Ahh, the good ol’ first feature film. So many of us have embarked on this journey with only a few of us making it out on the other side with a film for audiences to watch. I know, that seems a bit ridiculous, but it’s true. Many who start simply do not finish. Then there’s the group of those who end up hundreds of thousands of dollars in the hole, and those who actually recoup with a profit.
Many have tried to figure out the perfect formula for making the home run feature film, but, truthfully, that formula does not exist. It all comes down to risk vs. reward and your measure for success.
You’ll hear a lot out about just make your film for as cheap as possible or for half of what it should be made for. To be honest, that advice is just unhelpful and ridiculous. Sure, in theory, making your million dollar film for $500K is going to minimize risk, but it is it really going to make your film more successful? Is it REALLY going to minimize risk? What if that extra $500K spent got your film a bigger name actor, which meant you could actually get better distribution deals worldwide? Then is it really riskier to make a million dollar film than a $500k one? The answer is no.
It’s not about the budget, it’s about the business plan.
I’ve had my theories on a few ways one can minimize risk on feature films while still maintaining a workable and recoupable budget even if the film performs poorly with distribution. Simply put, my theory has been that one can actually make money on a loss.
Seems too good to be true, I know. “Mail Order Monster” was our first feature film and was our case study for this theory. There are so many tips, tricks, lessons learned, etc that I could talk about for an hour based on my experience producing “M.O.M.” But that’s better saved for a coffee or lunch conversation. I’ve boiled down all my findings into 4 major tips below:
- FEW INVESTORS: Many first time filmmakers crowdfund a portion of their film’s budget and fundraise the rest through multiple investors. Sure, that’s nice because the financial burden doesn’t fall on one or two people, but unless you have a massive audience you can tap into, you’re typically stuck in a pretty small budget range for a feature film. There’s nothing wrong with that. Many want that small budget to work in right off the bat. I get it. But what about your second film? Do you also want that one to be made for less than $100k? Don’t you want to scale up and work with long term investors? If so, I recommend finding 1 – 3 investors that you can provide a solid business plan to and get them on board. Fewer investors involved means less point distribution, less complicated tax filing, and less legal fees in investor contracts.
- TAX INCENTIVES: The holy grail of film financing. Tax incentives are talked about ad nauseam at every film conference, festival, workshop, etc. But no one really tells you the ins and outs of these tax incentives and how to take full benefit of them. All they tell you is to hire one of their great financing firms and trust they know what they’re doing. Right. First feature = no one cares about you or wants to take a risk on you so you’re on your own. Everyone thought once SECTION 181 died, all federal tax benefits for films were incinerated. Wrong. Don’t forget people, a film is a business. It’s like a mini startup every time you create that LLC. It’s a business, so here’s a tip, make your few investors part of the LLC. Make them ACTIVE BUSINESS INVESTORS, so they can file a K-1 during tax season. Active vs. passive investors will greatly influence the types of tax benefits your investors can take advantage of. Many investors will want to invest in the movie for the tax benefit alone regardless if it even makes money or not…yeah…we want to take care of these kinds of people. Then there’s the state tax incentives that are beneficial when filming in the U.S. and nationwide tax benefits that are offered in other countries when dealing with co-productions. There are a slew of things to consider when dealing with state and international tax incentives, so be sure you have a line producer or film accountant who HAS WORKED WITH THAT LOCATION’S TAX CREDITS BEFORE. You have been warned. There are ways to recoup close to 50% of a film’s investment before a single sale has been made. Buy me a coffee and I’ll give you the scoop.
- FILM PACKAGE: Who is in your film, what it’s about, and the target audience all play a very big role in the future success of a film. Relevancy is huge. Distributors are highly fickle and shallow when it comes to purchasing content. Why shouldn’t they be? We’re all drowning in entertainment, so they need to be extremely picky. If a sales agent can’t sell it in an elevator pitch do distributors, the distributor sure as hell isn’t going to be able to sell it to audiences flipping through thousands of TV shows and movies at home. Best thing to do is get with a film consultant like Stacey Parks or someone like her who comes from an extensive film distribution background and let them help you on your film’s package. They’ll be able to give input on name talent that sells and how to make your film something people actually want to watch. Another option is to get a sales agent onboard in the script stage since many are wanting to transition to the executive producer role on their films so they have control of the packaging. This comes with many pros and a few cons, but when you’re a first time filmmaker, many of these sales agent/EP’s want at least one film under your belt…risk/reward right?
- INSURANCE: They say you can never be overinsured. Well, it goes the same for films if not more so. Get the insurance. All the insurance. It will cost you money, but it will also save you money when inevitable B.S. pops up. First and foremost, get a production company onboard that has full production insurance. My company has that, so we were all good and I added workers’ comp to my plan for a few independent contractors we had. The payroll company provided workers’ comp for the employees that were on payroll. This is good. You want this. Payroll is expensive. It’s going to take up almost half your budget. It’s worth it, though. You want the payroll company to be in charge of workers’ comp, and going through a payroll company will help when it comes to filing for your tax incentives. Get E&O insurance ASAP. Get it during production or as soon as you sign with a sales agent. In one of my earlier posts a couple years ago, I mention not wasting money on E&O insurance until you have distribution. I waited until it was required of me by my sales agent who we signed with fairly quickly after finishing the film. Let me just say, I got lucky with the timing because I needed to use that insurance pretty quickly after signing up for it. Get the insurance as soon as you can. It’s insurance. It will save you.
Alright, those are my 4 major tips. There’s nothing glamorous about them, but they’re the truth. Again, if you’d like me to elaborate on these a little further or talk about a particular case, feel free to email me.