Before getting to the business of film here is the other Show Business.
Heading to Off-Broadway is a production of the comedy, 
Love on the Rocks.
Click below for a video synopsis:

Also an exciting new app, Chronicle, enables individuals to share photos and annotate with their own stories about any topic from films, to fishing, to the subways of New York. Below is a Chronicle of my experiences in Broadway, Theatre Festivals and Dance.

A minute overview below:


Major Changes in Film Production, Distribution and Financing

New Technology has made radical changes in Film Production.

The mid-20th Century the Hollywood 'Studio System' (actors under exclusive contracts) gave way to the 'Star System' within a Studio controlled Distribution System, but advances in production technology and new distribution channels have opened a wide door for Independent Films. The revolution is collapsing the walls of the old systems and has created a NEW WAVE of opportunities for Independent Films to be a major part of the movie business action.



No longer does a film have to be shot in 35mm for a theatrical release. Cameras like Sony's RED One have revolutionized film production.

The  complications of 35mm film stock: processing, transfers, copying, distribution, film opticals, and countless hours editing film was always a major expense to a film budget.

Rick McCallum, Producer of Attack of the Clones, confirmed his film shot on digital cost $16,000 compared to shooting in 35mm which would have cost $1.8 million. Neill Blomkamp, Director of District 9 says the decision to shoot with the Red One was a no-brainer. “It's the future of film making.”

The RED One not only looks like 35mm film, but at 4K resolution it exceeds 35mm film - and it doesn't an cost an arm and a leg. A Panasonic 35mm film package rents for $21,000 a week compared to a RED at $2,500 a week. “This camera empowers filmmakers. Before you couldn’t afford to shoot on 35mm - now you can shoot on Red.”
Current films shot in SONY RED One include: Angels and Demons, Night at the Museum, The Book of Eli, Lovely Bones, District 9, The Informant, Che, Knowing, My Bloody Valentine, Gamer, Crossing the Line, etc. The Academy Award nominated, BLACK SWAN, was shot using a Canon D7 - a camera retailing for $3,000.


Desktop Editing

A decade ago if a client wanted a simple effect like revolving a title it had to be done in an editing studio at a cost of $5000 or more.  Today such an effect costs $0 since the effects are included in desktop editing software programs (Avid, Final Cut Pro, Sony Vegas), and as simple as clicking a mouse.

Software programs like Gorilla, Movie Magic and Celtx also reduce time and costs in scheduling, storyboards, budget development and supervision, etc.

In the past the only way to add music to a movie was to hire an orchestra, and then along came synthesizers, but today software programs like Sony's Cinescore automatically generates fully composed production movie soundtracks for movies. A just released software program, Music Mastermind, even lets you hum a tune and turns it into full-blown professional sounding song. Several companies offer excellent royalty-free music. Music can now be added to Independent movies for hundreds of dollars rather than hundreds of thousands of dollars - or even millions of dollars (see the music budget for Spider Man below).



The Screen Actors Guild recognizes the new realities of Ultra-Low Budget and now make it possible to hire experienced professional actors for significant less than the big Hollywood budgets.
Some SAG contracts allows for 'deferrals' which means veteran actors or even name actors could agree to defer their usual fees until after the film recoups expenses and goes into profit.

IATSE, the technical crew union, also recognizes the new realities and has 3 Tiers of fees based upon the size of budgets, however a new Ultra-Low budget is expected to be approved in which Producers can negotiate fees with union members with the provision that fees are no less than minimum wage and that the production is at least 15 days.


The Star System

The Star System still exists, but is not the only way to make a film. Many recent movies have become hits without a single A-List name attached (Harry Potter, Lord of the Rings, the recent Star Trek, Slum Dog Millionaire, The Hangover, Precious, etc.). 'Stars' or 'A-List" talent are often necessary for very large budget movies requiring 'pre-sells' (acquiring monies before the film is shot from domestic and international distributors).

Many studios are also waking up to the realization that movie stars can get a picture made, but be bad for business. Jeffrey Katsenberg, top executive for Disney and Dreamworks writes:
“Movie stars were bad for business. Unreasonable salaries coupled with giant participations comprise a win/win situation for the talent and a lose/lose situation for us. It results in us getting punished for failure and having no upside in success.”
One genre, the horror movie, can make money without stars because of a ready and eager audience. (6 of the TOP 20 Grossing Movies of 2009 were - Horror Movies).

