19 April 2000 - 09 June 2000
Investors
joe
9:17 am wednesday april 19, 2000
our original budget was for $150,000 with each investor point costing $1,500. now in the final stages of post-production we find our budget nearer to $160,000. how do we get the additional monies needed?
re: Investors
John Cones
10:31 am wednesday april 19, 2000
Joe:
Get the written permission of all of your current investors to raise the offering maximum to $162,000 and sell 8 more units or "investor points" (as you refer to them) to existing or new investors. If necessary, contribute a portion of the producer's share or the revenue sharing ratio as between the producer group and the investors, so that your current pro rata division amongst your investors is not substantially diluted.
John Cones
Short Film Financing
Marcos
12:10 pm thursday april 20, 2000
I am contemplating going out to a number of private investors (most of whom I have an intro into) to raise approx. $30,000 for a short film. I am drafting an Informational Memorandum (not an Offering Memo) and was wondering (1) if this is a good idea, (2) where I might get a sample of one for a short film and (3) what other resources you could recommend. I am avoiding "friends and family."
Thank you!
re: Short Film Financing
John Cones
4:02 pm thursday april 20, 2000
Marcos:
None of my clients have ever raised money from investors for a short film. They have for documentaries, television pilots, live stage plays, infomercials and feature films (development or production). I think the reason is that there is not much of a market for short films. In other words, if no (or very few people) are able to make any money producing and selling a short film, or there are few prospects for making money with such a film, it is extremely difficult to attract investors to the project. Most people I've talked to suggest that your idea for a short film should be expanded to feature length, or develop something appropriate for an ultra low budget project and raise money from investors for that instead. At least, you can demonstrate that some feature films do make money, even if it's a long shot. Plus, feature films have more appeal that film shorts. Again however, if you can go out and do the market research and determine that there's a market for short films, then using investor money might be fine, otherwise, people doing short films usually use their own money, because the project is really just to benefit them, in the sense that the project is being used to show their work, and is not intended to make money. Also, keep in mind, the low amount of money you are raising does not determine whether the securities laws are involved. The question is whether the investors are active or passive. If you're raising money from a group of passive investors (no matter whether family, friends, acquaintances or strangers) then you are probably offering a security, and you need to be sure you are in compliance with the securities laws.
John Cones
financing and incorporation
Wayne Franklin
7:09 am friday april 21, 2000
I have been told tht before actively soliciting investors, you should have the corporation which will produce the film in place. It was suggested that you may face some liability otherwise, but my source (a filmmaker, not an attorney) couldn't remember exactly why. There was also some mumbling about SEC filings if seek more than a certain amount. (Again, no more clarification.) Could you shed some light on this issue as well as on the current preferred ownership structure for a single production? (i.e., is it an LLC with the producers as general partners and the investors as limited partners?)
re: financing and incorporation
John Cones
8:42 am friday april 21, 2000
Wayne:
If handled properly in the disclosure document, it is permissible to sell what we call pre-formation interests in a corporation, limited partnership or limited liability company to be formed upon funding. So, you do not necessarily have to create a corporation before raising money. The bank will most likely, however, require some sort of documentation that a company exists, even if it's a fictitious name filing, before opening the bank account in which you intend to hold the funds. There is very little liability exposure for raising money from investors and depositing it into an interest-bearing, segregated bank account. Film production activity and releasing the film create the liability potential, thus the entity needs to be created upon minimum funding (i.e., before you start spending any of the investor money). Now that LLC's have been authorized by statute in all 50 states, that is probably the preferred investment vehicle for single film project financing, except in those states like Texas where taxes on the LLC are greater than the LP form of doing business. So, you need to look at the advantages and disadvantages of doing business as an LP or LLC based on the state law in which you intend to conduct your business of producing a feature film. The managing entity for an LLC is referred to as the "Manager". The managing entity for an LP is the general partner. You don't want to confuse the two. An LLC does not have a general partner. Also, the investors in an LLC are referred to as "Members". Investors in a limited partnership are limited partners. It is also permissible for a securities attorney anywhere in the country to prepare your offering memorandum, but local counsel in the state where you are conducting your business needs to approve of the LLC operating agreement, and handle the filing relating to the creation of the entity (since that is a state function).
John Cones
Public television series financing
Jason Tecza
3:20 pm monday april 24, 2000
I am developing a weekly series that has drawn the interest of a few PBS affiliates. In order to get commitments from them to air the programming, they would like to see commitments from financiers & sponsors. Without a pilot episode, viewer responses, or a ratings track record, the financiers are reluctant to commit to funding, even though they like the concept. The catch 22 is locked and loaded.
Historically, what has been the most effective method of raising funds for public television programming? Are there any innovative techniques or financing options that are effective right now? Please recommend any web resources or printed materials that would point me in the right direction.
re: Public television series financing
John Cones
4:11 pm monday april 24, 2000
Jason:
Maybe you overlooked the introductory explanation describing what the appropriate subject matter is here at this site. It's questions regarding investor financing of independent film. Your question is not appropriate for this Q&A site, and I'm not the right guy to ask about public television financing. If you have a specific question about investor financing, I'd be happy to try to help. If, for example, you wanted to raise money from investors to produce a pilot program, that may be feasible using investor financing techniques. Let me know if I can help.
