Congratulations to our client, Sheila A. Laffey, President of Echo Mountain Productions on the completion of principal photography on her new documentary South Central Farm which tells the heartbreaking true story of the plight of a community of poor urban farmers and their supporters in South Central Los Angeles.
Given a barren plot of vacant land, after the L.A. riots in Watts, this group of dedicated individuals and families turned a concrete desert into an urban oasis. They created the largest urban garden in the country that fed a community of 350 families in need, as well as those who visited their markets, and sheltered birds and other wildlife, only to have it taken away from them and destroyed. The issue remains in the courts.
The film examines the environmental, health and social advantages of urban farms, their ability to create safe, sustainable environments for families, and produce nutritious and plentiful food sources to inner city communities in greatest need, as well as to many visitors. Social and cultural benefits shown include multi-generational and ethnic dynamics, spontaneous learning situations, free child care, mentoring and fostering of indigenous values of the commons and land stewardship. Environmental benefits include diversification of the seed bank, re-charging of the local aquifer, less urban runoff and cleaner air.
The film focuses on people growing their own source of food at the farm, as well as celebrity tree sitters such as Daryl Hannah, Joan Baez and Julia Butterfly Hill, and other supporters such as Martin Sheen and Willie Nelson who brought international attention to the issue. Supporters include Bonnie Raitt, Jodie Evans and James Cromwell and Environmental Media Fund.
Additional completion funding is needed to meet the distribution deadline of July 1 for the Natural Heroes PBS series which wants to air the film in its upcoming third season if the film is completed by July 1.
The International Documentary Association (IDA) is the fiscal sponsor of the Documentary. Donations over $200 that donors wish to be tax deductible can be mad payable to IDA and sent to Echo Mountain Productions for forwarding to IDA. IDA will send a letter to donors acknowledging the not for profit donation. Donations under $200 or donations for more that do not need to be tax deductible can by made payable and sent to Echo Mountain Productions, 1301 17th St., #101, Santa Monica, CA 90404. A trailer and budget are available upon request. For more info contact Sheila at 310-45304272; firstname.lastname@example.org.
BORROWING AGAINST PRE-SALE AGREEMENTS
One method that independents have used to finance films is to borrow the money to produce the film by using pre-sale agreements as collateral.
In a pre-sale agreement, a buyer licenses or pre-buys movie distribution rights for a territory before the film has been produced. The deal works something like this: Filmmaker Henry, or his sales agent, approaches Distributor Juan to sign a contract to buy the right to distribute Henry's next film. Henry gives Juan a copy of the script and tells him the names of the principal cast members.
Juan has distributed several of Henry's films in the past. He paid $50,000 for the right to distribute Henry's last film in Spain. The film did reasonably well and Juan feels confident, based on Henry's track record, the script, and the proposed cast, that his next film should also do well in Spain. Juan is willing to license Henry's next film sight unseen before it has been produced. By buying distribution rights to the film now, Juan is obtaining an advantage over competitors who might bid for it. Moreover, Juan may be able to negotiate a lower license fee than what he would pay if the film were sold on the open market. So Juan signs a contract agreeing to buy Spanish distribution rights to the film. Juan does not have to pay (except if a deposit is required) until completion and delivery of the film to him.
Henry now takes this contract, and a dozen similar contracts with buyers to the bank. Henry asks the bank to lend him money to make the movie with the distribution contracts as collateral. Henry is "banking the paper." The bank will not lend Henry the full face value of the contracts, but instead will discount the paper and lend a smaller sum. So if the contracts provide for a cumulative total of $1,000,000 in license fees, the bank might lend Henry $800,000.
Henry uses the loan from the bank to produce his film. When the movie is completed, he delivers it to the companies that have already licensed it. They in turn pay their license fees to Henry's bank to retire Henry's loan. The bank receives repayment of its loan plus interest. The buyers receive the right to distribute the film in their territory. Henry can now license the film in territories that remain unsold. From these revenues Henry makes his profit.
