state or country. Since 2005, according to BusinessWeek, US states have granted $3.5 billion in incentives to makers of films, TV shows and commercials, but many of these programs are currently under assault as states struggle to balance budgets.
• Still another component of film financing is print and advertising financing—prints need to be made for theatrical distribution, but the main part of the tab is advertising. The typical P&A budget today is equal to or greater than the film budget. An insider gives the example of a $16 million film with a $20 million P&A budget. The financiers offered to provide $8 million senior debt at 20%, which, he says, is a very common interest rate range for P&A financing.
  
• Producers can also earn money from product placement (think ET and Reese’s Pieces, think George Clooney’s character in “Up in the Air” flying American Airlines).

Whatever the structure of the film-financing deal, everyone hopes for a Hollywood ending by producing a smash hit with everyone getting fabulously wealthy. The odds, however, are stacked pretty steeply against this. A large-scale, independent studio making 12 films a year will probably get eight losses, two break-evens, one pretty good film and one hit. Smaller-scale institutions with the wherewithal to make only four films could find themselves with four losers and end up closing shop. As a business proposition, it’s better to spread the risk over a larger number of films. That’s an ability the studios have always had—releasing 20 or more films in a season. A slate of films may not assure investors of great wealth but it prevents them from losing their shirts.

Who Invests in Film?

Film financing is a complex business that requires good information, strong experience and a balanced approach that avoids emotion about being in the business. It is not for the faint of heart. According to a hedge fund manager, film investors fall into three main categories:

• First, there are angel investors—family and friends of the filmmaker who invest for other than strictly financial reasons.
• Second there are those who think they can beat the house. “Everyone else has been burned, many people in Hollywood are charlatans, but they think they can beat the house anyway—they’ll pick better films, they’ve met a very trustworthy guy who has a slate of films that can’t lose—and the hallmark of those people is they claim very outsize rates of return.”
• The third category of investor is able, by virtue of scale of investment or some other means, to truly diversify across a number of different investment opportunities. This investor looks at films the way others look at real estate—knowing many things could go wrong, but that if he’s truly diversified and invests on a significant scale, and is very diligent, then over a reasonable period of time, he’ll reap a “very handsome return.” Which is basically what the studios do—although even the studios get it wrong.

Another answer to the question, ‘Who invests?’ might be, ‘People who see an opportunity.’ Box office demand is currently strong, but the number of films being made with U.S. distribution is down significantly.

How to Succeed in Film Financing

• First, you must take the time to truly understand the many elements of film production finance and distribution, in particular, the legal components and how the rights are created, distributed and paid for.
• Second, you have to have some kind of connection to the industry at a fairly high level, meaning, you need to have access to trustworthy people and have a good mechanism for filtering out people who are not reliable business partners.
• The third piece of advice to would-be film financiers is “remain vigilant.”

Hollywood likes to fleece people, but if you follow steps one and two, you are more likely to enter good deals with good people.

To order your own personal copy of "Film Finance For Beginners" please visit: Books by Jeffrey Taylor

The Out Of Obscurity team.

Pitch Page On A Roll

With Sundance going on right now we’re reflecting a little on the hustle of actually getting your movie made which inevitably begins with finding the money to get it going in the first place. We get a lot of traffic through our website from aspiring film-makers of all sorts, from film students at college putting together their first short to experienced mainstream producers seeking partners on studio slate finance deals. The one common ingredient? – they’re all looking for money. So we’ve always felt there must be a way of connecting good movie projects with the investors they need.

That’s why we launched the Pitch Page on our site a few months back, and we’ve had a really enthusiastic response so far. There are currently over 80 active projects up on the site and we’ve had a number of inquiries from financing groups and producers looking for good new material. We get all sorts of project submissions from a tiny documentary about Tibetan llamas to all kinds of indie dramas, from no-budget shorts to major star-driven features. One of the first visible successes was a political drama with an all-star cast and Oscar-winning lead which was picked up for a mainstream box-office release. We weren’t directly involved in the sale but it was released recently to critical acclaim after being seen first on the Pitch Page. However we have had direct inquiries for a number of the projects on our site which are in discussion right now. One writer is closing on a verbal offer to sell his script and a production studio which inquired about a slate of 6 Pitch Page movies took a close look at two of them and is now negotiating on a $12 million investment into a movie project featured on the site.

