The Story's Just the Start

The purpose of this book is to familiarize the reader with the positives and pitfalls of investing in Independent Films. It's for people who want to make Independent Films, people who want to invest in Independent Films, people who have an abiding interest in Independent Films and all students of film. It won't tell you how to cast a film, where to put the camera or how to make your schedule fit your actors availability but it will give you insight into that most important element of the filmmaking process, the money and how to safeguard it.

The Independent film world is awash with talented writers, directors, actors and technicians but none of them get to do what they do best if the producer doesn't raise the money.

Of course the process never starts with the money. It usually starts with a writer getting, what he thinks, is a dynamite idea and writing a script. Somehow, by agent or connection, he manages to get the finished script into the hands of a producer and after fishing through hundreds, maybe thousands of such scripts, that producer uncovers one he likes so much, that he is willing to commit the next two to three years of his life to making and distributing it. That's, of course, in the Indie Film world. In the Studio world it's a whole different ballgame. In the Studio world the producer looks at a demographic chart, decides what age and sex group he'd like to spend the next two years of his life catering too, and hires a writer or writers to produce a script which that demographic group might find appealing. It's two different planets in the same universe but we'll get back to that later.

Confronted by a good script and having decided to make a film of that script the producer does three things. He options the script, he begins acquiring elements that will make the project desirable to financiers, distributors and ultimately audiences and he begins to think about where he will get the money to make the movie.

I was at that point in the process a couple of years ago. I had a really strong script, a script with a couple of terrific roles with which to lure talented, name actors and I had two experienced directors anxious to helm it. It seemed a perfect time to sit down with people who could lead me to the money.

Let me say right out front that I'm not a particularly well-connected guy. I don't know many people with the kind of excess income necessary to buy shares in even a low budget film but I do know a couple of guys who manage or invest money for those enviable people I don't know.

So I invited one of them, a prominent investment banker, to lunch. Between drinks and appetizers I had suggested the possibility of his guiding some of his high rolling clients into Independent Film production. He smirked, raised his glass in a mock toast.

"Do I look crazy?" he asked.

"I don't get it," I replied. "You will put your clients into all kinds of ultra-high-risk deals, preposterous IPO's that even a blind man can see will crash and burn, what the hell's wrong with Independent Film?

"I occasionally put a client into something with risk," he smiled benevolently, "but only when it has huge potential."

"The Blair Witch Project," I snapped, "was financed on a damn credit card and grossed over a hundred forty million bucks."

"Sounds great," he conceded, "but nobody understands how. I understand the business plan for a wildcat oil well in Turkmenistan but frankly what you people do is Kahzak to me."

I thought about that for a couple of days. This was a very smart guy. Why did what seemed so obvious to me appear so opaque to him? I was finally forced to admit that the problem wasn't really his failure to understand; it was my failure to communicate. I finally saw that the people in banking, like the people in film or the people in sailing, had their own language and approach, and if I was going to appeal to them, I had to present a project that I saw as an artistic venture with profit potential—as a profit making venture with artistic possibilities.

And so this study was born.

It started off as a simple brochure, which I called, Independent Film as Part of an Investment Strategy. It was aimed at explaining the process by which a film's money was spent and how that money was (hopefully with a profit) recouped. After writing it I found that any number of people wanted to read it. Unfortunately more of them were filmmakers than investors. Then I was sitting in a restaurant one afternoon with a lawyer who taught film production at Tisch. She had read the brochure, liked it and suggested that if I enlarged it into a book, she would use it as a text in her courses.

That's how that brochure turned into this book.

-- Sample --

What Is Indie Film?

The Off-Hollywood Guide, describes Independent Film as, "any film produced outside the Hollywood Studio System, as such system is defined by The Sundance Film Festival and The Independent Spirit Awards."

That's a swell description if all you're interested in are the parameters of award or festival participation rules. For the purpose of this report, which is formulated to inform producers, investors and just about anyone interested in the filmmaking about the process by which a specific type of film is made, I have narrowed the parameters of the above description to works of fiction produced and financed solely in the US and Canada, thereby eliminating all shorts, foreign films and documentaries. I will deal, in a later chapter, with the possibility of raising foreign money, the very complicated, fast disappearing world of European tax credits and the chances of foreign co-production. But just remember, if it has subtitles, is about raising grain in China or if Michael Moore is up there on screen, trying to prove a point, it's not for this study.

