Author: Ted Hope

Tax credits and subsidies for the film business are job stimulus. As a producer asked to ALWAYS squeeze a buck, I simply won’t shoot my films where the tax credits are not. Luckily I live in the wise and wonderful state of New York, that has one of the best tax subsidies for film and television any where in the world, not to mention the BEST talent pool in the universe too.

But it’s not the only place to go. The Incentives Office offers a clear MUST READ review of the state of the union of where to go for how much.

I received this email from The Incentives Office today. You should visit their site to receive such emails yourself.

Although many states have curtailed or terminated their incentives programs, others have expanded or enhanced their programs. There is still a substantial amount of money available – to find it:

THE INCENTIVES OFFICE TELLS YOU WHERE TO GO…

Alabama – $6 million available now, with new funds will be available on October 1st. $10 million annual cap.

Alaska – $50 million is available. Alaska has no caps on talent or projects, but requires a CPA audit to sell their 30-44% credits.

Colorado – $500,000 remains for their 10% rebate.

Connecticut – no annual cap. Regulations have tightened up for this (up to) 30% transferable credit.

Florida – (film only – see below for television). Only Florida resident cast and crew qualify, plus FL goods and services.

Georgia – 20% transferable credit, plus 10% uplift for logo (totaling 30%), requires audit/tax return. New sound stages, lots of post facilities. No annual ceiling.

Hawaii – refundable credit of 15% to 20%, requires a tax return. No annual cap.

Illinois – only resident cast and crew qualify, but Chicago is a major production center. Transferable credit of 30%. $100,000 per hire cap, but no annual ceiling.

Indiana – $2.5 million remains for the remainder of this calendar year.

Louisiana – top choice of producers, transferable credit of 30%, plus 5% bump for resident labor. The state redeems credits at 85 cents after CPA audit, or they can be sold (brokered). Many films now in prep or pre-production, so crew is getting strained. No annual ceiling, and three great stages.

Massachusetts – 25% transferable credit; state redeems at 90 cents. No caps or ceiling, and the credits are easy to sell after CPA audit.

Mississippi – a rebate of 25% for materials and non-resident crew, 30% for resident crew, $1M per hire cap. “The Help” was shot in Mississippi. Not a lot of crew depth, but growing. New sound stage in Canton. Costs are low, and the state is eager for production. $18 million is available.

Montana – refundable credit of 9% to 14%. No annual cap.

New Jersey – $14 million available, but half of this will be gone very soon, as earlier shows complete their submissions. 20% transferable credit, sellable after the CPA audit.

New Mexico – annual allocation is $50 million, for this 25% refundable credit which requires a NM tax return. First come, first served; if funds not available when you apply, you wait a year. Depending on total amount, credits awarded over 1, 2 or 3 years.

New York – fiscal year started July 1st, so new funds are available. Below-the-line credit of 30%, payable over 1-3 years with filing of NY state tax returns.

North Carolina – refundable credit of 25%, $1M per hire cap, and project cap of $7.5M. NC requires a tax return. No annual ceiling.

Pennsylvania – Some funds remain, but not for long. However, applications are stil being accepted, as films may drop out of the queue, freeing up funds for new projects.

South Carolina – $14 million currently available for their 10% to 30% rebate.

Texas – The incentive has now been raised to 15% for video game production. The previous rate was 5%. Only Texas resident cast and crew qualify, plus TX goods and services.

Utah – $11 million of fully refundable credits at 25% (with tax return), $3 million for 25% cash rebates (up to $500,000 per project).

West Virginia – $10 million annual cap, $10 million available. 27-31% credits.

AND WHERE NOT TO GO (FOR NOW)

Arizona – program was allowed to sunset, new legislation was defeated.

Florida(television only) – funds for the TV queue are exhausted, and without new legislation, new application will not be accepted.

Missouri – the film commission was not funded.

Idaho – program is not funded.

Iowa – program has been terminated.

Ohio – all funds gone until next fiscal year. Applications are being accepted in case something drops out of the queue

Oklahoma – no funds available until fiscal 2013, which starts July 1, 2012. Applications will be accepted beginning January 1, 2012.

Oregon – a good program, but they are out of funds until July 1, 2012.

Washington – program was allowed to sunset.

Wisconsin – allocation of $500,000 per year.

OTHER LOCATIONS TO CONSIDER

California – all funds allocated. Applications will be accepted starting June 1, 2012, for the next fiscal year, which starts July 1, 2012.