Horror movies are divided into several categories (Period, Slasher, Torture, Terror-in-the-water, Anthology, Comedy, Remakes, etc.).  For a list of all US Domestic Theatrical Grosses in the category of SUPERNATURAL horror -  only  (and does not include Foreign distribution, television, DVD sales, etc.)

Link below for revenues generated by supernatual horror movies:  http://www.boxofficemojo.com/genres/chart/?id=supernaturalhorror.htm
Many horror films continue to make money from sequels (Halloween, Friday the 13th, Saw 1- through infinity, Nightmare on Elm Street, Twilight, New Moon, Eclipse, etc.). Ironically, although the horror genre generally does not use stars the films have launched the careers of actors who later had their star on the Hollywood Walk of Fame.

Usually the first week's domestic release of a horror movie lands as the 'Number One' movie at the box office, and then drops in rankings for the next several weeks, but continues to make money in DVD sales and rentals, International sales and world-wide television. There is an undeniable major core of horror movies fans that will see every and any horror movie released. Simply put - horror pictures make money!


Made on a budget of $15,000?

It's not a misprint ... and it's closing in on a world-wide gross of a 1/2 BILLION dollars.

Previously studios turned up their noses at low buget movies considered to be '3rd Tier.' Major studios were interested in 1st Tier budgets of $50 million and above (usually way above) or more modest 2nd Tier budgets. However now, many of those same studios are now scrambling for scripts with budgets under $200,000.

Paramount Pictures, which bought distribution rights to 'Paranormal Activity' for about $350,000, and launched a new division dedicated to movies budgeting under $100,000." (Los Angeles Times, January 21, 2010)  http://www.latimes.com/entertainment/news/la-et-midnight21-2010jan21,0,3672418.story

How was 'Paranormal' able to be made for $15,000?  The cast was only 4 actors, only one location, a house donated at no cost; and everybody worked for free with the hopes of sharing future profits. Sony picked up the film and put in an additional $35,000 in editing costs, and then the major cost of advertizing.

It's not the norm. A low budget film with 30 actors and several locations - and with cast and crew getting some pay could normally be completed around $400,000. The film, 'The Devil Inside' was made in Romania for $800,000, but grossed $23 million - in its first weekend.

Consider the financial power of the Horror genre in a comparison with the total US Domestic Theatre gross for the year's Academy Award for Best Picture, The Hurt Locker:

The Hurt Locker managed a relatively paltry $15.7 million. " (from BoxOfficeMojo)  Compare The Hurt Locker total gross of $15 million to Paranormal Activity's total gross of $141,541,385. (this gross is for ONLY US Theatres - NO Foreign sales, DVD, Television, etc.) 

Paranormal Activity, however is NOT an isolated example as can be viewed from the following link: http://www.boxofficemojo.com/genres/chart/?id=supernaturalhorror.htm

Again, Paranormal Activity is not the norm, but compare The Hurt Locker to a horror genre film most people have never heard - Gin gwai- (English title - The Eye). The Eye played only 13 US theatres and grossed $512,049, as such, it made little or no money. But the opportunity to make a substantial net profit is in foreign sales. The Academy Award winner The Hurt Locker recently sold to Foreign sales for $11,000,000. The supernatural thriller The Eye grossed $11,652,965 in foreign sales.

Gin gwai, a practically unknown supernatural thriller released by a minor distributor (Palm Distributors) that played in only 13 US cities beats out an Academy Award winner in Foreign sales.


Paranormal Activity proved that an independent film can be made successfully - thanks to the changes in the film industry.



Every state employs incentives to lure film productions away from Los Angeles. One incentive is 'soft money' where the state provides services or facilities for free or at a discount and exempt productions from fees and taxes.

Some states offer rebate programs where money (calculated as a percentage of production funds spent in the state) is directly rebated to the production company even up to 49%. Many states offer substantial transferrable tax credits (with tax credit brokers ready to sell to their clients).  Shooting in these locations provide significant budget savings and provide tax benefits for investors. The SAG website has a list of all states and their incentive programs: http://www.sag.org/state-film-incentives

So why are most movies shot in California? 

California  has the best access to talent, locations, facilities, equipment, and good weather all year with plenty of sunshine. California does not offer the level of incentives of other states; although in 2009 the California Film and Television Incentive Program was signed offering Production Companies eligibility for a 20% Tax Credit with the requirement that Feature Films must be from a $1 million minimum to a $75 million maximum budget.

