Film Fund-amentals: A Whole Lotta Scamming Goin’ On

Every year I have to take a moment to remind folks of some very basic rules. Real simple rules that are easy to forget.
Unfortunately, there are legions of people out there hoping that you do forget. That’s why the rules are always worth repeating. Especially since the scam operators seem to be multiplying. Heck, in the past year I have gone through at least four direct and indirect incidents of outright scams or, at the very least, extremely questionable business operations.
Except for some bruised egos and deflated hopes, we have been pretty lucky. No cash, no dash. But many others have not been so fortunate. They have gotten fleeced. It is not because they are unusually dumb nor even particularly greedy. It’s because they were just gullible enough to believe that someone was really sincere about investing in their movie. They trusted a stranger in hope of achieving a dream.
First tip about real investors. They don’t hang around social media sites advertising themselves as investors. Really, they don’t. Anyone at a social media site claiming to be seeking indie movies that they can invest in must be viewed with extraordinary suspicion. Oh sure, I suppose it is always possible that some kind of half-nutty Warren Buffett type has nothing better to do with his or her time than troll these sites in hopes of giving away free money, but…. You are much more likely to be hit by a bolt of lightening six times while standing in the same spot.
Some of the people claiming to be film investors are really just fronting for various types of high-risk loan services. Others are seeking people they can hook with so-called “production fees.” You pay them to “produce” your movie. Mostly, they are hoping to take you to the cleaners before you catch on. It is mean and nasty and it is happening all the time.
One tell-tale sign is how fast they will try to force the issue. Most scammers have to get you baited, hooked, and gutted before you have time to really think the deal through. That’s why they first pump you up with the exciting news that they want to help your project. Then explain how everybody will make lots of money from this film. Once you are floating on air, they make their move. If possible, they will try to make the score within a week.
I am aware of a few exceptions to this time-line. Some will drag it out for months before making their play. I don’t know if this is supposed to be some type of reverse psychology or if they are simply not very good at their own racket. But it does happen.
When any would-be investors approach you must check out their credentials. What types of investments have they previously been involved in? Who exactly are they and what is their background? For crying out-loud, do they even actually have any money?
For example, do they or their company actually have a web site? They do. Great! Is it a “real” web site or more of a Potemkin village operation? What I mean by this is: Does the web site actually say anything about what they do or does it drift around in a lot of generalizations with non-working links and bogus material? Heck, I know of one company that claims to invest into advance digital development and then tries to pawn off links to various freeware systems (none of which they had any involvement with) as “support” material to their claim.
Yes, there are such things as bogus web sites. Pieces of eye candy for the scam. Even better are the (equally) bogus offices and mailing addresses often used in these operations. Most American cities now have virtual offices where a person can rent or lease (by the day or the hour) a well equipped and very nice looking space for use. In theory, the virtual office provides the occasional needed meeting place for someone who is working their online business from their home. But it also provides scammers with oodles of legitimacy. Hey, they must be real since they have an office with really nice furniture. Even better, they can clear out within minutes, which is a plus when pesky investigators show up.
Always check out the address they use. Twice in the past year I have encountered the virtual office operator. At least one of these outfits worked out of a combination office and casino in Vegas. It would be a hoot if it were not for all the people getting stung.
Many scammers will not pass this type of simple test. But some will. That is not good because it shows that they are better organized. Oh boy! This is why you need to keep a few basic things in mind. Nobody is likely to get rich off of your movie. When they keep spinning stories about all of the money you can make, dump ‘em. Yes, occasionally a small indie movie hits it big. These are the exceptions, not the rule. Any one who says otherwise is either a crook or an idiot. Doesn’t matter. You don’t need them.
Investors make investments. They do not charge fees. It is that simple. I don’t care what their story is, the minute they want you to pay them, dump ‘em.
They represent investors who wish to remind anonymous but who are looking to back your movie. Most people who invest in films do so, in part, because they want to be associated with the filmmaking process. As a general rule, movie investors do not seek anonymity. Many of them want to see their names on the big screen. Some are hoping to date the leading lady. If they want to be anonymous, they can just go to any major crowd funding site and donate there.
And always keep in mind one of the key signs of any con artist. They are all extreme narcissists. It is a standard part of their pathology. OK, it is true that this is a tough call in the film business. But trust me, con artists are the worse. They can’t stop talking about themselves. Good grief! I once had to call one of these bozos regarding the mysterious death of one of their “clients.” The official verdict was “suicide” (it was one of the state investigators who kept putting quotes around the word). Either way, I called the guy to inform him that we had found the body. All I got back was a long-winded description of his recent vacation trip to Las Vegas (most likely paid for by the deceased).
They can’t help themselves. But you don’t need to enable them. You just need to dump ‘em.

