You don’t need an MBA, you just need to know what’s going on
Especially when it comes to directing your first feature film, it is immensely important that a Director understand — at least to some extent — the business of filmmaking. In over half of the indie films I’ve been involved with, the Director held some stake in the Sole Purpose Entity that owned their movie. That means they owned a business — a business that owned their movie; and if they don’t have a very good understanding of how that business works, they could lose control or ownership of their own movie.
I’m not suggesting every Director get an MBA or even become a Producer. It’s perfectly fine for a Director not to like, be good at, or want to deal with the business aspects of filmmaking — but it’s in the Director’s best interest to at least have an idea of what is going on. Here are 5 reasons why:
You might not be too worried about ownership if you’re being paid by one of the big studios to make a multi-million dollar film with a wide release — but chances are, your first film is not going to be a studio film. Chances are your first project is going to be a small indie passion film, which you’re hoping will become a festival darling and sell for a decent MG (minimum guarantee) to a good distributor and get a nice release.
It’s important then, that you retain some ownership over your film. That ownership will come in the form of ownership over the LLC (the Sole Purpose Entity), which is created specifically to produce and own your feature film. Having ownership over that LLC will do two important things:
- give you control over the decision making (e.g. which deals to make, who to give back end to, who to sign with, etc.);
- if/when the film starts to turn a profit, you’ll be entitled to a portion of the company’s profits (which are separate from any net profits you may receive as a Writer or Director).
The more you know about how it all works, the better prepared you will be, and the more you will retain ownership and control over your own projects. It would be very easy for a greedy producer to buy out all the rights from a first time filmmaker, pay them pennies, and leave them without any ownership or control over their own film. But even when you have a good producer who you can trust, having a better understanding of this will make your relationship (and I would argue your trust) stronger.
With ownership, comes responsibility — and most first time filmmakers don’t know this. As a member of a company, you need to ensure your company is being compliant with State and Federal laws as well as the IRS. Not paying your annual dues could jeopardize your company, and its assets — in this case, the company’s biggest asset is your film. You don’t want to jeopardize your film over non-compliance! And it’s all well and fine if you have a producer taking care of all this for you, but just remember that if that producer fails, it’s ultimately your movie on the line.
The ownership of your LLC might also need to be filed in your Tax Returns, depending on the structure of the business. This is something you should review with your accountant, and the more reason to understand how your business is structured. Whether you like it or not, getting your first film made will come with a lot of corporate responsibilities, which you may not want, but which may be necessary to get your film up on the silver screen.
3) Get your film made faster
If you couldn’t care less about Ownership or the Responsibility, then maybe this reason might appeal to you. Most Directors are to some extent also a Producer on their first film(s). They’re either out there asking for money to make their films, trying to court actors, attracting an experienced producer to hop on the project, etc. Most first time filmmakers don’t have a clue, however, of how the business actually works. So they don’t really know where they’re going with the film, they just know they want to make it. This is a huge disadvantage. Most people don’t want to board a ship without a clear destination and some sort of map for how to get there.
Having a good understanding of the business will attract more experienced professionals and help you get your film made faster because:
- You’ll sound more confident about your pitch and your plan;
- You’ll be MUCH BETTER prepared to answer investor questions, and therefor much more likely to get funding;
- Your film will sound less like a passion project, and more like a business plan (this is a good thing);
- You’ll be able to strike deals faster because you’ll understand the basic terms;
- You’ll have a roadmap of the steps you need to take to make your film a reality.
This last one is very important, most filmmakers don’t really have a roadmap, and that leads me to my next point.
With more understanding comes more motivation. For me, lack of motivation comes whenever I feel I don’t really know what to do next. When I know what I need to do to get what I want, I tend to get a boost of motivation. The more I get done, the more motivated I get to keep going. Filmmakers often give up, because they don’t see the light at the end of the tunnel, and most of the time it’s not because they don’t know how to shoot the scenes they need to make their movie, it’s because the lack of knowledge of the business aspects overwhelm them and make it seem like they’ll never even be able to get to day 1.
While this is more a psychological factor, I think it’s a very important one. All of the most successful people I’ve worked with, tend to be highly motivated individuals who have a very good understanding of the business they’re in and how to get what they want. They study and read a lot, and are constantly learning about their own industry. I’ve never seen a film made with a director who wasn’t highly motivated.
This goes hand in hand with #1, but goes beyond just ownership. You might have a lawyer who will be looking at your contracts, but more often than not, the dealmaking starts well before the filmmakers have even thought of hiring lawyers. You have to think about how you want to structure your deals, the company, back end points, profit splits. (Getting 50% of “Producer’s Share of Net Profits, as defined by Company” means very little if the profits are defined to be 90% to Investors and 10% to Producer’s — okay, this is a highly unlikely exaggeration, but it’s very well possible).
What rights do you want to keep? How much say do you want over the Final Cut of the film? Who else has voting power over what distribution deal you take? How attractive will your financing deal be to financiers? Who gets EP credits? All of these questions come down to how the business is set up, and what the deals look like.
Not in a greedy way, but there’s a number of ways in which understanding the business of filmmaking will ensure you more money. The very first way is it will SAVE you money, because
- You won’t have to hire an attorney to explain every detail to you, and you’ll be able to do a LOT of the early work by yourself, and bring in the attorneys when you really need them.
It’ll also make you more money because:
- You’ll be able to negotiate a better back end deal for yourself as a Director
- You’ll be able to ensure the returns structure is set up in a way that you have a chance of seeing profits as the “business owner” of the company, as well as the “Director”
- If you don’t end up owning a piece of your film, you’ll at least know that, and will be in a better position to negotiate a higher rate in lieu of giving up all ownership to your film.
We’re obviously not in it for the money, but if you’re creating something valuable, you should be fairly compensated for it — and what’s more, we want to make a career out of this business, so that means we need to learn how to consistently make money with the films we make. And that’s when we get down to Business.