The various state incentives do not effect the 'Production Budget' since the production monies have to be spent to earn the rebates; however, the rebates add to the profit revenue.

Production Companies calculate the benefits of filming on location against out-of-state budget increases (per diems, lodging, transportation, etc.) and calculates the access to talent and crew, props, wardrobe and equipment facilities, etc. For example, you could on the set and a crane fails to operate. In Los Angeles another crane could be on the set in an hour, but in another state that crane may have to be imported and cause days of lost shooting time while the actors and crew are being paid. There is also the appropriateness of the settings. Hawaii might offer a great rebate but filming a classic Western in Hawaii would not work too well.

How the Distribution Process works and the Money Flow

For theatrical release it goes something like this:

The Producer sends the film to the Distributor who makes copies and advertises the film and then sends the 35mm or digital prints to Movie Theatres.

The Theatres sell tickets and return to the Distributor 1/2 of the gross ticket sales. The Distributor deducts fees and advertising expenses and sends the balance to the Producer. The Producer, repays the investors and then splits the revenues with investors according to contract.

Let's say a film was made for $300,000 and the US Box Office Gross is $5,000,000.
The Theatre Exhibitor takes 50%. That leaves $2,500,000 to be returned to the Distributor. Distributor then takes a 35% fee (a deduction of $87,500) which leaves $2,413,000. Let's assume a substantial budget of $2,000,000 was spent on Prints and Advertising and those cost are deducted leaving $413,000. Under the 'Standard Distribution Deal' the Distributor splits the profits 50-50 with the Film Production Company receiving $206,500.

However, this is just an EXAMPLE.

In reality - Independent pictures generally do NOT make money in Domestic Distribution. Normally films made for under $300,000 do not get U.S. 'wide release.' The reason low-budget Independent movies do not make money from US domestic release - the revenue from ticket sales are gobbled up by the 50% share of the theatres, the Distributors fees, and the cost of prints and advertising.

So why bother with a US Domestic Release?
Actually many films do not bother - and go straight to Foreign, DVD, Television, etc. - and make significant money.

However, low budget independent films can get' limited releases' of screens in a few cities that increases the value for other sales by gaining reviews and by playing a few Festivals (there are 1,200 Festivals) that may garner some nominations or awards and thus creating a value for other markets.

With or without domestic distribution the Film Production Company retains International rights - where the major share of profits are for BOTH major Studio pictures and Independent films.

The rest of the world is eager to buy American movie products. The movie is sold at major film markets, e.g., Cannes Film Market ('Marche' - not the Festival - 'Marche' is where the real business is done), the American Film Market (AFM) and the European Festival Market (EFM) in Berlin. There are 35 nations ready to buy the film for distribution in their countries for theatre and television releases. The total could be anywhere from a bottom of $300,000 to $3,000,000 to tens of millions of dollars. And all that money accrues to the Film Production Company - minus the costs of Foreign Distribution.

The following chart shows the difference between US Domestic revenues and Foreign revenues for a sample of blockbuster films.

There are two ways to sell to the Foreign Market:

1) Sell the film without a Distributor by setting up a booth or a suite at the major markets - this costs time and money (air fares, hotels, etc., as well as a $10,000 registration for each market at Cannes, AFM, EFM, MIFED, etc. Or ...
2) Contract with a professional International Distributor/Sales Agent.

International Sales Agents are always looking for new product, as well they can help sell, license and finance film product. They have established relationships in key territories, they know what products will sell in what countries and for how much, and what genres are most popular, etc.

Their registration fees for the several markets are amortized because they are selling many films. Generally they sell at NATPE, AFM, MIPTV, MIPCOM, MIFED as well as mini-markets and festivals. The fee commissions are negotiable and a highly contested part of the agreement. Fees can be from 10% to 25% depending on whether or not the Foreign Sales Agent provides financing, in addition fees are adjusted for high and low budget films.

The contract used by most foreign sales agent is the IFTA - Independent Film and Television Alliance. Sales agents account on a quarterly basis for the first two years, semi-annually thereafter. Statements and payments are no later than 60 days after the calendar close. The Producer has the right to audit. All copies of contract are to be aligned with the statements. Foreign sales agent agree that if there is an under report of 5% or more the sales agent will be responsible for the cost of the audit.

The full contract can be purchased at the IFTA website:   http://www.ifta-online.org/   A qualified Production Attorney can guide one through the labyrinth of this contract.