John Cones
Film Financing Database
mara
11:14 am tuesday april 25, 2000
I am currently compiling a database to be used as an independent producer's guide to sourcing funding for film, television and broadband content, worldwide. Do you know of a comprehensive listing for public and private US funders of film?
Thanks
re: Film Financing Database
John Cones
1:53 pm tuesday april 25, 2000
Mara:
The only thing I've seen like that is what is published each year by the Hollywood Reporter, and maybe something similar in Variety, under the heading "Where the Money Is" or something to that effect. Only a limited number of independent producers will be able to access those funding sources, however, since most require recognizable names attached, and/or a producer with a track record for bringing a film in on time and under budget. That eliminates a lot of first-time filmmakers and others who do not have the money to attach elements. Sometimes my clients will conduct so-called development/packaging offerings to raise the startup money from investors so they can then obtain firm commitments from one or more creative elements, that will, in turn, allow them to seek industry financing for the production costs.
John Cones
risk-return statement
pagit
10:43 pm wednesday april 26, 2000
is there a sample of a risk-return statement available on the net? what should one state in this 'disclaimer' and how much details should be included in it?
re: risk-return statement
John Cones
10:05 am thursday april 27, 2000
Pagit:
I've seen no such document on the Internet, which does not necessarily mean it's not there somewhere, but, if it is, I don't know where. What we usually provide in a private placement offering disclosure document is a three or four page risk factors section (required by the securities laws) disclosing as many of the risks that can occur because of an investment in the offering. A sample of that appears in my "Film Industry Contracts" book (containing about 100 sample film industry agreements), but at this point, the individual agreements are not available. The book is available through Amazon.com or Barnes & Noble Online. The diskettes are available through Rivas Canyon Press at 310/477-6842. With respect to the return, we normally provide Financial Projections as an exhibit to the offering memorandum, accompanied by written assumptions on which the projections are based and appropriate disclaimers. The disclaimer language also appears in the sample feature film limited partnership offering disclosure document in "Film Industry Contracts", but I don't think the financial projections are there. In my practice, I generally do not prepare the financial projections for my producer clients, but I do provide them with several samples that can serve as a guide in the preparation of such projections. Both of these documents are too lengthy to include in the brief answers to questions posted at this site.
John Cones
projected returns shedule
Dominic
3:57 pm sunday april 30, 2000
I am in the throws of finalizing my business plan/propectus for an indepedent film project. We are seeking private equity investment, and I'm designing the plan to account for investors who may have little experience with the industry. I would like to show an approximate schedule of returns for the various markets that the film will be sold to, i.e. domestic theatrical, foreign theatrical, pay cable and video cassette. Is there an industry standard timeline? Is there a source to research this information.
do big names sale script?
chrys
5:30 pm monday may 1, 2000
I am interested in knowing if the more well-known or familiar names you have attached to your script causes investors interest to go up, if so how do you go about attaching names to your script?
resources
Scott Wyler
11:45 am tuesday may 2, 2000
Can you recommend a reference source that will outline the different ways in which films are financed? I am most interested in mid-sized (say $25-$50 million) films -- not tiny ones. Say I am a producer and I have a script and a director and a complete talent package, and maybe even production facilities. What are my options for funding? I want to start with an overview so I can get grounded before I get into minute details.
Thanks!
SW
your book
Scott Wyler
1:38 pm tuesday may 2, 2000
What's the fastest way for me to get your book?
re: projected returns shedule
John Cones
4:40 pm tuesday may 2, 2000
Dominic:
I generally refer to what you are calling a "projected returns schedule" as financial projections. First, however, I think you need to be clear as to whether you are preparing a "business plan" or a "prospectus". The former may be used in seeking investment from one or two active investors, while the latter is associated with a public offering of securities. An offering memorandum, is used as the required disclosure document for a private placement offering of securities.
In any case, it is my opinion that trying to go into as much detail as your question suggests with financial projections adds little in the way of helping investors determine the prospects of profitability for the proposed investment. It's just too speculative. In addition, there are no readily available and reliable sources of information for each of the markets and media that might be isolated and included in such projections. My recommendation is that you start your underlying assumptions with three different levels of assumed worldwide grosses for your film based on its exploitation in all markets and media (e.g., poor, moderate, excellent). Then make reasonable deductions for distributor fees and expenses, and other deductions based on the assumed deal with the distributor, followed by investment entity deductions and percentages as between the investor group and producer group per the revenue sharing ratio as between them. Finally, take those calculations all the way down to a single unit purchaser for all three columns. That way, you are clearly not predicting what an investor might earn, but showing the possibilities (poor, moderate and excellent). With films, it is extremely difficult to be more precise, because nobody knows whether your film will get a distributor, and if so, how audiences will react.
With respect to a "timeline" (i.e., so-called market windows), you may want to check Harold Vogel's book "Entertainment Industry Economics" (third edition, page 72).
John Cones
re: do big names sale script?
