How It All Works: Supplement

The Players and Their Functions

Production Companies

You are here. Production companies range in size and prestige from yours truly to giants like Blumhouse. In most cases, the production company is the entity that makes the actual film and guides the filmmakers through the four phases outlined above before handing it off to a distributor. Often the production company will find outside financing to produce their films and reserve most company profits for overhead. The most successful production companies have what is called a FIRST LOOK DEAL with financiers, distributors, and studios. This means that said studio will have the first opportunity to finance any projects secured by that company. This allows the production company a fast track to capital in order to produce their films and should be the independent producer’s top target when looking to bring on another production company to co-produce.

Studios

Studios are a vertically integrated production company. Unlike production companies, studios produce, finance, and distribute their films. These are the big brand names everyone has heard of. Warner Brothers, Universal, Paramount, etc. As one can imagine, it is very difficult for an independent producer/ production company without a First Look Deal to contact these companies directly and films produced by the studios give the filmmaker much less control over the final product as a plethora of executives and decision makers must approve every facet of the production.

Majors and Mini-Majors

While there used to be a clear divide between studios and independent production companies, these days, with new entrants into the space like tech giants Amazon and Apple, industry insiders will often refer to studios as majors and mini-majors. Examples include…

Majors:

Walt Disney Studios

Warner Bros.

Universal Pictures

Paramount Pictures

Sony Pictures

20th Century Studios

Mini-majors:

Lionsgate

MGM (Metro-Goldwyn-Mayer)

A24

STX Entertainment

Amazon Studios

Netflix Studios

Financiers

Similarly to production companies, financiers run the gamut from individual equity, to private equity and hedge funds, to banks, to specialized film finance companies who provide debt financing. These debt financiers are the life blood of independent film and are usually positioned as the last money in and the first money out.

Agencies

The agencies are the central nervous system of Hollywood. They are the power brokers which control the flow of talent and therefore money. While traditionally the role of agents and agencies were to represent and guide their clients through contract negotiations, career decisions, and put their actors up for roles, today they are key to the packaging process. Film is a marketing business. We sell names on posters. Sometimes that means a famous director, writer, or producer, but more often than not that means actors. In order to get to those names you will need to get through their agent. Due to this powerful position, agents are also extremely useful in helping to put together the financing and other pieces of the production puzzle. If an important client at one of the major agencies wants to be in your film, the agency itself will often do a lot of the leg work of getting the movie made for you. CAA, WME, UTA, and to a lesser extent Gersh are far and away the most important agencies.

Foreign Sales Agents

Foreign sales agents sell the rights to distribute your film to distributors in foreign territories. Most independent films will have a deal with a domestic distributor that only distributes the film in North America and then a sales agent who sells off all other territories. Foreign sales agents will model an actor's market value in foreign territories and are a helpful resource during casting in order to help ensure a return on investment. Ideally, if the producer puts together an attractive package, a foreign sales agent will be able to sell off the rights to a few foreign territories for what’s called a minimum guarantee (MG) during development to help make up some of the films budget. Bring on a sales agent as early as possible is an invaluable resource. Reaching out to sales agents only after a film is complete misses many of their benefits.

Distributors

Distributors are a middleman between the producer and the exhibitors. The distributor is the entity which will roll out the movie to theaters, VOD platforms, and AVOD platforms. Additionally, they will try to sell the film to a streamer (Netflix, Hulu, Max, etc) if they are not a streamer themselves. Most importantly, the distributor will handle all marketing and PR for the film. This is commonly referred to as Print & Advertising or P&A in a relic of old hollywood. The distributor’s P&A budget will need to be recouped on top of the films budget in order for the production company and investors to make a profit.

What is an independent film anyway?

Put simply, independent films are any movie which finds most of its financing from outside of one of the major studios or as described by the Independent Film and Television Alliance films made by “companies and individuals apart from the major studios that assume the majority of the financial risk for a production and control its exploitation in the majority of the world.”

How independent films are financed (in these United States)

Independent films are typically financed through a variety of sources outside the traditional major studio system. The most common avenues include private equity, investment from wealthy individuals, domestic and international pre-sales to distributors, tax credits/rebates, crowdfunding, lines of credit, gap financing loans, specialized entertainment bank loans, film funds/grants, and product placement/brand sponsorship to name a few.

Anyone can google “How to finance an indie film” and find this list on various websites and seminars, but what does this really look like in practice for a sub $5MM film? As alluded to earlier, independent film financing is a dance. Producers are constantly dealing with the chicken and the egg problem. In order to raise money you need actors and in order to attach an actor to your project, you need money. With that in mind, the first step for raising financing is putting together your “package”. The package consists of your script, director, and actor, hopefully, a star. You will then take this package to financiers/ individual investors and try to raise 33% of your project budget in equity. In other words. Cash. For the well-established producer attaching actors to your project without that 33% equity is relatively easy, but for smaller producers you will often need to raise the equity first, and then attach actors. This is where the agencies come in and having a good relationship and reputation with those agencies will help you attach talent. Regardless, once you have your actors and 33% equity you’ve reached the point of inevitability. These two pieces of your package are the hardest to obtain and once in hand, it becomes exponentially easier to raise the rest of your budget and push a film into production.