Prominent Foreign Sales representatives are usually members of IFTA (10850 Wilshire Blvd., LA, CA - 310-446-1000). A good article prepared by the firm of Blake and Wang, P.A. explains how to protect against possible unscrupulous foreign distribution practices:   http://www.optimalegal.com/sys-tmpl/internationalfilmdistribution/

NOTE: Any Foreign Sales Agreement should have the Producer's right to approve each sale in each market. Producers should also stipulate in the contract that Cross-collateralization (bundling your film product with others) is prohibited.

Distribution is where the money is and  below are a  few tips on getting the best possible Distribution deal.

1) Do not put all your eggs in one basket. Divide the distribution into a US Domestic distribution and Foreign Distribution.
2) Do not contract with a Foreign Distributor to have long term agreements. Limit to 3 - 4 years. However, extend the contract if performance benchmarks are met.
3) Do not allow Distributor to apply expenses for attending Festivals such as the Cannes Film Market, AFM, etc, for more than 1 year.
4) All expenses should be verifiable.
5) If possible get an advance that will cover the production cost, but if not, negotiate for a 50-50 share of distribution costs until the production cost is realized.
6) Restrict Distributor's third-party licenses to 12 years.
7. Negotiate reasonable territory minimums with a fee schedule for each country to avoid cross-collateralization with the distributors other films.
After Foreign Sales there is the supplemental markets of DVD sales and rentals, Netflix, Direct TV, Dish Network, world-wide Network and Cable Television, and auxiliary markets throughout the world.

Can a film without a U.S. Domestic Theatrical release make money? Yes, many movies are very profitable for straight to International release, DVD, etc.

But there's now a bigger elephant in the room other than DVD distribution - NETFLIX.

Netflix has gone over 25 million subscribers and pushed Blockbuster into bankrupcy; and now Netflix is getting more involved in original programming, especially television series and is also planning to go International.

Link to the story: http://www.latimes.com/entertainment/news/movies/la-fi-ct-netflix-20120205,0,6597402.story

Expect more and more movies delivered via the Internet:  More competitors are on the way, e.g. Boxee Inc. (associate of NetFlix) iTunes and Amazon VOD pipes media directly to TV's and media devices such as video game consoles, Blu-Ray players, etc. RedBox, the kiosk company, has 30 million active customers, and they just teamed with Verizon for streaming video. Verizon has 9 million broadband customers and 109 million wireless customers.

Filmmakers can now make their films available online and wireless to consumer markets via iTunes, Amazon, Hulu, Netflix, SundanceNOW, YouTube, Verizon, etc. while still retaining ownership of their work

Does this mean that movie theatres will disappear? No, but the importance to independent film producers to be on the Big Screen is on the decline. Even DVD sales are less important.

In fact, the LA TIMES recently reported that ONLINE movie viewing has surpassed DVD'S.

'Content Providers' (the people who actually make movies) will certainly not cry that the movie theatres will shrink as noted from the following selection from How We'll Watch Movies in 10 Years Without Theaters by Mark Lipsky, TheWrap.com

"The only loser in the scenario is the national theater circuits whose extinction is inevitable. Content creators, especially the studios, will reap benefits never before dreamed with the elimination of the theater as middleman."

Evidence of this prediction is as the news of February 2011 with the startling industry shake-up of the two largest distrubtors, Regal Entertainment Group and AMC Entertainment, launching a joint venture to acquire and release independent movies. A major blow to the stranglehold of the major studios. Link below:

REGAL & AMC Indie venture

No longer will they be forced to share an exorbitant percentage of revenue with an exhibition "partner" nor will they ever have to go to sleep crying in their pillows about all that popcorn revenue that the circuits keep all to themselves on the back of the studios production and marketing skills.

And the revenue will go instantly into their bank accounts eliminating the need to kiss the circuit’s ass in order to a) get films booked in accordance with the content producer’s best marketing plan; b) ‘settle’ engagements with the hope of getting the circuit to agree to pay the content producer based on the original terms agreed to; and c) actually get them to cut a check."