So we've spent a couple of paragraphs talking about what Indie films aren't. It's now time to deal with what Independent films actually are and how they differ from those made by the Studios. Even a cursory glance shows some very significant differences between the two; primary among them, the ways they select material and what they do with that material once it's selected. We'll deal with those differences and some similarities as soon as I give you some background on Indies and how they fit into the history of film.


There have always been Independent films. At the dawn of the industry everyone making films was an independent, most of them Jewish entrepreneurs, tired of the garment trade and looking to expand their horizons into something more exciting. Men like Samuel Goldwyn, Carl Laemmle, Adolph Zucker, Louis B. Mayer and the Warner Brothers, Harry, Sam, Albert and Jack, began making short films and showing them in storefront theatres called Nickelodeons because that's what it cost to see a show.

They shot their films, for the most part in Astoria, Queens and Fort Lee, New Jersey, but eventually the east coast weather being what it is, they moved to the sunnier climes of California and began to dominate their new industry. As the industry leaders, The Studios, began to enlarge their companies, emerge from the pack and accumulate others, the independents began to fall by the wayside. This process accelerated when in 1922 politician Will Hayes left office to found the MPDAA (Motion Picture Distribution Association of America), which united the five major Studios, MGM, Paramount, Warner Bros., RKO and 20th Century Fox. They would eventually be joined by the "Little Three," Universal, United Artists and Columbia. The Five Majors having previously bought up all the theatre chains, were now in a position to squeeze out all non-studio production forcing the independents out of business.

Things stayed that way until 1938 when noted Trust-buster, Assistant Attorney General Thurman Arnold initiated proceedings against all eight studios for violations of the Sherman Anti-Trust Act. The big five agreed to a consent decree but the Little Three refused and as it turned out WW II put all action on hold until 1945 when the Supreme Court ruled that the Studios ownership of theatres was indeed a violation of the Sherman Anti-Trust Act. By 1949 all major studios had given up ownership of their theatres.

It was the 1950's before the Indies reappeared in the marketplace. They came back as micro-budgeted, mostly exploitation, films with limited release possibilities that were relegated to the Art or Grind House venues in a few major cities.

It started with the grind house product; exploitation films that promised a world of sexuality but delivered only a few cheap thrills. Soon distributors saw another source of product for their theatres and began to book European films that because of the less stringent censorship rules in their countries were allowed to include more sex and nudity than their American competitors. The label Foreign Film became synonymous with erotic and since they were better made then the local sexploitation product they began to acquire an audience.

It was in this way that the great Swedish writer/director Ingmar Bergman was first introduced to American audiences when his early films, Monika, the Story of a Bad Girl, The Naked Night and Lesson in Love, exposed them to more flesh in better films than they had ever experienced before. This led to an increase in foreign film distribution led by companies like Ben Barenholtz's Circle Films, which began bringing in the Italian neo-realists and the French New Wave. The success of these groups encouraged American independent filmmakers led by John Cassavetes and Roger Corman and led to the flood of Independent product that emerged in the Sixties and Seventies.

Despite the rush to produce Indie product the increase in box office results was agonizingly slow and with the exception of two high concept exploitation flicks Texas Chainsaw Massacre 1974, and Dawn of the Dead 1978 and the anti-war film Platoon 1986, no Indie before Crossing Delancy 1988 and Sex Lies and Videotape 1989 was able to count its US gross at over ten million dollars. That situation has changed dramatically in the ensuing years.

The new box office boom, fueled by greater visibility and increased promotion was due primarily to the fact that, beginning in the late eighties, Indies appeared in all the exhibition venues previously occupied only by Studio product.

This was evidenced by such Indie hits as; Sex, Lies and Videotape 1989, $24.7M, Pulp Fiction 1994, $213M, Fargo 1996, $25M, The Usual Suspects 1995, $35.7M, Boys Don't Cry 1999, $11.5M, My Big Fat Greek Wedding 2002, $244M, Lost in Translation 2003, $44.6M and Monster 2003, $33.4M, which, because they were of superior quality, found their way into big circuit distribution and bigger circuit profits.

More important, Indies have risen in stature to a point where they are a major contender for all artistic awards. Since 2001 they have been winners or major contenders in most of the Oscar categories, but that's only part of the story.

It was the Studios themselves that inadvertently provided what might be the biggest impetus to the emergence of Indie product at the box office. The release of Jaws in 1975 and the resulting mega-gross of $471M worldwide on a $12M budget changed the Studios outlook on how films should be made and distributed—big time. The result of this one film and its incredible success led to the birth of the tent pole process. Studios began gearing up to produce bigger films, with bigger stars at bigger budgets aimed at a specific, huge demographic that would lead to a boom or bust philosophy and gut their B-movie divisions. This phenomenon left a vacuum in exhibition.

