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Three Steps to Heaven? Part Two

Mick Southworth and Martin McCabe present the second instalment in their three-part guide to making and selling an independent film.

So as our somewhat less than definitive and certainly partisan look at the perils of first-time—or, indeed, second for those who should know better!—independent feature-film finance and production continues, the producer of the farmyard comedy thriller ‘Who Shot the Goose?’ has bagged himself some development coin, the terms of which are normally repayment of the principal plus a premium of (typically) 50 – 100 per cent, repayable on first day of production. He heads off with a spring in his step, to get the basic building blocks of his master plan into place. Being a smart guy he does what a lot of new kids on the block do and decides that he needs an experienced executive producer on board. Generally speaking, this is someone who will hold the hand of the creative producer and relieve him/her of all that nasty stuff like post-production deals, finance and bank negotiations. This is someone who has seen it all before, has a recognisable track record, who rolls with the punches and, critically, can get in front of industry movers and shakers. Their fee—along with the other 27 executive producers who will probably end up on the credit block if the film does get made—will likely be paid out of any dough that they are responsible for bringing in.

Fair exchange is no robbery!

Classically, the executive producer should be able to not only bring in cash and/or services, but also advise on the key business partners that the production will need to employ and then negotiate the best possible deals. Starting to sound a bit costly, isn’t it? That’s because it is; essentials such as employing casting agents, experienced media-entertainment lawyers and line producers are not a luxury so much as integral when it comes to keeping control of the schedule and budget.

Lawyer Kami Naghdi of leading London-based media-entertainment specialists Field Fisher Waterhouse feels it is important to underline the need to get all your ducks in a row. “Producing a film involves a lot of blood, sweat and tears and often very significant amounts of money. The toil and the investment starts at the very beginning, whether that’s optioning the rights to an article, a remake or a book, or commissioning a screenplay. Getting the rights you need on terms that will enable the producer to make the film is absolutely essential. Beyond the glitzy dinner and the honeymoon period of talking to film financiers and distributors at festivals, if they like the creative merits of the project, their first exercise and ‘due diligence’ will be to review your ‘chain of title’. Get this wrong at your peril. You may have paid handsomely for your script, but if you didn’t have an experienced media lawyer contract the rights for you, the chances are any one of a number of problems may arise. And I know of instances, particularly with literary estates, where a producer thought she had the rights, but didn’t!”

Naghdi further notes, from his own hard-fought experience as both a lawyer and successful producer on films such as Rescue Dawn and the upcoming No One Lives, that, “Some producers may take the view that once there’s momentum on a project, that’s the time to start getting the legals done. They fail to think about how many other tasks need doing when you’re heading into pre-production. It also means you have absolutely little or no negotiating power; there’s a long list of things you must get right and which will trip you up, if they deviate from standard practice.”

The script is absolutely critical. If that isn’t right it’s a complete drop-dead no go. - Simon Crowe, CEO of SC Films International

This initial packaging period is perhaps the most essential of all the stages. It is the process where commercial clarity needs to be achieved if any talent worth its salt, not to mention gap or equity funders, are going to give the project a second glance. So, now our producer needs to get someone to actually value the film, because that cheque book is just starting to get a pounding. What is the project worth? Do the commercial ingredients stack up or need changing? This is part of the elimination process that the package must go through if it is to be made; without it the film is pretty much doomed.

A good international sales company is normally a reliable water diviner as to the film’s global value. Simon Crowe, CEO of SC Films International, which is currently representing a range of strong commercial fare including the forthcoming Danny Trejo vehicle Bad Ass and the inevitable Cockneys vs Zombies, is succinct in how he evaluates any indie project that comes through his door. “The script is absolutely critical. If that isn’t right it’s a complete drop-dead no go. If a producer comes to me they must be able to pitch the project in two minutes because when it comes to selling the film to international film distributers at the major sales markets, that’s all the time we will get. Firstly, the producer has to know what the film actually is and who it is for. As a small independent production, if it doesn’t have some kind of unique selling proposition then how can we possibly know what the film should be made for? It’s chicken and egg; more than ever, we live in a film world where the majors saturate the market with huge-budget blockbusters. To compete we need to be smart, commercial and actually have something unique to offer.”

Along with the international sales company—if our producer is able to bring a suitable one on board—which other partners should he look to recruit? Post-production equity investment can represent another valuable source of funding for the cash-strapped enterprising young producer although, inevitably, there are caveats. Over the past two years, Molinare Post Production has invested in some 31 films, including the recent box-office smash, The King’s Speech.

The company’s managing director, Richard Conway, has some comforting words for independent producers. “As a leading full-service feature film post-production provider in the UK, we are frequently engaged at an early stage by productions seeking to confirm their post-production requirements prior to securing finance. This allows us to assist the production to close their financing through a combination of introductions to our own financial partners and industry contacts, as well as committing our own financing on occasion.” Yet Conway also has a cautionary note. “An issue that we have more recently encountered on occasion—due undoubtedly to the present economic climate—is the lack of contingency available for productions. This can affect us acutely as any overspend in production directly affects the funds subsequently available for post.”

Fortunately companies such as Molinare and contemporaries like LipSync and Prime Focus, have, through hard-earned experience, the depth, flexibility and resources to find solutions to such issues and ensure these contractual delivery requirements can be met. Tax breaks, specifically in the form of the UK’s Enterprise Investment Scheme for the purposes of our argument, have become another important part of any independent producer’s arsenal. Since 1993, this government-approved scheme has encouraged investors to put money into small businesses in return for a range of tax benefits. The historically peripatetic UK film industry has particularly taken to this form of investment vehicle and from next year these breaks are set to become even more attractive, with the recent decision to increase the income reliefs to 30 per cent, as long as the investment is held for three years.

Since its introduction a range of specialist companies proffering both advice and investment have prospered on the back of this legislation, to the general benefit of the industry. One of the most experienced in the sector is Quickfire Films, who specialise in providing minimum guarantees to films with international sales potential; recent credits include the award-winning documentary, The Cove. James Atherton, an independent production and financing veteran and now Quickfire’s managing director, explains, “For us it all starts with the screenplay. But since Quickfire is not an equity player—we put up an advance or MG against international markets—we need to see key parts of the package in place: director, producer and realistic cast expectations and, from a business perspective, budget, realistic finance plan and sales estimates, usually supported by one or two pre-sales. And we need the film to be bonded! But every film is different and has different requirements, from documentaries such as The Cove through to a thriller like the forthcoming Retreat, and therefore we have to remain flexible and try to meet producer requirements on a deal-by-deal basis if we’re to remain competitive.”

Distribution is often considered to be the last link in the chain, and something we’ll look at in greater detail next issue. For the purposes of our argument, however, it shouldn’t be. As Mark Webster, chairman of the UK’s Metrodome Film Group, cautions, “Producers increasingly need to balance creative aspirations with the commercial value of their film in the marketplace. Raising finance is significantly easier with distributor on board and setting the appropriate budget for a film given its potential audience seems sensible. A good independent distributor can certainly help with that and in this market is becoming increasing vital in our evaluation of any project that we might invest in.”

We have our script, our cast, our director, our crew, the money and a bond in place. What could possibly go wrong… ?

Related: Three Steps to Heaven? Part One

Taken from movieScope magazine, Issue 24 (September/October 2011)

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