John Cones
4:52 pm tuesday may 2, 2000
Chrys:
A lot of different elements of a film project might contribute to attracting investor interest, but I think it is fair to say that, all other things being equal, a commitment from a recognizable name will generally increase interest in the project for many prospective investors. The problem, as you well recognize, is that it often takes money to get those commitments (i.e., to get a firm commitment from an actor, actress or director to set aside a certain number of days for your shoot during a specific period of time). The amount of money and the type of deal that will work, depends on the specific actor, actress or director, and it changes all the time. If you want to go this route (i.e., try to attach a recognizable name before raising your production funds), my suggestion is that you hire a good casting director/agent to help, because this is the area in which they specialize. They're out their on the front lines so to speak, dealing with agents representing talent every day. They might be able to give you somne idea who is available and what to offer. The deal may range anywhere from nothing but a great script with a terrific part to a full pay-or-play deal (which, of course, you probably won't be able to afford, depending on the actor, actress or director), or something in between, which might be a non- refundable deposit based on a percentage of the talent's normal compensation. In any case, once you get an idea, of how much that is, then you might want to put together a so-called development/packaging offering to raise this early money from a group of investors for the purpose of financing the cost of getting this commitment from talent. But start with a casting director/agent.
John Cones
re: resources
John Cones
4:57 pm tuesday may 2, 2000
Scott:
At $20 to $25 million, you are most likely looking at dealing with the major studio/distributors for production money financing. That means you will be seeking a production- financing/distribution deal. That's probably a bit high for a negative pickup or foreign sales (lender) financing, backed by a distributor agreement/guarantee. A P-F/D deal also means the studio will be producing the film and you may or may not be able to remain attached. The only overview of film finance that I am aware of, since I once asked the same question and researched the industry literature before writing it, is my own "43 Ways to Finance Your Feature Film".
John Cones
re: your book
John Cones
5:01 pm tuesday may 2, 2000
Scott:
It depends on where you live. If in the Los Angeles area, where a lot of bookstores carry my titles, call the nearest book store and ask if they have it. Samuel French on Sunset generally does, but so do a lot of other bookstores here in Los Angeles. Otherwise, bookstores in your community that tend to carry film industry titles may have it. Call first. You can also order it directly from Samuel French or online at Amazon.com and Barnes & Noble online. I suppose you could also get it directly from the publisher (Southern Illinois University Press in Carbondale, Illinois). Other than picking it up at your local bookstore, I don't know which is fastest. Ask them when you call.
John Cones
Film Finance
M. Junaid
9:35 am friday may 5, 2000
Just wanna know if any body there who want's to invest his/her money in Indian Cinema ????????
Finance for Indian Film
M. Junaid
9:45 am friday may 5, 2000
Hi body thre must be some one who wanna invest his/her money in Indian films, The best thing of indian Film is now a days they have i large market 100% return & low risk, so any body intrested in this offer i am redy to provide full detail of project.
Junaid ( Crystal Communication )
The future of large format cinema
Ira Flowers
3:05 pm friday may 5, 2000
Are large format (15 perf 70mm, 15/65) productions tougher to finance then typical features?
Is there any information on financing large format productions out there?
re: Film Finance
John Cones
7:52 am saturday may 6, 2000
M.
It is not appropriate to post investor solicitations at this site. Besides, it is very unlikely that investors will be visiting this site.
John Cones
re: Finance for Indian Film
John Cones
7:56 am saturday may 6, 2000
M.
In addition, if you are trying to raise money from passive investors in the U.S. you will need to comply with the U.S. securities laws, some of which require that if you want to advertise (i.e., post a message on the Internet as you have done) you will need to obtain advance approval from the SEC and in each state in which you expect to raise money. In addition, you will need to provide an approved prospectus (disclosure document) to each prospective investors prior to their investing. Something tells me you have done neither. In any case, please do not post such messages on this site again.
John Cones
re: The future of large format cinema
John Cones
8:01 am saturday may 6, 2000
Ira:
It would be difficult to say with certainty whether large format films are more difficult to finance, since there is little existing history for such ventures. I think it is safe to presume that they would be since there is not much information about the money such films make. But if you can develop some such information (i.e., how such films are performing in the marketplace, and some information about that specific segment of the industry, much of the rest of the information that goes into a securities document relating to such an investor would be very similar to that used for 35mm feature films.
John Cones
re: The future of large format cinema
John Cones
8:01 am saturday may 6, 2000
Ira:
It would be difficult to say with certainty whether large format films are more difficult to finance, since there is little existing history for such ventures. I think it is safe to presume that they would be since there is not much information about the money such films make. But if you can develop some such information (i.e., how such films are performing in the marketplace, and some information about that specific segment of the industry, much of the rest of the information that goes into a securities document relating to such an investor would be very similar to that used for 35mm feature films.
John Cones
The Internet --&-- Shorts
Kurt Stoneking
8:38 pm friday may 12, 2000
I am in the process of producing a short film with some associates. We have heard rumors that the internet market is opening up new avenues for distribution. Is this true? If so, what issues relative to this should we be aware of? Is this a valid enough market at this point to attract investors based on internet distribution.
re: The Internet ----&---- Shorts
John Cones
9:52 am saturday may 13, 2000
Kurt:
There has been a considerable amount of discussion online and in the trade press about the prospects for going direct to the Internet with film shorts or feature films. There are sites now available that will exhibit film shorts, and recently a feature specifically produced for the Internet was presented online. So far as I know, the economics of such exhibition is not quite far enough along to attract investors, however, attracting investors to provide production-money financing for feature films to be exhibited in traditional media is also quite difficult, but it is being done. So, no one can tell you that you can't interest investors, it is just going to be difficult to reassure them with statistics about the economic prospects of the project (just as it is for feature film). The difference is that some feature films from time to time do generate a significant amount of revenue, and that has not yet happened with film shorts for the Internet. I would suggest that you get online and try to find these independent film sites that are now working with film shorts and possible features in the future and see where their efforts are leading. Also, contact my associate James Jaeger in Philadelphia regarding this topic. He has been a pioneer in this field and is quite knowledgeable. He can be reached at contact@mecfilms.com.