Dennis Toth (C) Copyright 2014 All Rights Reserved

Toward 2014, Step Two

At the end of last year, we dealt with the train wreak known as Hollywood. But that was 2013, a year that is so over and done.

It is now 2014, a year full of bright new promise and exciting possibilities. OK, I can’t tell the difference either, but let’s pretend. What does the new year offer for the indie filmmaker?  I suspect it will be both the best of times and the worse of times. Predicting the future can result in a dickens of a fit.

The two key issues at the core of predicting indie future are: 1. financial and 2. digital. The financial question is the simplest and the hardest to resolve. Indie filmmakers need money. You see, it’s extremely straight forward. They know that money is out there, somewhere. As I said, it is incredibly straight forward. They can’t find it. Damn!  I knew there was a tricky part.

Toward 2014, Step One

It is easy to dismiss John Landis recent comments about Hollywood (see the IndieWire story) as sour grapes.  After all, his last movie (Burke and Hare) earned $947 at the US box office ($4.3 million internationally).  Heck, I even know a few people who are still complaining about Blues Brothers 2000.  

Unfortunately, he is also right.  There are no film studios any more.  They are media companies.  In turn, they are owned by large media conglomerates.  Those are owned by gigantic multinational corporations who in turn own about two-thirds of the planet, more or less.

Likewise, making movies is not part of the function of the major film companies.  Not really.  Making movies imply a creative process.  Large companies are not interested in vague  notions like the creative process.  Large companies are involved in ownership.  

VOD Revenue: TS/SCI or OII

Should companies make public the revenue generated by films distributed via video on demand (VOD)?

According to The Hollywood Reporter, this question is a hot topic among indie filmmakers. I’m not so sure that’s true, but it ought to be.  Since VOD is the most probable distribution venue for many indie filmmakers, it would be really nice if they had some sense as to the financial possibilities of this approach. But most VOD distributors are not very forthcoming with the information.

In his report for IndieWire,  Anthony Kaufman outlined The Six Reasons Why You Don’t Know More About VOD Numbers. The core reason is that VOD distributors are, quite simply, unsure how to represent the numbers. VOD distribution is new and rapidly expanding. There is a market. It may be a boom market. Nobody actually has a clue where any of this will go and they are still trying to figure out how it compares to traditional forms of distribution.

Just look at some of the numbers that are available. About a year ago,  Gravitas Ventures  released figures for several films they had released VOD. One of the movies, AMERICAN: The Bill Hicks Story made $90,000 in its theatrical distribution. But during a three-year run on VOD, it took in $600,000. Obviously that is a pretty good increase.

But what does it mean? Inevitably we will try to compare and contrast the VOD release figures to the box office reports and there are really a lot of differences between the two. First-run theatrical is spread out over a time period of roughly 2 to 18 weeks. VOD may span years. Theatrical rolls out on a systematic release through theaters with a quick report on ticket sales. VOD goes through multiple channels, platforms and venues, which also means that the financial reports are often slow in coming and fragmented. Likewise, VOD is increasingly moving into an inter-connection with the TV market, and this linkage is radically shifting the distribution strategy.

With the little bit of information that is available, we can make some basic observations. The first is simply that VOD is commercially viable. Viable? Heck, it is inevitable. Though some indie filmmakers still question this notion, VOD will become the main means of distribution for low budget films.

The second is that comparisons between VOD and box office reports will require enormous adjustments and may really be pretty much meaningless. The business models are extremely different. It would be a bit like comparing the cost of a first-run movie ticket to the admission price to a major league baseball game. Of course, the MPAA  makes that comparison every year, but that is little more than a self-serving exercise in gibberish.