Full article:

"Show Me The Money" - The Profit Potential

It goes like this:

Domestic Theatrical Distribution Profits: Film Production Company receives 50% of net profits (after Distribution expenses of film prints or digital copies, advertising, publicity materials, etc.). However, the Film Production Company will typically negotiate for cash advance with a Domestic Theatrical distributor.
  • 'Window Sales' Profits: If a theatrical distributor has placed at least 25 prints in 25 theaters in 25 major markets a minimal advertising budget of $150,000. The movie company can then cash in on:  DVD, On Demand, Video, Pay Per View, Pay Cable, Basic cable and Broadcasting. The movie company gives a one to four-month exclusivity (known as the window) to maximize revenues.

What happens if there is not a Domestic Theatrical Release?

Foreign Sales: There are 35 nations that purchase films from America even if the film has never been released in United States movie theatres. This is known as 'made-for-foreign marketplace.' The object is to retain all foreign rights, and monetize by either licensing the film one by one, for exampel selling at the major film markets, or contracting with one International distributor to sell to all countries.

Sell-Through: Again, even if a film does not play US movie theatres sell-through sales can be made at Wal-Mart, Target etc. Pay-per-views from DirectTV, Dish Network, $9.95 downloads (CinemaNow, Movielink, etc.), $3.95 rentals (Blockbuster - distributes straight-to-DVD films), Netflix, etc. Even if a film does not get a theatrical distribution, a film can still go directly to the DVD world of sell-throughs, downloads and rentals and make one's own sales and profits.

Splitting the Profit Pie and Producer Credits

The Investors share from net profits from all the revenue streams is 50%. Each investor is paid pro-rata according to the amount invested.
The other 50% is called the 'Creative side' or the 'Producers side.' From this 50% the Producer pays out shares of net profits to several creative types (Director, Writer, Actors, etc.) and to those who either helped either raise monies or managed the film, including: Executive Producer, Co-Producers, Associate Producers.

A Limited Liability Corporation (LLC) is formed for each film. An LLC is a hybrid of partnerships and corporations, and it provides limited liability for the owners just like corporations but are treated has partnerships for tax purposes.  The members of the LLC are not individually liable for the obligations and liabilities of the LLC. The form of business utilized depends on the individual film situation and would be worked out with the Production Attorney and the Production Accountant.

Producer Credits and Profit Splits - How it works:

Descriptions of the several Production Financing structures for big budget films can be found at http://en.wikipedia.org/wiki/Film_finance

However, Low or Ultra Low Budget Indie Pictures often raise money from family and friends, and often these are first time film investors. The question arises how are the credits determined and how are the net profits shared and what are the priorities.*

The following are various formulas:

1) Executive Producer: If one investor put forth the entire amount of money for a film that investor can be credited as the 'Executive Producer." The Executive Producer would have purchased the script (the 'property'), may hire a 'Working' Producer to manage the production, a Director, cast and crew. Everyone involved in the film could receive a flat fee and the Executive Producer would then be entitled to 100% of all profits. In this structure the Producer has total control and makes all decisions. On the set the Director makes decisions but if the Producer is not pleased the Producer can fire the Director.

2) The Executive Producer invests 100% of the film budget but partners with a ('Working') Producer who organizes and manages the entire production. The Executive Producer receives 100% of the investors share, but shares the 'Producers side' with the working Producer. The share would be negotiated. It could be a 50-50 split of the 'Producer's side, or the working producer could be on brought on the project on a part fee and part profit sharing basis.

3) The Executive Producer invests no money in the project, but raises all the money. In this case the Executive Producer receives no money from the Investors side, but receives a negotiated split from the Producer sides. This becomes more complicated depending upon what important elements the other members of the creative team bring to the production - a big name star, or rights to a brand name property (e.g. Spider Man, etc.)

4) Two or more individual raise money for the production: The person(s) who raises the most amount of money can be credited and share the title as Executive Producers, and those who raises a smaller amounts of money could receive credits as Co-Producers.

5) Associate Producers: Individuals who raise units of money, even from one investor. The Associate Producer receives a 1% share from the profits of the Producer's side for every 5% of the producing company purchased by an investment unit for which the Associate Producer is responsible.

6) Front Money: An individual who contributes money before the production is fully capitalized can receive an additional small share of the producers side (a negotiated percent dependent upon the amount of front money, generally starting at 1%)  as well as a pro-rata share of the Investor's side (the front money, of course, is counted towards the total investment). Front Money is usually used for paying for the option of a script, LLC filing, establishing an office, costs of auditions, script printing, etc.

It should be noted that Associate Producers, Co-Producers, etc. do not have 'voting rights.' Although the Producer would be wise to value their comments and suggestions, the Producer is responsible for making final decisions on the production, just as a Director makes final decisions while shooting on the set and in the editing room. 