The Pitch Page listings continue to grow and we’re extending our reach among potential movie investors. We’ll be posting some of the concrete success stories of movies from the Pitch Page on our site in the coming months. So look out for the occasional credit and maybe we’ll be popping up at Sundance next time around.

The Out Of Obscurity team.

Busy At The Beach

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.

Trust Me, I'm A Producer

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.

Desert Days

We were invited to speak at the inaugural IIFF film financing conference in Phoenix, Arizona last week. We're always happy to hit the road and spread the word, so we took off to the desert for a couple of days. It was held at a graduate media school attached to Arizona State University, so there was an eclectic crowd of both established movie folks and enthusiastic up-and-coming filmmakers.

The overwhelming impression was that “where film meets finance” – as the IIFF guys bill it – is a vital area for movie-makers. Most are consumed with the creative process of getting their movies made, as they should be, but there’s often a disconnect regarding how they’re going to firstly get their movies funded, and then make the business part of the process a success for their investors.

One key point that came out of the discussion was that it’s not just about raising money to get movies made, which most film-makers eventually accomplish. The real silver bullet is that if you can show your investors a return on their money they’ll come back and finance your next movies. If they don’t make a profit, as is usually the case, you’ve burned a good relationship and source of finance. Just as important as making a profit, we also heard, is protecting your investor’s capital. If you can use any viable structure to ensure that your investor won’t lose his money, then even if he doesn’t make much from the first couple of deals he’ll still appreciate your creative work and desire to protect his interest and, again, may come back and finance your next movies. Make money, or at least don’t lose money . . .

We launched the Pitch Page section on our website just a couple of months back and we’ve had an overwhelming response. There are now more than 70 projects up on our page with more coming in every day. We’ve had several expressions of interest with a couple of potential deals being talked about. We’ve also been approached by a group interested in financing a slate of projects from our site. It’s hard to tell exactly what level of audience we have in the industry but it’s clear that people are taking note and that movie insiders are always looking for good new projects. For now we’re just happy to give filmmakers some additional visibility as they strive to get their voices heard.

The Out Of Obscurity team.

Just Like "The Producers"?

Bialystock: You're an accountant! You're in a noble profession! The word "count" is part of your title!

Bloom: I'm a nothing. I spend my life counting other people's money. People I'm smarter than. Better than! I want... I want... I want everything I've ever seen in the movies!



How many producers does it take to change a lightbulb? A whole lot it seems, and they’re all in the same room fighting it out over The Hobbit – which has cost almost $50 million so far without a frame being shot, en route to an estimated $500 million production pricetag. Sounds to us like there’s a whole lot of trouble a-brewing down under where Peter Jackson’s just about to begin shooting the movie. Not only has Guillermo del Toro recently stepped down as director after two years and moving his family to New Zealand, but one of Jackson’s studios burned down last week, no doubt adding to the cost.

But, the thing that caught our eye was the mire they’re in with financing the picture. Not only have Warner and New Line just swept up the legal debris of The Lord Of The Rings, including settling with Jackson himself and the Tolkein estate, but they’re waiting on the almost-bankrupt MGM to come up with its half of the production budget. MGM’s creditors, and potential future owners, will surely find the money for the Hobbit and also the next James Bond movie, as a safe bet to generate future income if the studio is to survive. But the funny part is that when the two Hobbit movies eventually get released, in 2012 and 2013, there’s a whole line-up of parties waiting to share in the gross revenue. It’s hilariously reminiscent of Mel Brooks’ formidable classic The Producers, in which Zero Mostel rounds up an army of little old ladies who each believe they own a large slice of their Broadway show and a share of the profit when it becomes a surprise hit.

