Business Plans for Filmmakers

8. Motion-Picture-Industry Overview

113 8. Motion-Picture-Industry Overview As noted earlier, the courts have determined that active investors need to have specialized knowledge and experience in the industry in which they are being asked to invest (see chapter 1). A strict interpretation of that requirement pretty well eliminates the use of a business plan with prospective investors who have not worked in the film industry; working in the industry is how someone would presumably get knowledge and experience in the applicable industry. Unfortunately , there is likely only a small number of prospective investors who may qualify under these court rules for investing as active investors in a film deal promoted through a business plan. Of course, as noted earlier, people currently working in the film industry do not need to see a business plan. They already know about the industry. They only need to see a producer’s package, and again, a producers’ package is not the same thing as a business plan. A third, borderline possibility may include those who are knowledgeable about the film industry even though they have no hands-on experience working in the film industry. If it is possible to raise funds from one to three active investors who are knowledgeable about the film industry, then the question becomes, “How can individuals who are not knowledgeable about the film industry become sufficiently knowledgeable and, therefore, eligible active investors?” One of the possibilities suggested by the securities regulations themselves is the use of a section in the business plan called the industry overview. In order to help bring those unknowledgeable individuals up to speed, knowledge wise, it may be essential to include in the business plan a “Motion-Picture-Industry Overview.” Such a section would provide basic information about how the industry works. It differs from the “Market Overview/State of the Industry” in that the former does not attempt to provide current statistical information. It also differs from the “Description of the Film” in that the industry overview does not discuss the current project for which funding is being sought. It does, however, Motion-Picture-Industry Overview 114 seek to explain in clear terms what happens during each of the various phases in the life of a motion picture including development, production and distribution. No assurances can be provided here, however, that adding such a section to a business plan will alleviate the court-imposed requirement that those seeking to raise money through the use of a business plan from active investors must limit their solicitation to those who are both knowledgeable and experienced in the film industry Sample “Motion-Picture-Industry Overview” Motion-Picture-Industry Overview This motion-picture-industry overview provides background information regarding the motion-picture industry generally for persons who may not be familiar with such matters. The information set forth in this overview has been prepared by the film producer, but such information may or may not apply to the specific project described in this Business Plan. General. The theatrical motion-picture industry in the United States has changed substantially over the last three decades and continues to evolve rapidly. Historically, the “major studios” financed, produced and distributed the vast majority of American-made motion pictures seen by most U.S. moviegoers. During the most recent decade, many of the motion pictures released have been produced by so-called independent producers even though some of the production financing for such pictures and distribution funds have been provided by the major studio/distributors. Other independent films are distributed by so-called independent distributors (i.e., those not affiliated with the major studios). The following general description is a simplified overview of the complex process of producing and distributing motion pictures and is intended to be an aid to investors in understanding the motion-picture business. This overview does not describe what will necessarily occur in the case of any particular motion picture. Production of motion pictures. During the film-making process, which may take approximately twelve to twenty-four months from the start of the development phase to theatrical release, a film progresses through several stages. The four general stages of motion-picture production are development, preproduction , principal photography and postproduction. A brief summary of each of the four general movie-production stages follows: • Development. In the development stage, underlying literary material for a motion-picture project is acquired, either outright, through an option to acquire such rights or by engaging a writer to create original literary material. If the literary material is...