John Cones
Pitch Info.
Scot
4:18 pm monday may 15, 2000
Dear John,
I was wondering what selling points should be included in a pitch to an investor and what points are the most vital to it's success.
Thanks,
Scot
re: Pitch Info.
John Cones
8:03 am tuesday may 16, 2000
Scott:
The answer to your question actually encompasses everything that might be included in a feature film offering disclosure document: why your movie is different, a marketable concept, appealing to a specified target audience, that the script is well written, by an experienced screen writer (if that's the case), that you have an experienced cast and crew (or some of them) in place, other similar films in the past have done well, the revenue sharing ratio as between the producer group and the investor group is fair or favorable to investors, the people involved know what they are doing, the upside potential is significant, the early money invested and held until the minimum is achieved will earn interest (if that's the case), the producer group is not front- end loading the offering (i.e., getting too much of their compensation up front), many salaries are being deferred (if that's the case), no broker/dealer commissions are being paid, offering expenses are being kept at a minimum, the financial projections being provided are conservative (if that's the case), investors enjoy limited liability (with LLC or LP), the investor will be able to spend a day on the set and visit with other investors, actors and crew (if that is planned), the investor's son, daughter, neice or nephew can be an extra in the film, it's an opportunity to learn something about the film business, it's a family film (the kind that Hollywood doesn't do enough of --if that's your belief), the messages communicated through this film are important to this investor and/or to society, no investor funds will be spent until the minimum is raised, rights to the script have been secured, investors will recoup at a specified level before the producer group begins to participate in film revenues at a significant level, if the investor is related to you, he or she may be interested in supporting your career effort, you have the discretion to offer fractionaly units to smaller investors, some limited tax deductions may be available, you have a distribution deal in place, or certain distributors have expressed interest or you hope to create a bidding war amongst distributors when you approach them with a completed film, and so on. Such selling points and what works will vary considerably from investor to investor, and of course, in a securities disclosure document these points will be balanced with a fair discussion of the risk factors involved in such an offering.
John Cones
What about Tax breaks and other breaks?
Head Honcho
12:06 pm wednesday may 17, 2000
I'm not to sure of all the details but I remember reading that there were quite a few tax breaks for investors in film back in the 70's and it one of the reason a lot of indies got made back then.
As laws have changed and do change every year. I wanted to know what form of tax breaks can you off investors? Also, are there any other financial breaks you can offer investors that maybe they might not know about.
I'm thinking that it would be a lot easier to get people to thrown there money into your project if there was some kind of back up, so that even if the film didn't make money, the investor can still benefit... Any info on this I'm sure would be appreciated by all on this forum...
re: What about Tax breaks and other brea
John Cones
8:26 am thursday may 18, 2000
The significant federal tax benefits associated with so-called direct participation programs (the limited partneships) were eliminated by Congress in 1986. No such U.S. tax benefits have been available since. However, for business ventures (including film production) operated for profit and organized as a flow- through vehicle (i.e., LP or LLC)some tax deductions will still be available to your investors on a pro rata basis as ordinary and necessary business expenditures incurred in the course of operating the business. Deductions for production costs cannot be taken, however, until the product (the film is placed in service). The costs incurred for advertising, if any, can also be deducted, and in the year incurred. LP or LLC organization costs can be deducted, but must be amortized over a 60 month period. Syndication (selling) costs are not deductible. Many practitioners include a detailed tax discussion, along with a tax opinion as part of a private placement offering memorandum. Some, on the other hand, particularly with the low budget pictures (offerings) take the position that the tax discussion is not material, since no signficant tax benefits are being offered. Securities regulators in some states will want to see the tax discussion any way, because they believe it is relevant and material to investors, thus to be safe, it ought to be included. Most state securities regulators take the further position that neither LP general partners, nor LLC managers are capable of authoring tax discussions or opinions. So, be careful about trying to do that on your own (depending on the state's level of review of the offering and policy).
John Cones
How about having starting funds???
Honcho Again
9:56 am thursday may 18, 2000
I assume that if you have a well known actor or director that getting funding wouldn't be so hard. However, how much money do you think is the lowest amount you can start a project with and get other funds. I know it must be different for different movies, depending on total budget needed and who your stars are. I've known quite a few people who could get me matching funds but I wanted to know if there is anyway to get a movie off the ground with little or no out of pocket expense, short of lawer fees and some business fees. Maybe this question is a bit to general but I wanted to know of any examples you might know of that might have worked in the past or something that always seems to work. I know there no 'sure things' but what is the closet in your oppinion. Thanks again John, this board is great...