Just like The Producers, we can see the court cases cranking up if The Hobbit ever takes a dime at the box office . . . . The LA Times reported last week that New Line, Warners and MGM will be joined by the Tolkein estate, Peter Jackson, Saul Zaentz (who previously owned the Tolkein rights), Walt Disney Studios and Bob and Harvey Weinstein (who developed the Lord Of The Rings movies at Miramax) in sharing gross revenues from The Hobbit. How a movie with so many gross participants can ever hope to generate a profit is beyond us. So heaven help anyone else who believes they’ve got a share of profit coming to them. But of course, just like Bialystock and Bloom intended in The Producers, many big Hollywood movies never actually make a profit, at least not on paper.

You may know from some of our recent posts that we like to see the truth win out – at least as close as Hollywood can get to the truth where money’s concerned. It’s notoriously hard to enforce film financing agreements, and several artists have sued recently for participation that they were promised under contract. It’s great to see court victories for some – Don Johnson even had his Nash Bridges verdict increased from $23 million to $50 million to allow for interest on his share of the profit. More cases are going to court: this week Matt Dillon sued producers for a share he claims he was denied from the movie Crash. In most cases we’d bet the production companies probably don’t have the cash sitting around on the off chance that they might have to pay out. And no doubt some companies or maybe even studios would be in extreme difficulty if they lost such judgements to actors or producer partners claiming an unpaid share of historical revenues.

So, it seems to us the bigger message is that perhaps, now that the spectre of enforcing old contracts has become a reality, just maybe Hollywood studios and producers will start to do the right thing and honour contracts, smarten up their accounting and pay participants fairly. Sleight of hand exists at the margins of many businesses but usually it’s bordering on the criminal and gets found out and fixed. It’s only in Hollywood that so-called “studio accounting” is a mainstream practice which the establishment is fighting in court to try and protect. We’ve all heard stories about someone getting short-changed on a movie deal, it’s not just a figment. But the growing trickle of cases seeking to apply fairness will inevitably change the accepted practice, and the movie financing playing field will get a bit more level as a result.

The Out Of Obscurity team.

Sun Setting On Studio Accounting?

Another victory for profit participants in Hollywood the other week, when veteran actor Jack Klugman won a “multi-million dollar” settlement from NBC Universal over unpaid royalties from the TV series Quincy, M.E. He was entitled to a quarter of the show’s net profits, but sued NBC when they didn't provide him with accounting statements. Amazingly, NBC’s lawyers had earlier refused him access to the accounts which he subsequently filed suit to get. Last month Don Johnson won a $23 million settlement for unpaid profits from his Nash Bridges series, and other cases are in the pipeline. If more such cases get to court it could spell big trouble for the studios and lift the lid on their accepted business practices.

For some in Hollywood whose mantra is “So sue me”, the idea of adhering to contract terms and paying partners an equitable share would be a new business concept. For many years the concept of “studio accounting” has been prevalent and accepted as just the way things are done. Producers and other participants had to accept that their movie or TV show might never be declared to have made a “profit” even though it’s been cranking in the bucks for years, and that the only way to really get what’s owed in the end is to commission regular audits on studio receipts and hold rights-holders to account under their contracts.

Sure, there may always be some grey areas but there’s really no reason why movie and media accounting should be any less specific than in any other business, where fairly clear determinations get made every day. So, can the movie business decide that adopting clean and transparent accounting practices might be a good thing to do?

There are a bunch of similar cases in the pipeline. We know a company specialising in the management of legacy media rights – the trail of revenues owed to producers and other participants on historic movies, shows and media assets – that’s gearing up a number of cases against studios and TV companies to recover unpaid revenues on properties they manage. Examples include simple non-observance of agreements and the usual non-provision of accounts, as in the Klugman case, to the interpretation of revenues owed on movies that are sold as part of a packaged rights deal.

