Frequently Asked Questions

Each uses an Internal Greenlight System. Understanding a studio's greenlighting criteria allows production organizations to replicate this process in their own shops. The internal greenlight system allows the producer to evaluate the strength of the picture before a studio meeting and even points producers to which studio distribution team will most predictably extract the greatest earnings for each picture. The discoveries from this absolutely critical process become the center of each picture's financial future.

Each operates with Fully Funded Development. Without question, most production companies fail because of under-capitalization. Development is sophisticated, time-consuming and expensive. It should be approached with similar planning and funding as production. Producers must have their own development funding independent of a studio, sufficient to develop a slate of pictures. This is the foundational practice, allowing each picture to predictably, unshakably move through the development process.

Each primarily or exclusively uses Bank Production Financing. The primary importance of this practice is not the obvious advantages of low bank interest and copyright ownership of each picture. These are both valuable, but even more beneficial is that bank production financing pushes the producer into global distribution relationships for each picture. These relationships are critical to engage essential presale collateral and virtually insures that every picture produced has solid, global distribution, including at least the US and six major foreign territories with collaborative maturity from commencement of earnest development, months preceding production. This is the catalyst that solidifies each picture's integrity.

Each engages US and Foreign Territory Distribution Relationships for each picture during its development. Internal greenlights are confirmed first with a US studio and then with a major distributor in each of the six major foreign territories. These confirmations are the second step in each picture's earliest development evolution and the beginning of essential creative and marketing collaboration. With an average of sixty percent (60%) of all global income being earned outside the US for US pictures, the foreign markets are essential in this process and contribute a broad array of essential elements, including cover-shot clarification and major media market preparation. This process defines and clears the pathway to each picture's global audiences and income.

Each plans the Rights Liquidation and either sells some rights directly or participates in these sales. This is beginning with the end in mind. Understanding the vast array of highly profitable ancillary sales areas, planning these rights sales with the producer negotiating and closing some of these sales, substantially increases the producer's profitability and advances each picture's distribution power. This is the key to protecting each picture and maximizing its profitability.

Each participates in the Campaign Management of their pictures in the US and the major foreign markets. Campaign creative, media planning and media buying exists in a highly sophisticated world of its own. Few producers even understand the semantics. However, knowing your target audiences must have a minimum reach and frequency media buy to deliver minimally acceptable box office gross, allows producers to anticipate each picture's opening weekend with more understanding than trepidation. Studio distribution departments are rarely surprised. They know fairly closely what box office results the campaign will drive. This is the ultimate topspin for each picture's profits.

Each is a Balanced Producer, giving equal weight to creative, audience and profits. Production of the vision only seems like the producer's primary objective. When the picture is completed, especially if it fulfills the producer's creative objective, is when it is inescapably clear that the picture's capacity to play to its audiences, and return a profit to the producer are equally important with its creation. Balanced producers sustain an equal check and balance between these three. Producers must understand their creative craft, and remember that audiences experiencing their creations become the picture's income. This balance assures the stability of each picture as it passes through the processes of development, production and distribution.

Approximately ninety percent (90%) of all US motion picture investments fund production. In 1999 there were approximately 2,300 private US motion picture production offerings funded, with total financing exceeding a stunning $2 billion. Historically, well over half of these investments are not returned to their funders, and most of these do not return any investor capital. The reason these investments predominate is that they flood the marketplace (with over 10,000 on the street annually), and they are pitched passionately by producers and their excited representatives.

US private investors financed approximately forty motion picture development offerings for a low nine figures in development capital to producers. By contrast, most of these offerings returned their investment capital and some profits. There is a clear reason for the high losses in production and the predictable returns in development — the dynamics of these processes make a convincing case to never, regardless of the investment scenario or script, participate in the high-risk dynamic associated with production financing.

The most successful and powerful production companies obtain their production financing from banks. The greatest advantage to the picture and its participants is not the retained equity or the substantially lower interest — it is derived from the necessity of collateral. Like all loans, these are fully collateralized, with all or most collateral in the form of presales (typically foreign territory presales, seasoned with a US studio distribution agreement). Bank loans drive producers to develop and produce their pictures in close collaboration with foreign and US distributors, assuring each picture's maturing in the major global markets over several months preceding its production, and importantly almost guaranteeing its major distribution.