The big questions remain: What is the real break down between the cost of the various channels involved and the platforms required for large scale distribution on VOD, and what is the final split in return between distributor and producer. Ultimately, how many ways is the pie sliced. It is not impossible that a movie could make $500,000 in several years of VOD release and the filmmaker still ends up seeing only a $1.50 in return. These things happen. Almost every day.

So I do understand why many people in the VOD business would like to keep their figures TS/SCI (Top Secret/Sensitive Compartmented Information). But the successful development of VOD practically begs for OII (Open Information Interchange). That is why an increasing number of indie filmmakers are asking for greater transparency in the VOD business. The more VOD becomes the primary focus of indie distribution, the more the producers of indie movies need to know how to determine the film’s economic potential.

Now, transparency is a tricky thing in the movie industry. The mainstream commercial film industry often prides itself on being economically transparent. Of course, that is an Urban Legend.  In reality the entire Hollywood industry is built on figures so fudged, so finagled, and so largely mangled that nobody actually has a clue if they are making money or going broke (for more on this, I refer you to the book Sleepless in Hollywood by Lynda Obst – a must read).

But that’s OK. Hollywood has millions of dollars to blow out of their collective wazoo. Indie filmmakers are often forced to panhandle for lunch money. So they need really precise information in order to create a rational business model for their films. Many indie movies can easily forgo a business model regarding theatrical release because they are not going to get a first-run theatrical release. But they do need to know the figures regarding VOD.

The immediate future (which is happening right now) is one in which theatrical and VOD distribution will co-exist in parallel but separate business models. Theatrical is basically the domain of the mainstream media industry. VOD becomes the primary venue for low budget indie film-making. Separate and basically unequal. Or, at least unequal until the VOD approach surpasses theatrical, which will probably happen within the next few years.

So yes, indie films need open information on VOD distribution.  Of course they will also need some guidelines as to interpreting these figures.  I have no doubt that someone is already working on a book called VOD Distribution for Dummies.

It’s bound to be a bestseller.

Dennis Toth (C) Copyright 2013

The Generals of Genre

The romantic comedy genre is dead. The horror genre has received numerous obituary notices over the past ten years. Film Noir is pretty much an historical concept used for stylistic flourish and the occasional directorial hommage.

Genre film-making – a major backbone to the low budget and indie cinema – is often treated as a dead commodity. Reports on the demise of various forms of genre appears almost as frequent as rumors of Bill Cosby’s death. They are also about as accurate.

Social Media for the Anti-Social Type

Where ever you go, the topic is social media. It is the quick fix for everything from fund raising to film promotion and distribution. It is all things to all people, which is why it is a good thing we have so many self-professed experts online to tell us how to use it. It plays a bit like that scene with Groucho and Chico in A Day at the Races.

So let’s begin by stating that I am not an expert on social media. Never have been, and never will be. To be honest, I have a strong anti-social streak which works against the whole concept. I am even thinking of developing my own social media site based on the principle that people ought to mind their own business. I thought I would call it MySpace/Not Yours.

New Approaches in Film Financing

Ted Hope may or may not have left his heart in San Francisco.  But he has left his job.  After slightly more than a year as director of the San Francisco Film Society, Hope has quit.

Officially, he wants to get back to work as an indie film producer.  Unofficially, there are stray rumors about certain “issues” between Hope and the board at the San Francisco Film Society.  I’m not really interested in the gossip, but it sounds a bit like a clash between old ways and new ideas.

During his brief time as director of the San Francisco Film Society, Hope aggressively explored the new and rapidly emerging terrain of contemporary indie film production, distribution and financing.  Especially financing.  Production and distribution issues are all tied into that question.

Which may be why Hope is ready to get back into the indie business.  In his recent blog post, called Towards A Sustainable Investor Class: Consistent Deal Flow, Hope presents a very detailed and provocative proposal toward a new approach in indie funding.  It is one of several ideas currently being implemented by indie film producers seeking new ways of dealing with the film financing crisis.

In Hope’s blog piece, he outlines his method: to create a package of multiple projects with budgets that are structured through an analyzed range of projected box office highs and lows, so that the total portfolio creates a sustainable range of  ROIs with an acceptable average.  Some of the movies in the portfolio will do OK.  Some not so OK.  But what counts is the overall portfolio.  As long as a reasonable job is done with the calculations on the portfolio, which is where database analysis comes into play, the final outcome of the portfolio should be efficient – in other words, profitable.