Michigan – Funds currently exhausted, but $25 million via a grant becomes available October 1, 2011. $2M cap per hire, and qualifying rates vary from 30-42%.

Minnesota – $1 million has been allocated; please contact the commissioner for details. Rules and requirements will change – no additional information is available.

Even if we are not in it for the money, it does not mean we shouldn’t be rewarded fairly for our knowledge, labor, services, expertise, relationships, and talent. It doesn’t happen much. If you are either starting out or already at an expert level, what can you expect to earn producing in the American Indie Film Industry, circa 2011.

It is often said by financiers that one of the problems with the film biz is that producers do not have enough “skin in the game”. They frequently think that the services Producers provide may not be worth the price they pay. I beg to differ, and I think if they feel that way they are working with the wrong producers.

I think a fair rule of thumb of what to pay for an expert producer, is five percent (5%) of negative costs, subject to a cap based on precedent. If one is not a true producer (i.e. there and responsible for everything from beginning to end), then one is not deserving of that full fee.

But you don’t start there. You need to work your way up to that fee.

So…

What does an indie producer get paid on a film?
2-5% of “budget” — depending on experience.

What is a fair initial salary?
2%: $50K for $2M, w/$25K increase per $1M increase in budget

What kind of cap is fair?
cap at $150K until 5 films produced
cap at $250K until you have a hit
cap at combined director & script fee
increase the cap if you are coming off a hit;
5% of negative cost, up until a budget level of $40M, with balance going on backend.

What does a producer fee mean in terms of earning a living?
Well, to answer that you have to answer a few other questions:

How long does it take to get a project made?
5.5 years (generally speaking)
development 2years
packaging 6 months*
financing 1year
production/post 1year
distrib/mktg.fests 1year

What is the annual take-home for a film
Annual starting producer salary for a $3M film (2%) = $10,900 /yr
Annual starting producer salary for a $5M film (2%) = $18,181 /yr
Annual starting producer salary for a $10M film (2%) = $36,363 /yr

Annual experienced producer salary for a $3M film (5%) = $27,272 /yr
Annual experienced producer salary for a $5M film (5%) = $45,454 /yr
Annual experienced producer salary for a $10M film (5%) = $90,909 /yr

The hard reality is that the American Indie Film Biz average budget is probably below $3M these days. It is the range I expect most of my movies to be in these days. Recognizing what it costs to live in NYC, it looks like one might need to produce 5 -10 features a year to make it work. It doesn’t leave much room for a hands-on craft-oriented approach to producing. A volume business is generally thought to be the antithesis of quality. Content can’t be king if no one is willing to pay for it. Clearly at these fee levels producers have a tremendous amount of “skin in the game” because the only way this could equal a career is if one is betting on the upside of the backend and winning.

Filmmakers know that Indie Films are sold on their back. Filmmakers know that it benefits their films and their careers to promote their movies. Filmmakers also recognize that they spend on the average two years developing their films, generally unpaid. And filmmakers also realize they are asked to spend eighteen months to two years promoting and publicizing their films, ALSO UNPAID.

If we don’t figure out a way to pay for these crucial services, the indie film biz is doomed. Even more so, if we don’t find a way to weave this recognition into the discussions with sales agents, distributors, and talent representatives, we are covering up one of the necessary truths.

I try to help my movies in every way I can. I think all producers and directors do that. Well, okay 90% of them. I think sales agents and distributors see that. I think they do likewise. Well, okay, 90% of them. But I don’t hear it in their conversations or actions with me.

It is not easy to go back to relationships one has built over years and say “what I just told you was doable, and is industry standard, well now we can’t do it.” “I know you are used to getting it this way, but that is the old way”, “Indie film is the new theatre, in that you do it for love and art and not money — but yes others make money at the same time”. Nor do I like going to those, like GC, who have given beyond what the deal was, and saying “I need you to do more” or “I need you to give again”. Believe me, I wouldn’t do it, if I did not have to. I put my reputation, relationships, and financial well being on the line all the time.

And I know the sales agents and distributors do likewise. I recognize all that they do, and I hope you know I appreciate it. But it doesn’t change the realities of the situations we are in. Nor does it ease the conflict when they take me out for that rare nice dinner and I know it — like ten others that I won’t participate in — are going to get charged back to my movie.