Honcho
financing and format
Andy Dunderas
11:53 am friday may 19, 2000
Hi Mr. Cones,
I'm an eager guy in Toronto, Canada who's trying to put together a film project and finance it with the help of friends and maybe others who I don't know. Anyway, my question is: is the format you use to record your project a factor as to whether investors will be more or less interested in your project. i.e. 35mm vs. 16mm vs. DV.? Obviously a film done in 35mm is more expensive but is it more likely to be invested in than let's say digital which I assume is much cheaper (tech. wise). I want to read your book, "43 Ways to Finance Your Feature Film", but I'd like to know if you know whether it would be more advisable to be informed from a Canadian source, or is your material fairly international friendly, barring minor details?
re: How about having starting funds???
John Cones
2:55 pm friday may 19, 2000
Honcho:
Yes, there are no sure things and in the field of independent film finance, that is nothing that I know of that "always seems to work" as you say. I work in the this field of investor financing of independent film because for some film projects that is the only way they will ever get the story on the screen (i.e., budget is too small, story too controversial, first time filmmakers, and so forth). I have had independent producer clients successfully raise money from investors for feature film private placement offerings ranging from $100,000 to $2.5 million for development/packaging, production, completion funds and distribution. Many of such offerings, however, do not succeed. At least with such offerings, the high risk involved is being spread amongst a fairly large group of people and they do not interfere in the filmmaker's creative vision. I've also seen clients get on the street with a private placement offering and raise money for as little as $5,000 out of pocket (reimbursible from the investors in a successful offering).
John Cones
re: financing and format
John Cones
3:00 pm friday may 19, 2000
Andy:
If you're doing an ultra-low budget picture, the investors may appreciate the fact that you are asking for less money up front, and the trade off is that there may be a difference in the quality of the picture blown up from 16mm. In other words, you have to convert the low cost into a selling point. It's impossible to know, what percentage of investors would care. If in your judgment, you can produce a film that looks as good as other films when finally put on the screen, after you have conducted what studies you need to, I suspect most of your investors are going to rely on your judgment. After all that's part of what they are investing in.
I'd have to say that most of the "43 Ways" book is based on U.S. law and may not be applicable in Canada.
John Cones
Originality in the UK
Jes Sadler
10:34 am monday may 22, 2000
Greetings from across the great wet divide.
Having returned from a short holiday on a Greek island, it suddenly occurred to my friend and I that we have the ability to produce, write and direct a feature, as well as deal with all the technical processes, pre- and post-production sound and editing and write and record all of the music.
My question is: would a proposed feature film (c.90 mins.) made by untrained amateurs, starring untrained amateurs and entirely produced by a small circle of very close friends be a complete turn-off for a potential investor? It seems to me to be a unique concept, and has certainly proved its worth in the 'adult entertainment' industry.
As you are probably well-aware, any kind of financial interest in movie-making is notoriously hard to find over here in the UK. Any idea if there's a British version of you lurking on the net?
Many thanks
the jesmeister*
re: Originality in the UK
John Cones
4:24 pm monday may 22, 2000
Jes:
I'm not aware of anyone based in England who specializes in investor financing of entertainment projects and business startups as I do. I could also never take the position that any kind of creative idea for making a film would be a "complete turn- off" to investors. If the idea was unique and interesting, held out the possibility of audience appeal for a significant target audience, was presented in an appealing manner it is entirely possible to obtain financing for a low budget feature with a properly drafted disclosure document. Maybe you and your friends should just come on over and associate with U.S. filmmakers and create your film here. You could still raise some of the money in England.
John Cones
Finishing The Film
Kevin
7:01 pm monday may 22, 2000
We recently shot a feature-length movie on 16mm. All the money to shoot it came from me.
Anyway, I'm trying to raise the completion funds to finish it. We're looking to just get a distributor to pick it up and move it on video, so we're not looking for a big theatrical release.
My question is: Most of my cast/crew is on deferred payments where I promised them a percentage of whatever we profit when it's sold. Now, to try to get a distributor to pick up the tab to finish the movie, do I form an LLC? Do you handle this sort of thing, if I needed contracts and business advice and such?
Any other advice, such as a book I could buy that lists potential investor/distributors is appreciated. If you want to email me about your services, I'd appreciate that also.
Kevin
Marauder Productions
http://members.aol.com/marauderpd
re: Finishing The Film
John Cones
8:53 am tuesday may 23, 2000
Kevin:
You do not need to form an LLC in order to get a distributor to pick up the tab for completing your film. An LLC is more commonly used as the investment vehicle for a group of investors that are financing some stage in the life of the film. Investor money can be used to finance any one or more of such stages including acquisition, development, packaging, production, completion and/or distribution. So, if you determined, for example, that you needed $50,000 to complete the film, another $10,000 to market the film to prospective distribtors, along with another $30,000 to self-distribute just in case a distributor does not come on board, then it might make sense to conduct a private placement LLC mini-maxi offering ($50,000 minimum and $90,000 maximum)to raise such funds from investors, and to give you some options in how you proceed. I suggest you contact the Academy Library reference line at 310/247-3020 to see if they can help provide a list of video distributors. Or check with the Samuel French Bookshop (on Sunset Blvd. in Hollywood, and also online) to see if they have a directory of such distributors.
You may also want to check around to see if you can find a film finishing fund. I have one client that is in the process of creating such a fund, but it's not up and runnng yet. Lists of investors may be available through Surfview.com or other list vendors. Such lists cannot be used during the course of a private placement securities offering, however, unless you have developed a pre-existing relationship with such prospective investors prior to the start of the offering. You could use such lists for finding one or two active investors, or for a public/registered offering.