Producers using non-bank financing can produce their pictures without major territory collaboration. Releasing motion pictures theatrically is sophisticated and costly — the average US theatrical release expenses in 1999 exceeded $24 million per picture. Motion pictures are slated on studio release schedules twelve to thirty months in advance. Ancillary sales including books, soundtracks and merchandise must be set seven to fourteen months in advance of the theatrical release. Producers waiting until after their picture is in production place themselves in the poorest negotiating position and their pictures' earnings at risk. Producers seeking private production financing may be excellent filmmakers, but they clearly lack the business capacity and experience to engage the global marketplace and exploit the abundance and advantages of bank financing.

Producers using bank financing most often use private development funding. This funding delivers a substantial advantage in the most challenging development aspects, including being able to option literary properties, attach directing and acting talent, and culture multi-territory relationships for their pictures. Critically, this funding also allows them to develop and produce multiple picture slates and own the copyrights to their pictures. Development funding is usually accomplished through subscribing investors in multi-picture development company offerings. The development company is owned by the production company and the investors. These offerings prescribe a pre-set purchase price for each developed picture by the production company. The number of pictures developed and the purchase price of each is established to return investor capital before the pictures are produced or distributed, providing a safety net allowing for one or more pictures to not complete development without destabilizing the development company. Most scenarios deliver investors returns from the development sale until they recoup their investment and allow them to participate in the completed pictures' earnings.

Are these investment funds principally for production or development? If the offering is for production funding and they do not have a US theatrical negative pick-up relationship, or foreign license agreements that total more than the picture's cost — walk away. Remember these statistics: in its highest distributor pick-up year, the Sundance Film Festival odds were one in four hundred. Approximately 2,000 pictures in all categories applied, approximately 200 were accepted and five were picked up. The lowest year was two pick-ups — one in one thousand odds. This is not a reasonable investment arena.

Because of the potent combination of power and vulnerability, star producers, more than any others, must develop a thorough understanding of all the vital aspects of the global business of motion picture production, distribution and finance. This understanding would protect them from poor decisions, enable them to move on opportunities with confidence, facilitate their discernment to select and direct a crack development and production team, allow them to establish achievable short and long range goals and financial projections, and empower them to organize the entertainment empire of their finest vision.

Shed the burden of introduction or demonstration of value, a star talent can generate instant responses from other creatives, producers, studios, and investors. In some cases a production company lot deal is arranged with a studio against the offset of acting services, future pictures or both. There are no free lot deals. Unquestionably it is "way cool" and may fulfill a fantasy, but at what cost? There are good lot deals — but you must know the criteria by which to evaluate these deals.

There is a natural tendency for those with lots of power to be overconfident. As Arnold Schwarzenegger's credo advises: "Stay hungry." Stay lean, in shape, bright, informed, and ready to make the pictures you like, in the manner that is accountable to equal parts creative and business sense. Often a celebrity producer will assemble the talent and resources of their peers and launch into projects with significant creative heft, only to find after substantial money and precious time have been spent that the studios are not interested in distribution. The unavoidable impact of this misfire is the loss of credibility among their creative contemporaries and awkward future relationships with studios and funding sources.

Consider the industry's small core of independent production companies that are consistently successful in securing distribution through a major studio for EACH of their pictures, arranging credit facilities from banks for EACH picture's production financing, and who fully fund their own development and pre-production advances for EACH picture. These same production companies earn a profit on every one of their pictures — not just some or most, but EVERY picture. Do they have more creative craft than the rest of the independent production community who generally struggle to sustain operating stability? There are other elements at play in addition to being creative.

A careful study reveals there are seven principles and practices employed by this small nucleus of powerful producers. These are in addition to basic creative abilities common among seasoned producers. They are all business related. They are all substantially easier to master than the creative. Using them will dramatically increase a star talent's creative freedom, distributor relations, and profit share. The seven principles and practices can be found in a more expansive form in The Producer's Business Handbook, available at major bookstores and libraries. They are also taught once a month at Producer's Business Seminars.