Juan's commitment to purchase the film must be unequivocal, and his company financially secure, so that a bank is willing to lend Henry money on the strength of Juan's promise and ability to pay. If the contract merely states that the buyer will review and consider purchasing the film, this commitment is not strong enough to borrow against. Banks want to be assured that the buyer will accept delivery of the film as long as it meets certain technical standards, even if artistically the film is a disappointment. The bank will also want to know that Juan's company is fiscally solid and likely to be in business when it comes time for it to pay the license fee. If Juan's company has been in business for many years, and if the company has substantial assets on its balance sheet, the bank will usually lend against the contract.
In some circumstances banks are willing lend more than the face value of the contracts. This is called gap financing, and since the bank is assuming a greater risk of not being repaid its loan, higher fees are charged. Gap financing is helpful if the filmmaker is unable to secure enough pre-sales to cover the loan. The bank lends more than the amount of pre-sales based on its belief that the gap will be covered when unsold territories are licensed. Before agreeing to supply gap financing, the bank will carefully review the existing pre-sales, and extrapolate from those sales an estimate as to what other territories might fetch. The estimate is based on the bank's experience that a film licensed to Italy for $150,000, usually fetches $100,000 in Spain. Of course, there is no guarantee that when the film is completed that a Spanish buyer will license the film, so the Bank wants to see projected revenue that is at least twice the amount of any gap. This ensures that even if some territories remain unsold, the gap is likely to be covered. Moreover, the bank will rely on the reputation and track record of the sales agent and/or producer in judging whether these estimates are realistic. Banks may decline to lend funds based on projections from a sales agent with a history of overly optimistic projections.
The bank often insists on a completion bond to ensure that the filmmaker has sufficient funds to finish the film. Banks are not willing to take much risk. They know that Juan's commitment to buy Henry's film is contingent on delivery of a completed film. But what if Henry goes over budget and cannot finish the film? If Henry doesn't deliver the film, Juan is not obligated to pay for it, and the bank is not repaid its loan.
To avoid this risk, the bank wants a completion guarantor, a type of insurance company, to agree to put up any money needed to complete the film should it go over budget. Before issuing a bond , a completion guarantor will carefully review the proposed budget and the track record of key production personnel. Unless the completion guarantor is confident that the film can be brought in on budget, no completion bond will issue.
First-time filmmakers may find it difficult to finance their films based on pre-sales. With no track record of successful films to their credit, they may not be able to persuade a distributor to pre-buy their work. How does the distributor know that the filmmaker can produce something their audiences will want to see? Of course, if the other elements are strong, the distributor may be persuaded to take that risk. For example, even though the filmmaker may be a first-timer, if the script is from an acclaimed writer, and several big name actors will participate, the overall package may be attractive.
Nowadays it is very difficult to finance a film completely through pre-sales. There are many completed films available for acquisition, and a distributor needs a compelling reason to take the extra risk present when one licenses a film that does not yet exist. There is much less risk in licensing a film that has been completed, because you know exactly what you are buying even if you don't know how popular it will be with the public. Consequently, independent films today are often financed with a combination of pre-sales, equity investors and various production incentives offered by states and nations. This article is based on an excerpt from Risky Business, Financing and Distributing Independent Films, by Mark Litwak, published by Silman-James Press (2004).
REGISTERING YOUR SCRIPT OR FILM WITH THE COPYRIGHT OFFICE
If the motion picture is finished, you should register it and the underlying script by sending in Form PA with a cassette of the finished film and an attached synopsis describing the film. If you are still at the script stage, you can register the script now and register the film when complete.
In either case, closely follow the instructions on Form PA. The following guide addresses those sections that applicants often find confusing when registering scripts or motion pictures. Remember to complete all applicable sections of the form, not just those discussed below.
Registering a Script
Under #1, Nature Of This Work, you could write "Screenplay for Motion Picture."
