OVERVIEW OF THE MOVIE BUSINESS p r e s e n t e d b y S t e p h e n C. S o h C O L I N N G & P A R T N E R S L L P M a y 2 0 1 6
CONTENTS 1. Introduction 2. Stages 3. Chain of Title 4. Creative Control 5. Waterfall
INTRODUCTION - Trailer for TMWKI - https://www.youtube.com/watch?v=oxgm9vlfx4
STAGES - Conceptualisation - Development - Pre-production - Production - Post-production - Sales & Distribution
CONCEPTUALISATION - Original idea - Option rights - Books, spec scripts, published works - Preparation of outline, synopsis &/or treatment - Pitch
OPTION RIGHTS - Exclusive right to purchase an interest in a copyright work, for a prescribed period - Usually between 6 months to 24 months - Small upfront option fee payment (usually ~10% of purchase price and paid against purchase price) e.g. $5k today for exclusive option to buy film rights in 18 months for $50,000 - Allows the producer time to consider the feasibility of the project and to raise funding, before incurring the full cost
WRINKLES - Automatic extensions subject to payment of extension fees (not against purchase price) &/or due to force majeure - Purchase price as % of budget (with floor &/or ceiling) e.g. $1,000 option for 18-months, against 2.5% of the budget with a floor of $50,000 and a ceiling of $500,000 - Backend participation (out of defined profits) & additional benchmark payments (box office gross sales, DVD sales etc ) - On-screen and advertising credits - Interest in derivative works
OUTLINE - Describes each scene and its important action(s) - Sample (Big Fish): Seq. 16 Pages 81-83 In Bed with Will and Josephine Will explains that he doesn t truly know anything about his father, only tall tales and stories with punchlines. Seq. 17 Pages 83-85 Breakfast Over breakfast Will tries to talk with his father about what, if anything, he truly believes. Will gets a Jesus/Pinocchio joke for his troubles.
SYNOPSIS - A short (2 to 3 page) summary of the plot of the screenplay - Highlights most important elements and scenes - Used as pitch to agents / producers to generate interest - Sample: http://www.writersdigest.com/editor-blogs/guide-to-literaryagents/synopsis-example-ransom-thriller
TREATMENT - Longer-form (3 to 5 pages or more) summary of the movie in narrative form - Used as pitch to producer & prospective collaborators or as precursor to screenplay development - Superfluous once screenplay is ready - Sample: http://www.simplyscripts.com/scripts/sxa-prometheus-outline.pdf
DEVELOPMENT - Rights acquisition - Development financing - Commission screen writer - Coverages & rewrites - Development hell - Creative control
PACKAGING - Attach `above-the-line cast and crew (director, screenwriter, producer and lead actors) - Deal memos (pay or play) - Determine above the line expenses (rights to secure material upon which screenplay is based and production rights, compensation for above-the-line cast and crew) - Budget top-sheet (fixed costs)
PRODUCTION FINANCING
PRODUCTION FINANCING - Debt & Equity - Grants & Tax Rebates - Deferments & Service Deals - Pre-sales - Negative Pickup - International Sales Companies - Gap financing - Crowdfunding
DEBT - Family & friends - Third party investors and financiers - Lower risk vs lower return - Collateral - Backend?
EQUITY - Filmmaker sell an interest in the film or film company - Interest means a financial participation in the films revenue - Distributes risk for the filmmaker - Investor only recoups if the film shows a return - Higher premium or rate of return reflects the level of risk - Security laws
GRANTS & TAX REBATES - Soft Money - Tax incentives (credits or rebates) and deductions / allowances) - Co-production treaties - % of in-country spending back in rebates - Can be bankrolled or cash-flowed to offset investor risk
DEFERMENTS & SERVICE DEALS - Amounts payable to cast and crew for services rendered that they have contractually agreed to postpone receiving until the film begins generating gross receipts - The individuals assume the risk that the film does not generate any gross receipts or generates insufficient gross receipts to recoup their deferments - May be coupled with additional royalties or back-end participations
PRE-SALES - Distributor buys distribution rights before the movie is made in exchange for a minimum guarantee - Producer must show good reputation, script, cast & crew - Distributor benefits with preferential terms - No payment until delivery of the completed film - Producer cashflows the minimum guarantee with a bank, at a discount
COMPLETION BOND - Before cashflowing the minimum guarantee, the bank will take collateral and require a completion bond - The bond issuer guarantees the film will be completed within budget and on time - If it doesn t, the bond issuer must either repay the bank or pay the cost of completing the production - The bond issuer will not issue the bond unless it is satisfied and confident that the producer can complete the film in time and on budget
NEGATIVE PICKUP - Movie studio / distribution entity enters into contract with producer to purchase the movie at a given date for a given sum - The studio / distribution entity is given distribution rights, with net profits split with the producer - The producer can again secure a bank loan against the negative pickup contract to help meet the production costs
PRE-PRODUCTION - Engage below the line cast and crew - Plan logistical and creative aspects - Recee locations - Costume design - Set design - Story board - Insurance - Filming Schedule
PRODUCTION - Principal photography - Out of sequence - Continuity - Retakes - Overages - Underages - Creative control
POST-PRODUCTION - Picture and sound editing - Overlay of adjustments and effects - CGI, music scoring, sound synchronisation etc - Credits - Titles - Final cut - Creative control
SALES & DISTRIBUTION - North America (Domestic) - Rest of World (International) - Sales Agents & International Distributors - Film Festivals - Online Distribution Platforms
EXPLOITATION - Theatrical - DVD & Blu-ray - Cable TV / Satellite (paid) - Network TV (broadcast networks) / Free to air - Internet / Digital Distribution (Netflix, Amazon, Hulu, itunes, YouTube) - Airlines, hotels, oil-rigs, prisons, etc
ANCILLARY RIGHTS - Novelisation rights - Remakes, Sequels, Prequels and spin-offs - Internet distribution (OTT, SVOD) - Soundtracks - Music scores - Character merchandising - Collector editions
NETFLIX, HBO, HULU - Streaming services now account for over 70% of peak traffic in North America, Netflix dominates with 37% (Venturebeat 7 Dec 2015)
NETFLIX
STAGES - OVERVIEW
CHAIN OF TITLE - Legal documentation establishing proprietary rights to all relevant components of the film - Original copyright filings, option agreements, acquisition agreements for spec screenplays, work-for-hire agreement from screenwriters, releases from location owners, on-screen performers and other key creative contributors to the project, etc etc
CREATIVE CONTROL - Screenplay - Director s cut - Final cut - Market research - Test screenings
THE WATERFALL
THE WATERFALL - Senior Debt - Mezzanine debt - Preferred shares - Ordinary Shares - Deferments - Net profit participations - CAMA
WATERFALL RECOUPMENT
WATERFALL RECOUPMENT
THE END! THANK YOU! GOOD BYE! Contact Stephen Soh Colin Ng & Partners LLP DID: +65 6349 8731 Email: ssoh@cnplaw.com www.cnplaw.com