The internal greenlight process allows celebrity producers to build confidence in — or discover embarrassing traits about — their pictures in the privacy of their own shops. Knowledge is power. If you suspect you could benefit from personalized help preparing or more importantly engaging these principles into your organization, you are invited to schedule a preliminary meeting with us.

This is the business plan narrative and partnership agreement used to engage private financing for motion picture development. Each memorandum typically includes: planning and preparation of the company's activity and cash flow projections; origination and authoring of the development company's plan and offering; preparation of company history and management biographies; state and federal securities declarations and compliances; tax commentaries; partnership agreement and certificate; and offeree questionnaires and subscription documents. Each offering should be delivered complete, ready for engagement, and restricted to sophisticated investors. The scope and cost is determined by business objectives, the country in which the production company is based, and the variable securities venues with which the offering must comply.

The internal greenlight constitutes each picture's crucial information upon which studios and major foreign distributors principally base their decisions relative to distribution and related licensing. It includes a breakdown of each picture's campaign elements, at least one :30 second television commercial or theatrical trailer script, the picture's target audience definition, comparable pictures and their campaigns and global earnings, estimated global gross earnings, the producer's share of these earnings and its relationship to the picture's budget. The first step delivers a campaign breakdown, campaign script, a live pitch, preliminary comparative picture and audience composition analyses, and an initial global earnings summary. The second step delivers finalized comparable pictures and audience composition analyses, comparable picture campaigns, the picture's finalized global liquidation breakdown (including Producer's Share and greenlight ratio), and the picture's final global business narrative.

Script doctoring involves critical writer reconstruction and/or polishing for a script that has elements worthy of development but is not sufficiently substantive to pass a greenlight. Quality story consulting services are substantially story- and creative-focused, centered in: deepening characters with steeper edges and more powerful motivations; creating multiple, complete and tightly woven stories; tightening story beats; escalating dramatic pitch; maximizing comic impact; and intensifying the story's moral arguments. A typical engagement includes an initial script review with meeting and report covering structure, story, character arc, dialogue, mise-en-scène, overall execution and other critical topics — followed by subsequent reviews as the script evolves.

This is the reconstruction of a picture, substantially through post-production services, but may include rescripting and shooting. The objective is to either maximize its global earnings or qualify it for earnings in excess of fixed expenses. The process typically follows four steps: (1) screening and report — determining whether the picture has a waiting market, a probable market given a fix, or is financially unredeemable; (2) a fix proposal with schedule and budget, prepared with the support of the original production team; (3) producing the fix, often with the picture's original producer, director and creatives participating; and (4) selling the picture into the global marketplace, usually during the fix itself.

Company formation encompasses incorporations and LLC formation including the basic organization planning, structure, and directing the initial directors meeting. Beyond formation, producers should understand the landscape of organization restructuring — ensuring their production entity is properly set up for studio relationships, foreign territory distribution, talent negotiations, presale planning, and bank memorandum preparation. The right structure from the outset can significantly impact a producer's negotiating position and long-term profitability.

The motion picture industry advisory landscape extends across multiple stakeholder groups. For producers: organization restructuring; studio, foreign territory distributor and motion picture rights negotiation, documentation and management; talent negotiations and documentation; presale planning and negotiations; and bank memorandum preparation, submittal and management. For US studios: independent producer screenings, pre-release target audience profiles, and reverse greenlights. For banks: global picture valuations, establishing or refining gap financing models, and coordinating US and foreign entertainment lending programs. For investors: entertainment portfolio management, media investment analysis, special investment project negotiations and documentation, and resolution of media investment disputes.

Understanding the vast array of rights sales areas is critical to maximizing each picture's profitability. A knowledgeable advisory relationship should map out the full rights liquidation landscape — from theatrical and home entertainment to streaming, international licensing, and ancillary sales including books, soundtracks and merchandise. The key is beginning with the end in mind: planning these rights sales from the earliest stages of development, not after a picture is completed. Project-basis arrangements and relationships that allow partial payment through participation in profit and equity may be available in some advisory engagements.