The Industry

The motion picture industry is currently divided into two unequal segments, the Studios and the Independents. They market different products in different ways for different costs and for the most part they reap different rewards but despite their many differences they are in a broader sense doing the same thing, making movies.

Independents contrast sharply from studio product in two major areas: Content & Cost.


Independent films are, for the most part, divided into two segments; seriously conceived works, based on strong, character driven scripts, aimed at an adult audience and low budget genre films that fill the various markets once supplied by the B-product of the studios. They contrast sharply with studio product, which is, for the most part, aimed at a younger (14-29 year old) demographic and uses comic book, action, video game, animated and romantic comedy themes that appeal to a wider, often less discriminating audience. Of the top fifteen domestic grossing films of 2010, only one, Inception, was aimed specifically at an adult audience. The other fourteen were a combination of animation, comic book adaptations, video game rip-offs and one Harry Potter. And a change is not evident in the foreseeable future.

The process of making a film, whether by a studio or by an independent, is basically the same but each defines its territory by a few distinct differences. Both must acquire a story on which to base the film, develop a script from the story, acquire a director, raise money to make the film, decide where the film is to be shot, schedule the shooting of the film, hire cast and crew, shoot the film, edit the film, add music and other elements, show the film to distributors and decide on ways to promote the film. Acquiring a story is not just the first job to be accomplished. It is, in a great majority of cases, the most important. It can be accomplished in a number of ways. A producer can option or buy a finished screenplay; option the rights to a book and hire a writer to write a screenplay; entertain story pitches by writers and if he likes one of the ideas pitched, option it and hire that writer or other writers to write a script, much as he would do with a book option. The big difference between the Studio method and the Indie method is that while both groups use all of the above techniques, Indies seem to lean more heavily on optioning a finished script, while the studios favor developing a script from books or concepts. This choice of methodology is due in a great part to the background forces that dictate the way each selects their material.

Studios, because they are large corporate entities whose decision-making processes and the men who govern them are sometimes far from the trenches have learned the value of demographics. The nature of the demographic to which an idea will appeal is often the first consideration made by a studio staff in the selection of material. This dependence on demographics accounts for the preponderance of films aimed at younger audiences whose preferences are, usually more defined in scope and therefore much easier to target. The result of this approach is a steady flow of big budget animated, effects driven, comic book, action and tent pole films that when successful, generate as many sequels as the market will sustain, always bolstered by A-list stars.

Independents, on the other hand are more inclined to pick material that conveys ideas, stirs emotions, creates fear or generates an erotic response and appeals to a more specific, often more mature audience that is demographically much smaller but because of that constriction, much easier to pinpoint. A film like Memento, a noir thriller, fueled by moral ambiguity, containing sharp plot twists and demanding its audiences attention is aimed directly at an educated, urban audience in the thirty to sixty-year-old, age bracket while films like Last House on the Left, or Friday the 13th are aimed at slightly younger, less intellectual more thrill seeking audiences. Both are specific niches, vastly different but equally definable and each with an easily targeted market.

Once a concept has been decided on, sometimes even before a finished script is available, a studio will begin to acquire stars and directors, often referred to as elements. More often than not, the attachment to a project of these elements, even more than the merits of the finished script, dictates whether or not it will be a "go" project, that is whether or not the production head at the studio will okay it for production. Dealing as they do, with multi-million dollar productions, the studios are loath to give the "go" to any project that does not have the insurance of huge box office names directing, producing and most importantly, staring. Additional insurance for their enormous budgets comes in the form of best selling novel titles or in the case of sequels, prior success at the box office. The huge box office success of Spider Man 1 & 2; along with the re-assemblage of director Sam Rami and its superstar cast enabled Columbia Pictures to justify the staggering ($250M) cost of Spider Man 3.

Independents, on the other hand, without the financial wherewithal to attract A-list star power or to afford budget breaking special effects have chosen a completely different way to make movies. For independents the story is the principal element on which the film will be built. True, name directors and stars are sometimes drawn to independent films but that is most often the result of a script that they want to perform in or direct or occasionally a collaboration in which they wish to participate. It is rarely the result of a significant paycheck.

Studio films are shot, when they do not absolutely require a distant location on studio sets on the studio's back lots. This enables studios to bill back to themselves huge rentals for the stages and to amortize the union payrolls that they must support whether or not they are in production. This results in inordinate overhead costs to the individual production but a bonus to the studio.