* "Net Profits" is all net revenues collected by the LLC from the Project after the payment of all costs of production, sales, marketing and distribution of the Project.

* Distribution of net profits from the Project are typically made by the LLC as follows:

1) Repayment of the principal and/or interest from any bank loan - if any.
2) Payment of any front-end deferrals - if any. (e.g., actors, producers, director may lower their normal fees and defer industry standard fees until a profit is made).
3) Repayment of the cash contribution of each Investor, on a pro-rata basis to each Investor.


Investing in Film - Q & A

Q: Isn't film a high risk investment?

A: Any speculative investment carries a risk, however, it is often assumed investing in film is riskier than other investments. But that is not entirely accurate:

As an example, stocks diversified in the financial sector of banks and real estate, were considered to be 'safe' investments. What could have been a safer than a stock diversified in the most conservative of all investments - banks and real estate? But yet, we saw those stock collapse in recent years.

And how safe  to invest in the icon of American Business - General Motors? Ironically, the pillars of American Business - the American Auto Industry desperately needed Government bail-outs just to stay in business whereas the Film Industry is not only healthy but one of the United States major assets:

"Based on Department of Commerce statistics, the copyright industries represent more than 6% of the nation’s GDP. We bring in more international revenues from exports than aircraft, agriculture, auto parts. The movie industry alone has a surplus balance of trade with every single country in the world that exhibits our films. No other American enterprise can make that statement."
Sheldon Pressor, Senior Vice President of Warner Brothers
Those who believe film investing has a higher risk than other investments point to cinema's two worst financial disasters: 'Heaven's Gate' and Kevin Costner's 'Waterworld.' 'Heaven's Gate' was unique in that the studio allowed director Michael Cimino to go radically over budget and out-of-control to shoot 220 hours of footage (more than 1.3 million feet of film) and deliver a movie that was 5 and 1/2 hours long. Despite being a theatrical bomb, since its release 30 years ago, 'Heaven's Gate' is still recouping monies in television sales, VHS, DVD's, cable, international sales, etc. And the other historic flop - 'Waterworld' broke-even many years ago. If flops were the norm and not the exception - studios would stop making movies.

There is a risk in any speculative investment, although there is an old adage: "No Risk- No Reward." It is sensible to diversify a portfolio with secure investments, such as CD's. Current CD interest rates are less than 1% for a CD, and with the US inflation rate at 1.8% it will not keep your investment even.  The average money market fund's annualized yield is an infinitesimal 0.02%. At that rate an investment of $10,000 will earn all of $2 a year - not quite enough to buy that mansion on Malibu beach.

An investment strategy depends on one's goals and level of financial security: as a general guide: one should not invest what one can not afford to lose. If investing $5,000 means not being able to pay the mortgage or put food on the table, then do not invest.

Q: With our current economy isn't this the worst time to do a new film?

A: Ironically - just the opposite - especially for low budget films - and especially for low budget films not dependent on Distribution advances for financing.

"This sobering recession ... has studios cutting back the number of movies they were producing in recent years." Doug Hansen, president and chief operating officer of Endgame Entertainment, says "Clearly, there are a lot less packages being made out there, but I think in the long run, it's healthy.We see it as a big opportunity."

Lacking any new distribution entities, Amritraj predicted, "We'll start to see holes on those domestic calendars."

Variety article, March 7, 2010:  http://www.variety.com/article/VR1118016032.html?categoryid=10&cs=1&nid=2248

Q: Are there tax incentives to investing in film?

A: Depending on one's situation there could be significant tax incentives.  Several states offer tax reductions as part of their Incentive opportunities.

For Federal Tax Information Section 188 click on:  http://governor.state.tx.us/files/press-office/Federal_Section_181.pdf
and for Section 199:

For any tax questions seek expert legal and tax advice.

Q: Tax advantages might be good for those in upper income levels, but I can't afford to lose my money in a film investment. What happens if the film goes over budget, or there is a disaster and the film is never made?