One favourite is the transfer-pricing fix where a studio or holding company sells a property to a subsidiary company – a TV network, for example - at a less than market price, thereby creating a loss-making show which then has no “profit” left over to pay the show’s creators or producers. That was one of the main factors in the $270 million verdict against Disney/ABC in the recent “Who Wants To Be A Millionaire” case. That's elementary financial window-dressing and we’d like to think that the room for this sort of thing is squeezing tighter and tighter as it all bubbles up to the surface.

Juries don’t like to see people getting ripped off, which is one reason why it seems imperative for the studios to try and settle these cases before they get that far. But they can’t stop the tide, and we’re cheering for the little guys on this one.

It’s something we like to talk about because we firmly believe that if you construct a transparent platform for investors to participate in then people on all sides of the deal can make money fairly or, at the worst, get a fair accounting of where the money went. And we also think that the movie business is one of the best opportunities for investors to get into a real alternative investment with terrific potential to make them money regardless of what’s happening on Wall St.

The Out Of Obscurity team.

What's In A Commitment?

So, you’ve put your heart and soul into getting your movie made. You’ve called in favours and run out of friends and family members to rope into your venture. Finally you’ve cracked it: after hundreds of mostly dead-end calls, meetings and follow-ups you’ve got the money. It’s not yet time to relax but closing on important investment capital is a great achievement.

You’ve got a commitment of the financing you need to make your movie, that’s great. However you’d better tie that commitment down and convert it to cash as fast as you can because things have an unfortunate habit of unravelling in the movie business. Nowhere is this more painful than when the money falls out.

We’ve all seen it: we’ve had promises, commitments, sure things, cheques in the mail and proof of funds that somehow didn’t quite make it to cash in the bank as promised. Investors have a habit of getting cold feet in any walk of life, but maybe more so in the movie business where the lure is so seductive but the financial reality can be stark. If there’s any part of the process where we all need to do our jobs like superstars it’s in absolutely securing the money we need to make our movies.

There are many ways of getting investors comfortable with the prospect of investing in your movies. It’s not always profitable but we all know that’s not why most investors come to the movie business in the first place. We actually heard a speaker at a conference last week say that you should let your potential investors know that indeed movies don’t make money but they’re a great way to write off tax liabilities! A bold suggestion and maybe a touch risky. Otherwise, there are lots of ways to get people comfortable enough to make the pledge and stick with it including the U.S. government’s Section 181 tax incentive, and structuring preferred repayment out of revenue, not “profit”. Finally, aligning your investor’s interests clearly with your project’s will ensure that he achieves his goal along with yours. This could be for him to become a recognized media investor, get close to celebrities, gain visibility for his other business interests or any number of things. You need to be very aware of what’s going to float the boat of every investor you’re approaching and try to help them get there. Once they can see they’re investing in something that benefits them in some way, regardless of pure financial performance of your movie, they’re likely to stick with you.

Here’s a few real-world few examples from our own experience of how things sometimes don’t quite hit the deck as planned:
- A $250,000 investment into our movie fund from a Middle Eastern investor was confirmed not only by his broker but his bank confirmed it had been “sent”. Sadly, and suspiciously, something went wrong and the funds never arrived.
- After multiple term sheets a European investor confirmed his offer of a significant investment into our company. Despite signed contracts the investor then hid behind the “I pushed as hard as I could but my committee wouldn’t approve my suggestion” ruse, maybe you’ve heard that one before.
- We had two separate letters confirming a $5 million investment for a movie production. Solid, written commitments helped us to put together significant project elements and were looking forward to getting the production rolling. However in both cases the investors melted away, one through business reasons and the other, we think, because he was a lying fraudster in the first place . . . All the more galling because the starlet we had lined up for her breakthrough role as our lead loved the script and is now a superstar.
- And, we’ve come across a whole bunch of big-talkers promising everything from movie investment money to business partnerships which didn’t happen. Sometimes there’s a hint of innocence about the over-promisers and bigger-uppers, but they generally fall into the category of people who put more effort into talking themselves up than they spend getting things done.

Undoubtedly, episodes like these will be no surprise to those of you going about financing your movies and perhaps the business does attract more than its fair share of people making big claims. So it’s even more important to try to qualify your potential investors, just as you would with anyone you’re getting into business with.