Independents do most of their shooting on real locations and hire creative production personnel on a project-by-project basis, thereby eliminating the studio's inflated overhead costs.


Studio films, depending as they do on A-List stars and high cost special effects and working under the burden of the studio's union contracts and inflated overhead costs regularly produce films at enormous cost in search of a broader, less discriminating audience. The average cost of a studio film is currently somewhere around $75M with an additional $50M in prints and advertising costs. Using the conventional industry formula that film would have to gross around $185M to break even. This is a daunting amount of money.

Independents pride themselves on smaller operating budgets achieved, mainly, by making story driven rather than effects driven films that contrast with the studio's over-the-top costs of stars and effects as well as the absurd overhead costs that are often compared to The Pentagon's $180.00 screw driver. Their share of the market for a particular film is considerably smaller than the studios but that's acceptable because a small crime film budgeted at $3M will only have to gross $7.5M to break even and as seen from both the charts in the Financial Section and the number of films being released directly to DVD, it has in the past been possible to do that from DVD revenues alone and in the future to achieve it through Internet distribution and who knows what other technological advances, of which we have no knowledge at this point in time.

Financing for Indie product, especially the smaller films, comes, historically, from sources outside the traditional Studio system. Even this, however, is no longer completely true. Miramax, once the star of the Indie scene became a subsidiary of Disney and as such did most of its financing through monies supplied by that most major of studios. In doing so they were part of a trend participated in by such other stalwart Indies as Fine Line, Content, Forensic Films, Lion's Gate and Focus Features, that while not always owned by Studios did receive all or part of their financing from them through pre-established, co-production or distribution agreements.

For the most part, however, Indies do depend on either outside the industry money (Equity investors) or the coupling together of other Indie or distribution entities to finance normally smaller than Studio budgets.

One of the biggest obstacles in attempting to put together some kind of cohesive picture of Indie financing has been the shortage of research on the subject. This is due in large part to the nature of the beast itself. Indie producers are a maverick lot, not given to publishing records of their financial transactions.

We have, therefore, comprised our own list of Indie product, comparing, where available, their production budgets with their US grosses and other sources of income. This, of course does not give anything like a complete financial picture of the industry but it is, unfortunately, all the information that has been published. For this purpose I am deeply in debt to Tom Trenker, CEO of the Institute for International Film Financing, Tom Weiner's Off-Hollywood Film Guide, Daily & Weekly Variety, The Hollywood Reporter, the Internet Movie Data Base, Baseline, Baskerville Communications, Kagan World Media, The Motion Picture Association of America, Philip Kotler, Neilson EDI, and most especially Louise Levison for her brilliant book Filmmakers & Financing.


One of the major institutions that effect a films ability to make or lose money is the past and current ratings system. The ratings as we know them today are the crippled grandchild of the original Motion Picture Production Code formed in 1930 by Will Hayes head of the Motion Picture Producers and Distributors of America on behalf of the Studios. It was a cynical bow to the sometimes real but too often hypocritical outcries of the country's religious demigods against what was then perceived to be filmic attacks on Christian morality. The code banned sex scenes, sexual relationships that crossed racial lines and nudity. It also banned violence, criminal activity and scenes of drug use. Can you imagine what America's film and TV scene would be like today if the later three were actually banned? In reality they never were. The only bans that were ever upheld were in the areas that dealt with sex and once or twice blasphemy. The MPAA finally ended the code in 1968 but it was quickly replaced by a self-inflicted code run by the Studios that again sought to judge films on their level of violence or sexual activity, seemingly without regard for how these offenses were portrayed.

So what is the result of these codes and how have they affected the lives of the films to which they have been applied? Well, it's interesting to note that the most highly publicized censorship applications have almost always backfired. When the Catholic Legion of Decency and the Code condemned films like The Outlaw, Lolita and Baby Doll, the action drove the box office of what would have ordinarily been mid-grossing films, through the roof. In today's scene things are somewhat different, mainly due to newspapers reluctance to advertise NC17 rated films. The result of that lack of advertising is that the Studios never release an NC17 film and filmmakers who produce such fare are either forced back into the editing room to comply with at least an R rating or sent searching for other than major distribution.

Brave Indies or those who have a cause, still release NC17 films but they are few and far between with short theatrical runs and sometimes huge DVD sales. It's interesting to note that the DVD and Internet markets has rejuvenated the old double shot process that was established in the fifties and sixties when Hollywood shot foreign versions of some films that included scenes of sex and nudity not shown in this country. The DVD & Internet markets are doing the same thing now. Films released with PG13 or R ratings are then released on DVD in much more controversial versions.