So you have equity and your star now what? The next step is to take your package to a foreign sales agent or distributor and try to secure a pre-sale. Sales agents can also come on earlier and help advise on casting to better position yourself for a pre-sale. As a quick example, let’s be generous to ourselves and say we cast Emily Blunt and Daniel Bruhl in our lead roles. The sales agent will then bring that package to a British and German distributor since those actors play well in those territories and pre-sell the rights to the movie for a minimum guarantee (MG) before we even begin to film. These can make up anywhere from 15-33% of the budget. So now we have 33% in equity and 20% from pre-sales bringing us to 53% of the budget. Getting close!

Next up we’ll choose our shooting location based on a tax rebate also known as soft money. Let’s say we choose Newburgh, New York which has a 30% tax credit, plus an additional 10% on labor. So we register for the tax credit and now we’re ready to go to a lender whether that be a bank or a specialized film finance firm like Buffalo 88 and take out a loan. The financial institution will evaluate our package, the money we’ve already raised through equity and pre-sales, and our NYS certification in order to approve us for a loan of 25% of our budget, using the soft money as collateral. We’ve raised 78% of our budget!

The final piece can come from any number of sources. A bridge loan, a product sponsorship, credit, finding a final equity partner, making an EP deal with a post house, etc. In an ideal world, the budget will consist of 33% equity, 33% pre-sales, and 33% soft money, but often it will be a little more complicated than that. While we laid this out in a very orderly fashion, really it’s a dance, talking to all these stakeholders simultaneously, knowing when to strike, and receiving soft commitments you can then bring to your other interested parties to flip them into hard commitments.  

The Market: Supplement

More on Distribution

The film industry is extremely competitive, and a film's success often hinges on being acquired by an established distribution company. Attracting these distributors is largely a product of three avenues. 1) A pre-existing relationship, 2) a major festival premiere, 3) an attractive talent package. At risk of repeating ourselves, our strategy will be option number 3, which is why again, attaching notable talent to all our projects will be so important. Furthermore, a Pre-Sale strategy increases our chances of landing a major distributor because buying in early provides the distributor with a slight discount. It’s for these reasons that we believe securing a distributor as early as possible far outweighs a festival-first strategy. It should be noted as well, that all Pre-sale deals have a buy-out clause in the event that you do get that major Sundance premiere and a larger distribution company makes a better offer.

Once a film is released, the best-case scenario is to secure a theater release. Many films will be forced to skip this window as there are fewer screens than there used to be and some distributors feel you make more in the digital windows regardless, but it is our belief that this window is still incredibly important. All of our films are chosen with an eye toward theatrical. Even if you do not make the majority of your revenue from the theatrical release, this window provides the film with a level of prestige and importance which greatly helps sales in subsequent windows. This is another reason why it’s so important to attach or be acquired by a major distribution company with the resources to get a film into movie theaters.

While many film business plans will spend some time talking about self-distribution and the best way to release and run a film campaign, the reality is, in order to make significant returns, bringing on a distributor who will put marketing dollars into the film and place it prominently in theaters and on digital platforms is far and away the most important ingredient in a successful distribution. In this one aspect of the film process, it’s best for the producer to let the experts take the wheel.

A note on film festivals

An important change in the independent film industry over the past 10 years is the transformation of the major film festival from a talent discovery platform to the first stop for marketing films already acquired or represented by established distributors, sales companies, and production companies. With this in mind, our strategy will be to pre-sell movies in a Negative Pick-Up Deal or attach a sales agent even before filming or submitting to festivals in order to ensure placement in major festivals. This strategy provides producers and investors less upside than a big sale out of a festival, however is far less risky. In many ways, festivals have become the hidden first window, which makes the theatrical window more likely and more successful. In addition to utilizing our network, we, the Managers, will attend all major North American film Markets as well as Cannes in order to secure these deals.

Merchandising

An additional pillar in a marketing strategy follows the idiom that in 2024 everyone needs to be their own lifestyle brand. This is true of companies as well. With box office sales dwindling film companies have moved to diversify their revenue streams. For larger companies, this has manifested in the form of vertical integration. Sales agents and distributors are now producing and studios are getting into the exhibition industry. In part due to the lapsed Paramount Consent Decrees of 1948, which now allow for studios to be their own exhibitor. While controlling the entire life of a film from development to exhibition is still out of reach for the independent producer, our version of this is building a brand and community with in-person events, merchandising, and creating social media content beyond just promoting our films. Companies like A24, and Strong Baby have been extremely successful at this. To support development and social media, we plan to sell products through our merch store like the books are films are based on, hold in-person industry cocktail hours, create products and experiences based on our films, and produce content of general interest to film lovers. We are already in the process of launching our first product, a Film Strip Bookmark with iconic film images which is being manufactured in collaboration with CPC London.