Legal Advice: 6 Tips for Filmmakers Making An Indie Film
First question, Counsel. Who is Matthew Valentinas?
I am a Boston-based entertainment lawyer, literary manager, and producer. I provide production counsel for films, documentaries and reality TV shows from development through distribution. I am also co-founder of KV Media and own Mom’s Basement Management which is a boutique for screenwriters, authors, directors, and producers. My hands-on film experience includes producing the documentary An Open Secret (watch the trailer below and serving as Executive Producer on the television series based on the book WHITE DEVIL by Bob Halloran in development with Sony Pictures International Television and 3 Arts Entertainment.
When an individual takes the bold leap to make a film, what is the first step they should take?
LEGAL ADVICE: I think the individual needs to commit to the idea of whether they are going to sell their film project to a third party to finance, or whether they are going to fund the project themselves. I receive a lot of calls from aspiring filmmakers who have never raised twenty-thousand dollars, let alone the “just a million” dollar budget they often envision. I generally prefer to stick to one approach if possible; meaning, we’re either working to raise the financing ourselves, or we’re positioning the material to be optioned or purchased by a third party who can get the film made.
When should they involve an entertainment lawyer?
LEGAL ADVICE: I’m not being biased when I say that your attorney should be one of the first members on your team. For film production seek a lawyer who is more experienced on the transactional side as opposed to someone who may be more of a litigator or copyright specialist. Definitely, don’t ask your uncle who might be a corporate attorney but who has never done anything with entertainment. Find an attorney who can work with you in setting up the organizational entities and necessary agreements needed to get you from content ideation through all stages of production, sales, and distribution. A lot of the best advice I give clients is what not to do, or when to do it. The ultimate goal is to transfer this production over to a licensor or distributor as seamlessly as possible.
How much should a filmmaker allocate out of their production budget for legal services?
LEGAL ADVICE: Fee expectations are dependent on how many transactions and agreements you’ll be relying on your lawyer to handle for you. A more experienced producer can get a lot of things in place before bringing them to an attorney. Hourly attorney rates can generally range from $300-$800 an hour depending on the experience of the attorney. Bigger firms may require larger retainers, but boutique law offices like mine often offer flat fees. I suggest budgeting a minimum of no less than $20,000 for an indie feature. Legal fees may run between $35,000-$50,000 for feature-length productions with a million-dollar production budget (and this will not include any fees for a Private Placement Memorandum used to raise money from sophisticated investors which require compliance with the SEC).
I structure flat fees to be paid out over the various production stages with an agreed-upon payment schedule when I am engaged as production counsel. I will consult with my client as to what types of agreements will be covered during those phases so we can set milestones and budget accordingly. I also offer a paid one-hour phone consult that many initial clients have found to be the most economical and effective way to start a working relationship with me – especially for ultra-low-budget productions or emerging filmmakers.
How has the JOBS Act (The Jumpstart Our Business Startups Act) changed crowdfunding?
LEGAL ADVICE: The Jobs Act, first signed into law by President Obama in April of 2012, was finally enacted in May this year. The quick answer is that it is yet to be determined how successful this action will be. Many of my colleagues who work in big law, finance or venture capital seem to think The Jobs Act is ripe for fraud, and that too many unsophisticated investors will be scammed out of their money. However, I am very bullish on the positive prospects of what this may do for the creative industry.
Your friend who has been bugging you on Facebook for years to give her $100 for her movie in return for an ill-fitting t-shirt, can now bug you on Facebook to invest $2,000 in her movie. And now, you can actually participate in any potential profit of the production through owning equity in her project.
The Jobs Act lowers the bar on some of the hurdles that were often a barrier to raising money before. Particularly the legal costs of securities compliance have been lowered from approximately $30,000 to a ballpark cost of $5,000 (or arguably much lower than that). The pool of people that you can seek funds from has grown much bigger with less onerous paperwork and approvals necessary to qualify to raise the funds. Access has been increased for the average person making less than $100,000 a year. And now you can even advertise so people can be solicited about your project, whereas that was not allowed before.
What’s the potential net-net out of this … for filmmakers, investors and the industry at large?
LEGAL ADVICE: In short, Regulation Crowdfunding will allow filmmakers to raise smaller amounts of funds from a larger pool of potential investors who will now be allowed to participate in potential profits. This allows the consumer to also be an activist investor. My hope is that this will finally allow streaming to become the secondary market that we lost when the Home Entertainment profits evaporated with the loss of VHS and DVD revenues.
This may revitalize the genre and B-level film industry, and also help more independent arthouse films to achieve profitability. It may also help reduce the losses affected by the globalization of the industry that is cutting into the number of foreign sales (e.g., Netflix pays a worldwide fee as opposed to getting fees per territory) and subsequently aid local production output by enabling more emerging and amateur filmmakers to find financing outside of the studio system.
I’m sure there will be some spectacular failures and scams, but I’m predicting that in two or three years The Jobs Act will spur a new wave of successful and profitable independent films that we have not seen since the nineties.
What is the biggest mistake first-time filmmakers make?
LEGAL ADVICE: The biggest mistake I frequently see first-time filmmakers make is their lack of appreciation for the investor class. Making sure the financial backers of your project get a return on their money should be the foremost priority for every filmmaker. The filmmakers that keep their financiers updated and deliver on their promises are the filmmakers who will have the greatest chance of a continued career in this industry.
Second, first-time filmmakers should always make sure they budget for post-production correctly. At least 50% of their budget should be dedicated to getting all the editing and mixing completed. So many issues arise during production that newbie filmmakers never even anticipate that I often see films bogged down for months, or even years, trying to find completion funding. That should be avoided at all costs.
Third, have a plan to release the film, and then have a back-up plan to release the film digitally if the initial plan falls through or never comes to fruition. Filmmakers need to realize a completed film with no distribution allows distributors to have complete leverage on the production. The indie film industry is a lot like the junk-bond business because distributors can come in and make very low offers for completed films and set-up very favorable deal terms at the expense of filmmakers in the event the film does well.
Thanks, Matthew, for sharing insights with our fellow Indie Film Hustlers!
Please Note: Filmtrepreneur® is not legal counsel. The advice and thoughts Matthew Valentinas Esq. is his alone. Please consult an entertainment attorney before making any legal decisions. You can contact Matthew Valentinas here
About the Author: Bob Heske is a multi-award-winning filmmaker, screenwriter, graphic novelist and indie comic creator. By day he churns out compliance marketing content for financial services; by night he is maniacal at his keyboard – creating characters and dramatic conflicts far more interesting than he. Bob is currently working on an experimental documentary called Afraid of Nothing (you can help support it by clicking here). You can watch his first film BLESSID on Amazon Prime and Vimeo on Demand.
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