If you have any additionial questions about what I may or may not be able to do to help just give me a call at 310/477-6842.
John Cones
a film on Buddhism and Indian values
sudipto sen
6:28 am wednesday may 24, 2000
Hello!
I am an independent film maker from India. As a result of my three years research on Buddhism in Ladhak at Inod-tibetan region I have developed a unique human story on Nature, Buddhism, man-woman relationship and role of nature in to it. I strongly believe it is a concept that has shot never before.
Other basic highlight of the proposed film is - it is going to be a very low budget full length film to be shot in 35 mm- cinemascope format. Budget is 80, 000 US Dollar.
Because of stiff Indian censorship law it will be difficult to release the film here with out cut. More over, because of social taboos it will be difficult to extract immence business possiblity of the film.
I have two fold request: one, I am looking for a broad hearted producer/financer for the above mentioned amount for production;
two, if I organize the fund, I will be looking for international distributors who can ensure the business in highly potential market for the said film particularly in Europe and South America.
thank you,
sudipto
sudiptoo@vsnl.com
re: a film on Buddhism and Indian values
John Cones
8:04 am wednesday may 24, 2000
Supito:
This is not the appropriate site to be seeking a co-producer. Check out Surfview.com.
John Cones
Tax,investment and law resources
Jason Salonen
7:54 pm thursday may 25, 2000
Dear Mr. Cones,
I'm trying to find a comprehensive listing of tax ad vantages that I may be able to offer to investors. I'm sure that thier tax lawers probably are aware of them but I'm sure it would help if I knew exactly what they were as well. Also are there any good books on finance procedures for film specifically that I can get for my accountant, as he's been a buisness cpa for twenty years and new to film,(no he's not doing my production books),and has been enjoying the challenge of setting up my corp. in a new field of buisness and we want to do this right.
Do you have any reccomendations for an atty. who work in your capacity in Utah? I'm based here and don't know if there are any really savy firms I can go through. There is not much word of mouth here on the subject as most people seem to ignore the issue until it's too late or they make a deal where it's handed to them.
I would like to start out as prepaired as possable in this new arena as I can. I know a set like the back of my hand , but the finance and legal aspect can get confusing, (due to varied opinon, qualified or not) and dangerous. Too many people I know have tried the same thing and failed because of a lack of knowledge of the fundamentals. On set we like to say "Success is in the prep."
I'll stop babelling now. Thank for offering a great web site.
Jason L. Salonen
re: Tax,investment and law resources
John Cones
8:13 am friday may 26, 2000
Jason:
Few, if any, investors invest in film deals these days because of tax advantages. Most significant tax advantages for investing in the so-called direct participation programs (like limited partnerships and LLC's) were repealed by Congress in 1986. Many securities attorneys today even take the position that it is not necessary to include a tax discussion or opinion in such offerings, because in their view, such disclosures are not material to the offering (i.e., investors are not motivated by the tax consequences of the investment). On the other hand, depending on the state in which you intended to make offers or sales, the state securities regulatory authority may require a discission or opinion, precisely because they believe the tax consequences are material. It's easy to get lost in trying to research the tax consequences of an investment in a film deal, but if you want something more focused, there is a copy of a private placement feature film offering including a tax discussion and opinion included among the 100 or so sample agreements in my book "Film Industry Contracts" available through Amazon.com, Barnes & Noble online, Samuel French Bookshop or directly from the publisher Rivas Canyon Press at 310/477-6842. That particular discussion is slightly dated but your accountant can easily get a feel for the tax issues by reviewing it and noting that the entity classification rules have changed. I do not know of securities attorneys in Utah that do film offerings. I have worked with Utah producers in the past. Most of the work associated with a securities offering is based on federal law. We would need a Utah attorney to review the LLC operating agreement (or LP agreement) because that's based on state law, although I would provide the basic agreement, and hopefully it would just have to be modified slightly to conform with specific Utah requirements. Depending on what you are doing, you may or may not want to incorporate. Either call me at 310/477-6842 and let's talk briefly, or E-mail me directly at jcones@gte.net.
Re: Corporation vs. LLC
Karen Scott
3:38 pm friday may 26, 2000
I have a corporation that I could change the paperwork on to use for movie production. Would this be a good idea, or is an LLC better? Right now, I am only getting my feet wet with local documentaries in the Birmingham, Alabama, area, short films and working with high school students. I would, however, like to have protection in case some accident occurred during shooting, or in case of a lawsuit of some kind. I would like to use the corporation as an umbrella organization, then d/b/a's for each individual project, so that I can purchase insurance for all of them through one policy.
re: Finishing The Film
Kevin
2:21 am saturday may 27, 2000
Thanks for the reply and info! Anyway, say a distributor shows interest in finishing the film and wants to make a deal. Are you a lawyer that deals in this kind of thing, so that I could send you the contracts and you could make sure I'm not signing away something I don't want to, or could negotiate in our behalf for the best deal? If not, any referrals? There really aren't any entertainment attorneys in our area(Maryland).
Anyway, thanks again. Great forum. I'm going to post a link to it on our web page.