Simple values always hold true: is this a good deal; is this person an honest partner we can trust; and do we want to be in business with these people if things get tough? Of course it can be hard to tell and raising money is tough, and we all kiss a lot of frogs along the way.

So what’s in a commitment? – you’ll know as soon as the money hits the bank.

The Out Of Obscurity team.

Independent Film In The Rat Race

This week we’re pleased to present our first Guest Blogger on Movie Beach, please feel free to post your comments. We’re always interested to hear suggestions for topics you’d like to see covered in the areas of movie finance, investment and film-making in general, so let us know what's on your mind.



The film industry is in an interesting state right now. With studios leaning more towards known material such as sequels, remakes and books we are seeing a trend that is opening doors for independent filmmakers to make their mark and join in the race. It was just a few years ago that independent films started to become more than just a straight-to-DVD commodity that was lucky to get any attention. It became an important necessity for an industry that could no longer afford to risk making films that weren’t guaranteed blockbuster status.

Hollywood’s overall box office numbers may have be down a smidge earlier in the year, but studios are bringing in nearly the same amount of revenue on higher ticket prices and half the number of movies that were being made ten years ago. In other words studios want a guarantee that a movie is going to make money or the project will die. There are a few exceptions though. Sometimes movies get made with questionable scripts, but it’s the star power that gets attached that green lights the movie and guarantees a big opening weekend and profit. A perfect example would be a movie that premiered last Valentine’s Day (I can’t seem to remember the name of it). It was the perfect example of a movie that had an All-Star cast, a proven director, a perfect release date, and was guaranteed to be a money maker. It’s too bad the film was terrible. It’s movies like these that prove that independent film-making can continue to blossom and prove they belong by creating telling works of art with actors who will give their right arm to start their career.

While everyone seemingly has a script in Hollywood, this is the time for action. Studios are constantly looking for independent films that show great story, production value, and are entertaining. Independent movies that show potential for box office success have studios clamoring and bidding to get their hands on them and shove them in theatres. In today’s market studios don’t want to take the risk of financing a project with a new film-maker, but they are willing to buy a final product if it is filmed properly and acted well. Some of these movies’ budgets are less than the cost of a new car, have actors working for free, and DP’s running around with standard light bulbs and cardboard reflectors. While this may not be the most attractive way to create a film it’s a win-win situation for new film-makers who just want to create and studios who are only looking to buy.

Before running into the forest at night to shoot the next big horror movie, film-makers should seriously consider the many resources online that can help prepare for an independent movie. Sites like Outofobscurity.com can help find financing, and Zoetrope.com and Massify.com can help in getting feedback and reviews on your script. Screenplay competitions like the Nicholl Fellowships in Screenwriting and BlueCat are two of the most well known, but be leery of others and do your research. Use sites like Actorsaccess.com for casting, and if you don’t want to pay for the account fee then go old school and start posting auditions on Craiglist.com. The resources are out there, they’re just not the big budget ones. Besides, nothing is more liberating than being your own boss: that’s why it’s called independent.

As an independent film-maker you can write your script, cast your actors, guerrilla shoot it on a beggar’s budget and find the success you are looking for. In order to do it though there are sacrifices to be made (most of them financial), and absolutely no guarantees. If you believe in your script, your actors, and most importantly yourself, your chances are a lot greater than if you gave up and didn’t make your movie at all. Creating an independent movie can end up being one of the most satisfying things you do in life. Success itself is dependent on preparation, quality and a little bit of luck. So while the rat race may be a clogged maze of big budget films, the independent film-maker can think outside of the box and still finish with a movie in theatres.

Christopher Ray Allison
The Out Of Obscurity team

Movie Finance's Holy Grail?

When deciding what movies to finance and produce, you’d think it would be useful for studios and producers to have a clearly structured way of assessing how they might perform at the box office. On the other hand you might think it’s a complete lottery and that movie-goers are just a fickle lot. However it would be the holy grail if a film-maker had a real formula to determine accurately the true revenue potential of his movie, and more importantly how best to tailor his work towards success during production.