Some films are more difficult than others. It’s that curse when you deliver a film that gets into competition at one of the A List festivals. Okay, it is a wonderful curse, but in some real ways, A list festival acceptance is very much a curse. There are costs involved that one just doesn’t expect will ever get paid back.

It is even harder nowadays when the producing and directing fees on such films don’t pay you enough to live. Maximum producing fees on indie films are generally 5% of the budget — and most earn less. Frequently writing/directing fees are tied to the producer fees. And we spend about two years minimu developing, packaging, financing a film. Add a year to make it, and for the director 18 months to two years promoting it. That is five years of work. On a $3M movie (if one can be as fortunate enough to raise that kind of money) that breaks down to a whopping $30K/year salary. That is less than my Mom earned teaching community college 35 years ago. No wonder everyone needs a second job. Luckily for producers, we often can find a way to make a film each year, and still try to handle the other 4 or so films that are either in development or release. That is not the same for directors. They only get to do one film at a time.

If I had a distribution or sales company, I would build in a percentage fee so that the director could afford to do publicity, but that’s just me dreaming the world could be different.

I have to tell my directors a hundred million times or so that we don’t have the money for what they need to do the work I and others request of them daily. What is a producer supposed to do when a director’s request is directly related to work on the film, but the budget or sales cap doesn’t allow for it. If the film doesn’t pay it, it will come out of the director’s and my pockets, threadbare as they are. I contextualize the situation clearly for my collaborators so I know they wouldn’t ask if it wasn’t necessary. The people I choose to work with are generally not demanding or greedy personalities. They are trying to find ways to survive and still do the work required.

Yet the industry says they can’t pay for it. I know everyone values the work. So where does this leave us? Don’t we need to find a better way?

Why aren’t the sales agents and distributors and PRODUCERS and the talent representatives trying to find a way to do something about it? The culture and business we love depends on it. We are all in this together. Isn’t it time we spoke openly about it?

As we head into the Fall Festivals, a lot of people are going to be frustrated, disappointed, and resentful because we keep ignoring all the elephants in the room.

So many people want to “keep their options open” as opposed to actually committing themselves to something they really believe in. We fill our shelves with 1001 variations and some people think it is freedom, but doesn’t it just obscure the real problem that we haven’t committed to what we really want?

(image via Flavorpill & Brian Ulrich)

Of course having extremely limited choice is far from freedom too.

I have had the pleasure of participating in two think tanks sessions with Michael Gubbins of the UK. He’s a fun and thoughtful advocate for the change that needs to occur in our industry, if we want to survive. As he points out today in his article in MovieScope “Face The Music”, ten years after the release of the iPod, has the film biz really learned anything from it’s sister, the music industry?

In MovieScope, Michael points out:

….film, where there has been a polarisation of the global blockbusters at one hand and ever-smaller art-house releases at the other. A fine film with critical acclaim can still struggle to find any traction in the market. The independent sector will struggle with the critical mass of sales to create a business model, and an on-demand world of easy access to the whole history of film at the push of a button looks likely to make life tougher—if not impossible—for a significant proportion of independent producers.

The ‘Experience’ Business
One of the ironies of this era of ubiquitous access has been the increased emphasis on those areas of the business that were supposed to be killed off by it. For music, the growth area has been live performance. Estimates suggest that easily the largest proportion of those who work in the music industry are working in festivals and concerts. It is also the area which is continuing to attract significant private equity, bringing impressive returns on investment.

Live is not a direct equivalent of theatrical; the cinema is tending to act in recent years as the marketing platform for the profit centres of DVD. But it does suggest that in a world of instant perfect copies available on demand, there is increased want for the exclusive and authentic. In music, this is not just about live performance, but about merchandising and memorabilia.

Film has some of these same opportunities, not just in cinema but in much of the under-exploited metadata of production that may have value to consumers. These rely on a direct relationship with audiences and the retention—or at least a bigger interest—in rights, particularly given that the European Commission seems increasingly against territorial rights and licensing based on national borders. It also suggests the need to reassess the windows of exploitation…

We need to work harder at our solutions. It is not going to come from a series of individual efforts, or even a national campaign. If we care about the culture of film, the studios need to support the independents, we need to embrace experimentation with business models, throw off the liability of legacy, and truly improve the experience for audiences. We need to become a real community and not just a bunch of different, somewhat related enterprises.

Read Michael’s full article here on MovieScope.