Under #2, "Name of Author": Note that if a screenplay has been written for you or your company, in other words, if you hired someone to write the screenplay, then it may be a work-made-for-hire. In this case, you or your company is the copyright holder and should be listed under "Name of Author."
On the other hand, if a writer has created the screenplay on his own, and he is then selling it to you, the writer would be the author. If this writer has already registered their script with the Copyright Office, you should not register it again, but merely record the transfer (assignment) of the copyright to you. The copyright should be assigned to you or your company with a written contract, and a short form copyright assignment recorded with the Copyright Office.
Under "Nature of Authorship," you should give a brief general description of the author's contribution to the work. If the author wrote the entire script you might write: "Entire Text." If you are claiming copyright to something less than the entire script, describe your contribution, for example, "Editorial Revisions."
Registering a Completed Film
Under #1, "Nature of This Work," write: "Motion Picture."
Under #2, "Name of Author": Usually this will be the name of the Production Company or entity that hired everybody who made the motion picture. If this is project was entirely a work made for hire, check "Yes" under "Was this contribution to the work a 'work made for hire'."
Under "Nature of Authorship," write in "Screenplay and adaptation as motion picture."
If this motion picture was not at all a work for hire, fill in the name of the person(s) who made the motion picture, and check "No" under "Was this contribution to the work a 'work made for hire'."
Under "Nature of Authorship," write in "Screenplay and adaptation as motion picture."
If this motion picture was partly a work for hire, and partly not, you'll need to fill in a space for each part. For example, if your production company made the motion picture as a work for hire but bought a completed screenplay from a writer who was its author, then you would fill out two spaces:
In one space, you could fill in the writer's name as author, check NO under to the question of whether it was a "work made for hire," and fill in "Screenplay" or "Script" in "Nature of Authorship."
In another space, you could fill in the production company's name, check YES indicating it is a "work made for hire," and fill in "All other cinematographic material" under Nature of Authorship."
Under section 5, if the motion picture contains a substantial amount of previously registered material, answer "Yes," to the first question and check the box indicating the reason for this registration. Include the registration number and year of the previously registered material.
Fill out #6a & b only if the work has a significant amount of previously registered, previously published, or public domain material.
Under #6a, "Derivative Work or Compilation," you could write in "Previously registered screenplay."
Under #6b, "Material Added to This Work," write "Motion Picture."
You are required to deposit a copy of your film within 3 months of publication. If you do not, you may be subject to fines and penalties.
Complete #4, "Copyright Claimants," even if the Claimant is the same as the Author. The Claimant is the person or company that has legally acquired the copyright. It will be either the Author or the entity to which the copyright has been transferred. When the Claimant is not the Author, you need to describe under "Transfer" how the copyright was obtained by the Claimant. You could state, for example, "by written assignment."
Don't forget to include a copy of your script or film when you send in your registration form.You need to sign Form PA and send it in with a check for $45 payable to "Register of Copyrights." Retain a photocopy of everything you send the Copyright Office including the completed Form PA and your cover letter. It is a good idea to send your package by certified mail.
If you would like to put your attorney's name under "Correspondence" so that he/she can answer any questions the Copyright Office may have, you may do so. In this event, you should send your attorney a photocopy of the form and your cover letter so he/she will have a record of what you have submitted.
Mail to:Library of CongressCopyright Office101 Independence Ave., S.E. Washington, D.C. 20559-6000
Copyright circulars and forms are available from the Forms and Publications Hotline, (202) 707-9100 (leave a recorded message requesting the documents you want mailed to you), or on the Copyright Office website, http://rs6.net/tn.jsp?t=afuwkbcab.0.yun9mbcab.8f8tz4bab.630&ts=S0261&p=http%3A%2F%2Fwww.copyright.gov%2F. The website also offers extensive copyright information. Circular 45 specifically addresses copyright registration for motion pictures. To speak to an information specialist, call (202) 707-3000.