One aspiring guru has come up with just such a formula and is hell-bent on applying his ground-up approach to identify success factors and weed out known mistakes in movie production. His revolutionary approach factors in certain features that he believes lead to a movie’s success such as character types and development, genres and storylines that resonate with audiences, it determines specific camera shots and angles and a myriad of other factors which together, he claims, can reliably generate profitable movies.

Would Hollywood listen to such a revolutionary concept that could potentially force it to change how it does business? Our friend Steve arrived in Hollywood last year to introduce his concepts but he found that few doors opened to allow him to get his message across. Many of you reading this won’t be surprised at the reluctance of insiders in any industry to be told what to do by a relative newcomer, and the thought of questioning the established beliefs in the movie business is certainly too much for many of its fragile egos. No producer wants to be told “you’ve got a pretty good concept there but step aside and let me rewrite your script and change a bunch of other stuff”. And, the thought of applying a scientific process with a checklist of criteria that need to be fulfilled probably sounds too much like regular corporate business practice, not something most Hollywood creative types are best at.

However, it’s a topical issue every weekend as the box-office numbers are pored over. This week, for example, the trades are focusing on the differing performances of Inception and The Sorcerer’s Apprentice. Inception, a thoughtful, high concept “thinking adult” kind of film they don’t really make any more, could have stumbled amid the summer popcorn audiences, but took in almost $63 million. And although The Sorcerer’s Apprentice looked like a slam-dunk for the summer crowd it stumbled at only $17 million. From a review of movies currently on release our friend Steve feels there are several obvious mistakes in some of the big movies out there which, by applying techniques determined by his model, would have been corrected as those movies were being made. And, although the studios’ current favourite survey partner CinemaScore does a remarkable job of predicting the performance and longevity of movies at the box office, their results are based purely on exit polls taken during the movies’ first-run weekend. Those movies aren’t going to get any better once they’ve been released, but Steve believes the studios ought to listen to him because his model will help them to make better movies and get them right before they’re released.

Many companies and consultants have tried to solve the problem of “how much will my movie make” with decidedly mixed results. Others have looked at the more oblique issue of “how can we present the best movie, with the right mix of talent, genre and time of release in the calendar, to ensure our best shot at a good result”? That’s daily business for the studios and some elevate it to a science. But they’re generally dealing with known elements: scripts rewritten to an existing formula and tailored to the whims of directors and stars, marketing departments doing what they know has worked before, and churning out genre fare to suit the perceived demands of the public. Maybe best known of the current number crunchers is Ryan Kavanaugh, whose Relativity group runs mind-numbing models to determine where to put its money. But is he beating the average, as you might expect with such an appliance of science? Quite possibly he is. But it’s going to take a strong will or a spectacular result to get a major studio to fundamentally change how they do things and apply Steve’s new techniques to their movie slate.

Steve believes that by applying real analytical techniques to movies at every stage of their creation he can ensure an absolute success rate. Of course this sounds fantastic and if he can prove his model’s capability he’ll see a rowdy line of Hollywood producers and studio exec’s develop outside his office. He has discussed his model with the few producers and studio exec’s who would agree to meet him, with similar results: they like his concept but aren't sufficiently convinced to put their money behind it, at least until it’s proven. He’s in a Catch-22 situation where he needs to prove his model but Hollywood isn’t listening to him or lining up to fund his efforts. He comments about a current studio blockbuster:
“It is clear they have no idea why "The Sorcerer's Apprentice" lost money. It is crystal clear to me. That means on the face of it I am better placed then Jerry Bruckheimer and Disney to understand what the movie-going audience is looking for. That is a sobering thought. What do I do with that?”
What he’s looking for is someone who can understand his modeling approach and the idea of a breakthrough concept, who’s prepared to back him to go make a movie that, in Steve's words, will "break the gut-feel mould of Hollywood movie selection and add some science to the process". We're watching eagerly.

The Out Of Obscurity team.