This approach does not remove all the risks from the process.  Heck, all of those traffic laws do not remove the risks from driving.  But it does create a manageable and rational process for indie financial management.  At R&R, we have developed a system for securitizing a static pool of small ticket films using statistical forecasting tools that is remarkably similar to what Hope describes in his article.  We have also developed and validated the algorithms to tie out the sustainability quotient.

Of course, the problem with financing a whole portfolio at once is the significant upfront financial investment it requires even before production can begin.  We are talking big bucks here, from corporate or institutional backers here, not so much from private investors.  That is the most difficult part of the portfolio model.  Especially since most major investors, both corporate and individual, have problems getting past the one-shot-at-a-time model.  You know, the method where the investor throws their money into a single movie with the naive belief that it will become the next Blair Witch Project.

In reality, the vast majority of indie films will never see that kind of success (99.99% is a safe failure estimate).  But a lot of investors go seeking that type of quirky, rare phenomena.  To be honest, they could cut to the chase and try a casino instead.  I suspect the odds would be slightly more in their favor (but not by much).  However, a lot of the current indie fiance model is based upon this method.

There are investors out there. Some know what they are doing, some do not.  The problem is finding them.  Especially finding investors who might be seeking the type of project that the filmmaker is working on.  This is where Slated.com enters.  The people at Slated combine some of the crowdfunding approach with social media networking, rounded off by an approach to matching filmmakers and investors that kind of resembles a dating site.

Unlike crowdfunding, at Slated the investors will be engaged as honest-to-god investors.  They will have a certain degree of production involvement.  Even Duncan Cork at Slated admits that the system opens up a lot of new questions in the filmmaker/investor relationship.  The process used by Slated is extremely selective.  In their first year of operation, they took 2,500 submissions which were then narrowed down to 35 titles.  The short list gets narrowed further based upon the ability of the films to find investors through the system within a prescribed time frame.

The concept with Slated is very provocative.  Of course, it is also extremely limited in its usefulness since it operates a bit like an installment of Survivors.  It takes the old model of indie financing and stream-lines the process with its digital adaptation.

But obviously most indie filmmakers will not get accepted into the system.  For a vast majority of indie filmmakers, the crowdfunding  model will be infinitely more useful. It becomes that magic moment when we must paraphrase what Tom Cruise said in Risky Business:

“What the (bleep).  Looks like Kickstarter for me.”

 

 

 

Is American Cinema Racially Biased?

The question of racial bias in American movies is supposed to be over. You know, the product of some long-forgotten age. Way back in Antebellum time when dinosaurs roamed the Earth, and we had just discovered fire.

However, almost every major study on this issue completely and adamantly disagrees. Take for example Andrew J. Weaver’s report, The Role of Actor’s Race in White Audiences’ Selective Exposure to Movies, published in 2011 by the Journal of Communication. Weaver’s study found that white audiences were largely less responsive to the concept of an African-American leading man, especially in a romantic role.

Other studies have not only confirmed Weaver’s results but have gone even further. Racial bias also appears in mainstream movie reviews, as was demonstrated in the report Racial Bias in Expert Quality Assessment: A Study of Newspaper Movie Reviews by Lona Fowdur, Vrinda Kadiyali, and Jeffrey Prince in the Journal of Economic Behavior & Organization. They found a systematic and measurable review bias against movies with a leading black actor (generally by 6 per cent) that was consistent enough to rule out other critical factors.

Numerous academic reports clearly outlines racial bias with the audience and the press. My own first-hand experience showed racial bias with the average exhibitor. Most theater managers are convinced that any movie with a large black cast will bring in a crowd of gangbangers, and they hit the panic button. Some theater managers actually resent it when a movie is successful with a predominately black audience.

Once, when I was working as the lead reviewer with a weekly newspaper, someone phoned in a “hot” tip. Supposedly, local businesses near a theater showing Menace II Society were complaining of “problems” with the audience to the movie. The caller was suggesting that I should do a story on this in the hopes it would force the theater to withdraw the film. The caller was the guy who owned the theater and thought I would do him a favor. Privately, I wrote him off as a nut.