A: Most film productions can secure a Completion Bond (usually 2-2.5% of the budget) that assures banks and/or investors that:

1. The film will be in keeping with the screenplay, budget and production schedule that the bank or financiers approved;
2. The completion guarantor will complete and deliver the film in keeping with such pre-approved screenplay and production schedule, and advance such sums in excess of the pre-approved budget necessary to do so; or
3. In the event production of the film is abandoned, the completion guarantor will fully repay all sums invested in the film by the bank or financiers.
4. In the event of an ultra-low budget picture with a small group of investors the investment group may decide not to purchase Completion Bond insurance, as such, if additional capitol is needed to complete the film the investors can decide could decide between several options:  to contribute additional money (with a pro-rata share of profits), or apply for a bank loan, or bring in additional investors, or accept an advance from a distribution company.

Q: How can I be confident in an honest accounting in a film?

A: In addition to the oversee and security of a Completion Bond company, film productions have the integrity of qualified Production Accountants and Attorneys. Moreover, states that offer incentives require a State Audit; some states require both an official State Audit and an Independent Third Party Audit.

In addition, all sales require a 'chain of title.' This means the screenwriter turns over the copyright to the film corporation. The corporation now OWNS the 'property' and the Distributors relies on the chain of title to sell, for example, to Foreign countries who pay the Distributor who in turn must send checks to pay the corporation who controls the chain of title.

Q: How do 'Deferrals' effect budgets and profits?

A: It can be a significant savings to the budget if Producers, Directors, Writers, Actors, Crew, Special Effects Companies, etc. agree to defer part of their fees. There is more risk for the creative side, but less risk for investors since it lowers the budget and therefore requires less monies to be invested. Deferred fees are recouped prior to net profits, and deferrals may be slightly above normal fees because of the extra risk.

When you see some actors are on every talk show promoting their new film it is either because they have a contractual obligation to be available for publicity, but many times it is because they lowered their fees for a percentage of the profits.

In addition, it could be just to get the film made. Making a film is a long process with many changes along the way. Often a film may have the star and a director 'attached' to the project but then the financing is not complete. Later the financing is in place and the director is attached - but then a star drops out. There are many examples of movies that have taken 10 years to be made - and some of those went on to win Academy Awards. Making a movie is a complex and fragile journey with many pitfalls, sandtraps and bunkers, detours and many 'element' changes along the way. It is often said -  "It's a miracle any movie ever gets made."

Q: Wouldn't it be better to invest in a major Hollywood film than a low budget independent feature?

A:  Studios do not like to share their budgets, but this is one listed on Wikipedia  for the film Spider-Man 2:
Story rights: $20 million
Screenplay: $10 million
Producers: $15 million
Director (Sam Raimi): $10 million
Cast: $30 million:  (Tobey Maguire: $17 million - Kirsten Dunst: $7 million  - Alfred Molina: $3 million - Rest of cast: $3 million )
Production costs: $45 million
Visual effects: $65 million
Music: $5 million; Composer (Danny Elfman): $2 million.
Total: $200 million

If one were able to invest $5,000 in Spider-Man it would represent an investors' profit share of 0.00025. Whereas if one was lucky enough to have invested $5,000 in Paranormal Activity (a budget of $15,000) one would have had a 1/3 share - a 1/3 of a share of a film that hs grossed over a 1/4 Billion dollars would be a significant profit.

Q:  In addition to possible financial benefits are there other benefits in investing in film?

A: Being part of a film production can be exciting: walking the red carpet on Opening Night. Showing your friends the first DVD copy. Seeing the DVD release on shelves at Blockbuster. Attending a screening at one or several of the 1,200 film festivals around the world. Seeing the film trailers in movie theatres. Seeing clips on YouTube. Reading the reviews in newspapers and magazines. Seeing photos on the Internet. Watching the video with your friends and family. Seeing the movie translated into other languages. Reading comments from viewers on IMDB and other sites and blogs around the world. In short, an investor becomes a partner in the experience, part of the legacy and history of cinema.

And the Oscar goes to ...


Supernatural Thriller - VAMPIRE CROSS 


Vampire Cross Video Preview


Social Networking and the Internet

As a test 2 scenes from the novel, 'Dancers in the Dark,' were shot for a $100, and then uploaded to YouTube.  This was the only promotion for the novel, however, the video received thousands of 'hits' and pushed the novel to Number 1 Bestseller on Amazon's Dance category.

Getting a buzz about a film on Facebook, Twitter, Youtube, etc. is all free promotion, and not possible even a few years ago.

 DANCERS IN THE DARK  #1 Bestseller on Amazon Top 100 books in Music and Dance.

Link: Amazon Dancers-in-the-Dark

2 Video scenes from the novel below:

Link to Amazon - Dancers in the Dark