Travel Always

The other day we read a great piece in the Los Angeles Times about an uncle advising his nephew on the route he might take to drive across the USA from the East Coast to Los Angeles to attend the American Film Institute. We’ve spoken at one or two events at the film school here in LA and it’s certainly a venerable institution for an aspiring young film-maker to go to. Rather than zip across country on the Interstates the uncle, a noted film director himself, felt his nephew would be better off taking the slow roads where there’s more chance of discovery. Take your time he urged, meander through small towns along the way – heck, even take a couple of years to let the whole thing brew and soak up all the different experiences along the way. Don’t just go to film school in LA and learn how to copy other filmmakers but find your own voice and your own techniques borne of your own experiences. His underlying message: be an original voice, and find yourself through travel.

Funnily enough, that’s how Out Of Obscurity got started in the movie business, and I guess why that piece hit home. A few years back after living in various parts of the world, we bought a red Mustang rag-top and set off from New York to take the slow roads and drive right around the US. We covered just over 10,000 miles in 6 months and found ourselves in many small towns and byways along the way. We made some great friends and finished up playing music and watching the world go by for a month or so in the French Quarter in New Orleans. From there we hopped over to the Bahamas where we wrote our first screenplay, drawing heavily on our experiences from the road. It was picked up by a producer straight away, a minor miracle in itself, and we began working with agents and producers in LA.

And here we are: travelling has always been a part of our lives and we can’t imagine things otherwise. Travel always.

The Out Of Obscurity team.

A Square Deal In The Movie Business?

We were with a professional colleague the other day who’s raising money for a forthcoming marquee franchise property that’s being produced outside the studio system and is fully financed by equity capital from private investors. An intriguing combination as it seems to be every producer’s goal these days to have his movie 100% equity financed by a bunch of old ladies: however, few manage to pull it off. Our guys have raised $30 million so far and are on target to top $100 million to cover production and P&A on two movies in the franchise. It’s a powerful position, providing of course the distribution trail works out and the movie sells. But there’s a lot of confidence in their camp as the production and talent teams are second to none and the movie continues the legend of one of the all-time classics.

They have a revolutionary capital structure too, with investors guaranteed to be repaid capital plus profit first. In first position before any other entity, even the studio which eventually picks it up for distribution. That’s unheard-of in Hollywood and has been scrutinised to death by various parties to check whether it’s true or not. Not only that, but investors get provided with transparent financial statements and can - and do - visit the production any time to check on their investment. It’s a great concept to give investors exactly what you say they’ll get, and unusual only in that it seems so unusual to anyone familiar with Hollywood business practices. In most businesses you invest in some sort of promise and get to see how that pans out in practice and on paper. In Hollywood through the ages, however, investors have been surprised time and again on deals where they were promised some sort of “profit participation” only to be told “Sorry, your movie didn’t make a profit”. Examples are legion of blockbuster movies which have broken box-office records but never made a dime for their investors.

During the conversation our guy, who’s relatively new to Hollywood, asked in passing “Does anyone do a square deal in the movie business?”. As it happens the verdicts had just come down on two high-profile cases illustrating that very point, so-called “Hollywood Accounting”. The first featured the creators of the TV game show “Who Wants To Be A Millionaire” who sued Disney and ABC TV for unpaid profit on the long-running hit show: the jury awarded them $270 million. In the second case the actor Don Johnson sued the producers of his TV show Nash Bridges for unpaid participation and was awarded $23 million. Nobody knows whether these verdicts will stick on appeal, but they’re seen as the thin end of the wedge as there’s a steady stream of such cases coming through and no shortage of investors and producers feeling short-changed. They’re often settled out of court and in the wake of two such high-profile jury verdicts the studios will be seeking any way they can not to get back into court on subsequent cases. If things do take a turn towards business transparency this week’s verdicts could change the Hollywood landscape.