Kevin
Marauder Productions
http://members.aol.com/marauderpd
Re: Corporation vs. LLC
John Cones
8:58 am saturday may 27, 2000
Karen:
Most corporations are authorized pursuant to a general purpose clause, that allows them to engage in any business that's legal. I suppose if your articles contain a more specific or more limiting authorization, or your bylaws or board minutes have only authorized certain business activity, then it would be appropriate to "change the paperwork" as you say, otherwise, there may be no need to do so. If, the corporation was properly formed and has been properly maintained (records, taxes, etc.)the existence of that entity will provide about as much limited liability as an LLC. On the other hand, if you are trying to raise money from investors by selling corporate stock, you have to deal with questions relating to the dilution of your ownership interest and thereby your control of the corporation. In addition, if you conduct an offering of corporate shares, you may have to disclose varying levels of financial information on the corporation, depending on how much money is being raised. In the alternative, you can use the existing corporation (if authorized) to serve as the Manager of a series of LLCs (or general partner of a series of limited partnerships) and use one of those vehicles to raise the money for development, packaging, production, completion and/or distribution of one or more films, arranging to have all rights to such films revert to the corporation after the investment vehicle has served its purpose, thereby creating a library of films in the name of the corporate (manager or general partner). Selling interests in a passive investor LLC (or limited partnership) will not dilute your ownership/control of the corporation. Each investor group will only be participating in the revenues of the film or films financed by the particular LP or LLC invested in. The disadvantage is that you then have at least two entities to maintain (records, taxes, etc.) On the other hand, a dba (fictitious name) is not an investment vehicle. You could have created a dba for the production company and then conduct an LLC offering to raise money for one or more films, allowing the production company (dba) to serve as the manager, and still have enjoyed the limited liability you seek, without the expense and effort involved in creating or maintaining two entities. This approach often works well for low budget film producers. It's great to hear from someone in Alabama! I'm originally from East Texas and I miss the piney woods.
John Cones
SEC Concerns
Jaq
10:51 pm thursday june 1, 2000
I am currently creating an overview document that entails the mission of the production company and the details of the first script to be produced with all the principle info. While that is the case, I still would not call this a full blown business plan. My partner and I are planning on using this document to gauge interest in the project.
Our goal is to secure some passive investors. By using this preliminary document am I opening myself up for trouble with the SEC if we do not file with them before we start to distribute this document?
In other words, at what point in the process of getting money from passive investors is it mandatory that you file with the SEC?
Thanks,
Jaq
re: SEC Concerns
John Cones
8:18 am friday june 2, 2000
Jaq:
If you otherwise comply with the conditions and limitations imposed on the use of the SEC's Regulation D, a private placement exemption from the registration requirement (i.e., no advertising, no general solicitation, sales limited to persons with whom you and your organization's upper level management have a pre-existing relationship, no more than 35 unaccredited investors, a proper disclosure document provided to these investors 48 hours prior to their investment, etc.) you will not need to submit your notice filing to the SEC until before 15 days following the first sale in the offering. That means you can talk to the prospective investors that you know and show them your preliminary document, without running afoul of the SEC, so long as you otherwise meet the conditions and limitations of Reg D and each state's compatible exemption. But, if you do not have the required pre-existing relationship with these prospective investors, your entire preliminary document and pitch must be re- oriented toward finding a few active investors (at this preliminary stage), not passive investors, otherwise, securities regulators may take the position that even though you were not using a properly prepared private placement offering memorandum (disclosure document)at the time, you started a securities offering by using your preliminary document to look for passive investors, some of whom you did not know prior to the start of the offering. So, if you want to solicit people you don't know, it either should be done with a view toward finding active investors, or as a public/registered offering, not a private placement. Of course, a disclaimer stating that you are not offering a security will also be helpful, but not determinative, if, in fact, you are seeking investment from passive investors.
John Cones
I want to distribute independent films
Wayne L. Lee
9:55 am saturday june 3, 2000
John,
I want to distribute independent films to broadcast channels. I have been to film festivals and am impressed by the quality of the films there. But many of these films will not find distribution.
I have an idea that may or may not be viable and I would like your suggestion. If I have agreements with different broadcast channels (cable and satellite) to show independent films, from filmmakers who have agreed to let me introduce their films to these channels, do I need a special license to do this?
Also, if we all agree on a fee structure, similar to industry standards but more in favor of the filmmaker, do I need a special license to do this?
I have put "feelers" out to see if it could work and I have received nothing but good things from filmmakers in England, Indonesia, Germany, Brazil, New York, Texas, Georgia, Michigan,and Florida. However, I do not want to break any laws. John, do you think an alternative distribution strategy like this is viable?
re: I want to distribute independent film
John Cones
2:34 pm saturday june 3, 2000
Wayne:
These are not investor financing questions. If you wanted to raise money from investors and then use that money to finance your acquisition and distribution activities, we could discuss those plans here. But, the rest of issues you raise are outside the scope of this Q&A site.
John Cones
re: SEC Concerns
Jaq
2:50 pm sunday june 4, 2000
John,
Thanks for the informative reply. I do have a follow up question though.
What is entailed in filing with the SEC if I do want to search for passive investors?
Paperwork, Fees, Time, How to go about it, etc?