So, basically, we have an abundance of empirical and anecdotal data that overwhelmingly support the claim of racial bias in American movies. What is not clear is how much this plays out within Hollywood’s creative and decision processes. Actually, it is sort of clear and unclear at the same time: Hollywood is singularly blessed with the unique ability to speak out of both sides of its collective mouth in different languages and still manage to say absolutely nothing.

A quick overview of the history of ethnic presentation in American movie history would suggest that Hollywood has been pretty democratic in insulting all non-white races. Let’s be honest, at times Hollywood was pretty backhanded to the Irish and the Italians as well. Part of this was evidenced in the approach used in casting found in old movies. If the character was suppose to be Chinese, they would cast a Swedish actor (Warner Oland or Nils Asther). If it was a Western with an Indian in a speaking part, it would be played by an Italian-American actor.

But African-Americans were a problem. Especially once show biz had to give up on the blackface bit. For the first forty-some years of American movies, blacks primarily functioned as servants and crude comedy relief. The Production Code of the Motion Picture Industry restricted images that ostensibly might incite racial unrest or present issues of racial inequality. Basically, it pretty much restricted any presentation of blacks, period. Making them go away was seen as an “equitable” solution.

Some changes did take place. In the 1941 production of High Sierra, Willie Best catered to stereotype humor as a lazy, slow witted black guy. When the film was remade in 1955 as I Died a Thousand Times, it was decided that they had to cut out the  racist stuff. So the character was turned into a Mexican and made even dumber and lazier.

In short, the history of Hollywood on this point is not very reassuring. Their only defense is, they give what the audience will accept. Of course they also condition, manipulate and reinforce the audience’s expectations on what they have conditioned the audience to expect, resulting in a great circle of something or other. It’s a complicated relationship. But Hollywood is far from being blameless in this process.

Not that things haven’t changed. They have, big time, though paradoxically the changes are most noticeable in television. Mainstream American movies are still mighty slow to move. As always, Hollywood is fast with the finger pointing. They blame their dependence on the foreign market. Foreign audiences don’t want to see African-Americans in lead roles nor do they want to see inter-racial romances etc. etc. Damn those foreign bastards for holding Hollywood back.

Personally, I find that something just doesn’t smell right about this argument. OK, some of these films would not fare well overseas because they involve uniquely American social or political issues. Others might not fare well because they are very African-American in their cultural viewpoint and gee, guess what, that makes them extremely American in their codes and references. You see, most African-Americans have cultural and personal roots that go much further back in American history than those of us whose great-grandparents arrived around 1900 (all on the same boat, I hear).

But most of all, Hollywood is busy peddling tent-pole productions overseas and most movies headlining an African-American cast are not tent-pole productions. Arguably, the comparison becomes a bad case of apples and oranges. I have no doubt that Lee Daniels’ The Butler is not going to play as well overseas as, say, any movie showing Bruce Willis blowing up half of a city. This is not necessarily anything to do with race. We are talking about radically different kinds of movies.

We are also talking about Hollywood’s longstanding ability to completely sidestep a major issue. And yes, the Hollywood cinema is racially biased. It always has been.

 

Which Way to the Future?

First, there was Y2K. Then came 2012. Now, the film industry is bracing for 2015 (according to the article 4 Reasons 2015 Could Be the Movie Industry’s Worst Year Ever).

OK. Y2K kind of flopped. Likewise, 2012 was a farce produced by an odd collection of New Age gurus who didn’t know the difference between Maya and mayonnaise. But the 2015 theory has a point, even if the provided link is to an article at Cracked.com.

The Audience Divide

Theater owners do not depend upon folks like me for their trade. After all, I prefer to watch movies in theaters that are largely empty. Quiet as the grave, and more deserted than a tomb. I love it this way. Too bad none of these places stay in business for long.

So the recent dust-up about rude audiences has sparked my interest. Especially since I have long felt that certain movies demand a loud and rude house in order to be properly appreciated. Heck, a misfire like Maximum Overdrive is only enjoyable with a rowdy audience.

Traditionally, the rude house debate has been mostly focused on the difference between a quiet, polite audience versus a boisterous band of total loudmouth jackasses who behave like a pack of Vikings on their way to England. The proper film audience stays reverentially silent while casting a studious glaze at the screen.

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