This is nothing new, of course, there are many ways for investors to lose money and a bad movie deal is only one of them. However it’s not simply that Hollywood is the bad guy, but it does seem somehow easier for investors to be seduced by the glamour of the movie business and scrutinise the terms of movie deals less thoroughly than they would on other investment opportunities. So we’re sure that there are indeed fair deals to be done in Hollywood and we’ve always believed in the merits of investing into quality movies in the right structure. We like to maintain a level playing field with our Movie Portfolio Fund, a feature we agreed on wholeheartedly with our producer friend. Give investors a fair deal and then sure, the movie business will still be highly lucrative if a little risky, but we’ll all share in the fun without feeling cheated out of the profit.

The Out Of Obscurity team.

Introducing The Pitch Page

Over at our websites for Out Of Obscurity and the Movie Portfolio Fund we receive a regular stream of submissions from people all over the world looking to make things happen with their movie projects. We’re never sure what we’re going to see in our inbox: as you’d expect missives can range from the fantastic to the forgettable. But there’s usually some sort of spark that, in the right hands and with the right backing, might just ignite into a flame of inspiration. Some projects come ready packaged with directors, crew and talent, some with a little or a lot of money, and some are just the germ of an idea. We respond to them all and we’d like to be able to help them all.

We also get a fair bit of traffic from people interested in investing in the movie sector, whether they’re industry insiders, money managers or just individuals looking for a smarter way to invest their money. As we’re fond of saying in this journal the movie business is a classic alternative investment sector, which can out-perform traditional investments whether conventional indices are going up or down.

So, we like to help out whenever we can by introducing film-makers to potential contacts that might help them in getting their movies made. But of course we can’t help everyone with a project, and some investors may be looking for something beyond our investment fund: that oddball movie project that nobody’s picked up on yet. Which is why we’re thrilled to introduce The Pitch Page, a dedicated forum where we post details on a bunch of project submissions that we receive. We’re aiming to give film-makers much-needed exposure to the community of movie business executives, producers and investors watching our site. It’s true that there are always more projects doing the rounds than ever get made into movies, but we believe there’s a great chance for movie business insiders to uncover some hidden gems from the world of creative talent we hear from every day, and we’re excited to see the Pitch Page take flight. Go on, take a look at The Pitch Page.

The Out Of Obscurity team.

Onshore: Offshore Synergies

Greetings again and a happy 4th of July to everyone out there, wherever you are. We’re a hybrid mix ourselves of International roots and travel along with a whole bunch of American influence in our lives and work, and we have our own reasons for joining in the celebrations on Independence Day. This year we took in a party down at Marina del Rey among the pretty yachts and quaysides, with a big fireworks celebration in the evening, it was quite a sight. It reminded us of other great nights around the world: fireworks at the foot of the Edinburgh castle in Scotland; crazy fiesta explosions of everything in sight in Valencia, Spain; Chinese New Year pyrotechnics in Hong Kong harbour; and nice things going pop the world over on countless nights in the company of good friends.

It’s good to be right here in the heart of the movie business and you never know who you’re going to bump into. The other day a friend arranged for us to meet up with a group to discuss raising finance for a great movie project of theirs and it turned out that we had real synergies in our work through some mutual friends in the Bahamas. Regular visitors to Movie Beach, if indeed there are any, will know by now that we’ll use any excuse to mention the Bahamas and our plans for global domination centred on our cozy little offshore HQ down in the islands. Out of Obscurity and the Movie Portfolio Fund are based offshore currently so it’s not such a stretch and we’re working on it, oh yes we are.

Anyway, at the time of writing we’re following up with our new friends to see what we may have in common to work on together. We believe there are real opportunities to match their proven ability to raise movie finance from domestic onshore investors and our offshore fund for international investors. It’s hard enough to finance movies at the best of times and investors are rarely faced with a level playing field when looking at different movie investment opportunities. We like to present investors with a transparent, flexible and tax-neutral opportunity to share in the upside of investing into movies as an alternative asset class. And if we can do that in partnership with our friends then so much the better.

We firmly believe in the merits of investing in movies as excellent alternative assets, and we surely believe in synergies involving our favourite island chain.

The Out Of Obscurity team.