Thanks,
the $100 letter.
jeff conlon
11:23 pm sunday june 4, 2000
Actually the two hundred dollar letter. If I get 100 people(friends and family) to give me two hundred dollars each, what legal, contractual steps do I have to take to stay out of SEC radar? I already have a business license for my production company, in case it matters.
looking for financial some ideas good an
ANDREA DAZ
5:42 am monday june 5, 2000
Hi,
I am an executive producer from Italy and I am looking to someone who can hear to some good ideas I have to make money with some movies really easy and cheap to do.
You can contact me at my site:
anddaz.hollywood.com
or at my email
andreadaz@hollywood.com
Development Company and Offerings
Scott Lindenberger
7:24 pm monday june 5, 2000
I am currently in the process of researching the best means under which to raise investment capital for my production company. I have a completed script which I've optioned and am looking to raise between $500,000 and $1,000,000 for a film to be shot in the Midwest.
I currently don't have an entire team together (i.e. production designer, DP, AD, etc.) and am looking to structure a development company whereby I can raise money and coordinate the team through with incentive of funding while at the same time allowing me to present a better "story" to potential mini-majors and other distibution channels.
My questions is, specifically: in selling units of a limited partnership, am I required to adhere to the similar disclosure parameters as if I were performing an exempt (Reg. D, or otherwise) offering of my company's securities? I am targeting investment capital from non-affiliated, dis-interested persons who would be 'limited partners' in such my development company. Does this qualify as an "offering", as promulgated under the '33 and '34 Acts?
I am familar with Reg. D filings, such as 504, 505 and 506 offerings, as well as the more laborious Reg. A filings. As I see it, I'm not so much doing an offering of my company's securities as provding the opportunity for interested parties to invest in my dev. company in exchange for a certain specified number of units, or interest, as limited partners in the LP company.
Any comments or suggestions would be greatly appreciated.
Thank you.
scott@integramedia.com
re: the $100 letter.
John Cones
12:09 pm tuesday june 6, 2000
Jeff:
Unless you want to conduct a public/registered offering, which is probably not economically feasible to raise such a small amount of money, you will need to identify the available exemptions from the securities registration requirement (e.g., Reg. D at the federal level and each state's compatible exemption) and comply with all of the limitations and conditions imposed on the use of such exemptions, including preparation of a private placement offering memorandum (disclosure document), notice filings, numerical limitations on number of investors, investor suitability standards, risk factors, estimated use of proceeds, financial projections (if desired), creation of the entity and so forth.
John Cones
re: looking for financial some ideas goo
John Cones
12:11 pm tuesday june 6, 2000
Andrea:
This site is for use in asking questions regarding investor financing of entertainment projects based on U.S. law.
Good luck,
John Cones
re: Development Company and Offerings
John Cones
12:15 pm tuesday june 6, 2000
Scott:
Selling interests (units) in a limited partnership or passive- investor LLC clearly involves the sale of a security, and you must therefore either register the offering as a public/registered offering or comply with the conditions and limitations imposed on the available exemptions, one of which is Regulation D at the federal level. That includes the preparation of and providing a properly drafted and formatted disclosure document (private placement offering memorandum, if doing a private placement--exempt offering) to each prospective investor prior to investing.
John Cones
re: the $100 letter.
jeff Conlon
1:00 pm tuesday june 6, 2000
John-
Where can I find Red. D and the other information you listed?
WW1 Indie project needs equity investor VictorjLiu 2:30 am thursday june 8, 2000 we have a quality docu-drama that needs financing. we need $400,000.00. In return we are offering 60% equity to start. if interested lets talk.
thank you.
Victor
doc and short distributor trying feature
Thijs
5:11 am thursday june 8, 2000
John,
We are an internationally operating distributor from the Netherlands. Recently we have moved into the area of feature film sales. What strikes me is that this product group is represented fairly often in discussions and forums dealing with financing of these ventures. I wonder if financial advice exists for documentaries and short films as well. In my view the latter product lines are just as interesting from a business perspective as are feature films, but market information and especially financial information is very scarce. I am looking for (leads to) information for writing a sound investment plan into documentaries and short films. Hope you can help me,
regards,
Thijs
re: WW1 Indie project needs equity investment
John Cones
7:36 am thursday june 8, 2000
Victor:
Come on guys, don't be so desperate in your search for funds that you willingly violate the rules of the site. This site is for posting questions about investor financing, not solicitations. There are few, if any, prospective investors attracted to this site.
John Cones
re: doc and short distributor trying fea
John Cones
7:37 am thursday june 8, 2000
Thijs:
Contact the International Documentary Association.
John Cones
auditions and casting budget
manman
10:57 am thursday june 8, 2000
If you are a film industry player,please give me a big help . my stupid question is how much money I should set aside for auditions and casting when I start a film?
Thanx
re: auditions and casting budget
John Cones
7:42 am friday june 9, 2000
Manman:
I have never held myself out as a "player" in the film industry. I am a securities/entertainment attorney working with independent producers on investor financing of their independent films. For reliable information on budgeting questions, you need to identify an experienced line producer who prepares budgets, or for specific information relating to auditioning and casting contact an experienced casting director/agent.
John Cones
| Film Industry Reform Movement | Books by John Cones |
| Matrixx Entertainment | Movie Publications |
| Bookstore | Professional Services | Useful Information |
| Employment | In-Development | Script Submissions |
| Script Reading | Website Development | Non-Linear Editing |
| Film Distribution | Discussion Den | Contact MEC |
| Lee Garmes Cinema Institute |
