The author with his father, director, Vincent Sherman.

The complexion of the film industry has changed immensely in the past decade. Prior to the mid-'80s, a picture had to be a success on U.S. screens in order to have any chance at profits, let alone to return even the initial investment capital. However, with VCRs here to stay by 1986, with the proliferation of cable, LaserDisc, satellite, DVDs and God knows what other media just around the corner, a modestly budgeted film in the right genre has a chance to recoup its cost even without a U.S. theatrical release. With the media technological explosion in full force (and predicted to continue indefinitely), the "pie" constituting the potential revenue of a movie is growing, with more and more slices being added.

How can the independent moviemaker tap into these growing alternative marketplaces? Aren't the venues of exhibition still controlled by the major distributors with their powerful pipeline of product? If the independent does break through the gates and secures a release deal-either with a major or an independent distributor-what can he do to ensure a fair chance at the box office, and, perhaps most importantly from the viewpoint of his future ability to raise production funds, how can he be sure to collect his due?

All these questions are answerable-not all in the space of this article-and must be answered if the independent moviemaker wants to survive as an independent, separate from the media giants.

A key to understanding these issues is an awareness of one of the current myths of the film industry: that there is a "glut" of films. The truth is that while there may be a glut of films at prime release times (e.g. the summer season, and from Thanksgiving to New Year), exhibitors often go wanting for titles during the "off season." These non-prime times last approximately from the beginning of the year until Memorial Day and from Labor Day to just before Thanksgiving. Exhibitors have even been known to call producers directly during these off-times and ask if they have any available pictures!

Another common mistake made by independent moviemakers is that when they are budgeting their production, they do not include a line item for marketing expenses. Who do they think is going to pay for preview prints and screenings, for press kits and public relations efforts, for video copies and trailers, for trips to festivals and the wining and dining that occurs there, and for the legal work done in analyzing offers and contracts? These are all vital expenses incurred while hunting up a distributor. Indie producers often cut themselves short by thinking that when the picture is shown the world will come to them. It is not at all uncommon to spend $50,000-$100,000 just to secure a decent deal. And in the age of Clerks, Swingers, and Blood, Guts, Bullets and Octane, that's a huge percentage of the overall budget. This is a reason why so many worthy films end up being prey for "vulture companies" (quasi-distributors who, for the price of "finishing funds" and a modicum of p.r. materials, buy your movie for cents on the dollar). Thus, it is my strong recommendation to budget for this preliminary marketing and do not begin shooting until you not only can finish the picture, but can fuel the primary market outreach.

Another shortfall for the typical first-time independent is a lack of audience testing prior to seeking distribution. It's one thing to show a picture to your cast, crew and friends. It's quite another to recruit a neutral audience and poll their opinion of the movie. Assuming most low-budget independent pictures are somewhat "quirkier" than the typical Hollywood mainstream, what are you going to say when you're presenting your film to distributors and they say "it's weird" as a method of avoiding paying you an advance? You can't say much-unless you've tested the film in front of an audience and have analyzed the results of your polling. In such a case, you can come back with, "It may be an unusual picture, but 90% of the recruited audience said it was excellent and very good, and 90% of those say they would recommend it to their friends."

Perhaps the back-off from the audience testing by independents is driven by two factors: fear of numbers and of over-staticizing an art form, and the expense associated with it. I assure you that in both cases, you're in for a surprise. When a real, statistically and scientifically valid test is done, you will learn much about your picture that you didn't know (e.g. who the favorite characters are, what parts were too long and too short, even what kind of a film it is). This information can radically alter how you present your film to viewers (e.g., sales reps, distributor's employees, etc.). And regarding expense, you will more than get back in terms of distributor offers what you spent on the test screening. A final warning note: no matter what you think, you will get a significantly different response from an audience who knows you than from one that doesn't. So don't delude yourself into thinking that a simple request by you to Aunt Ellen to tell you what she really thinks will result in objectivity. It won't. It's not humanly possible for family, cast or crew members to divorce themselves from the energy and effort they know you expended on making the picture-whereas, a neutral recruited audience is only concerned about the effect created on them.

Another myth to overcome is the necessity of "pre-sales" in order to finance your picture. Most pre-sales involve a commitment by you to give certain rights to your movie to a specified distributor for a specified medium in a specified territory of the world. In exchange for this commitment by you, the distributor commits to paying you a certain amount of money and/or a certain percentage of profits when you give them a finished film, -if that film meets certain professional standards and criteria (which they define). The theory is that you can use these paper commitments to impress money lenders, financial institutions or wealthy individuals to give you the cash you need to make the picture. It's almost as if these paper commitments become the collateral or security for your loan or investment. But guess what? If, when you turn in the picture, the distributor doesn't like it, he'll simply renege on the deal and find a loophole in your contract that justifies his decision. When the lender or investor finds this out, who do you suppose they'll go after-you or the distributor?

There is such a thing as a real pre-sale. That would be one accompanied by cash. If you had cash pre-sales, you wouldn't need money lenders or investors. So it can be said that the only valuable pre-sale is a cash pre-sale. What would drive a distributor to give you cash before they had seen the picture? Usually it would be the presence in your group of a star, writer or director who had been associated with a successful picture in the past. If you don't have one of these-either by choice or by circumstance-you may as well save yourself the effort of looking for a cash pre-sale and simply tell investors the truth: you think it's going to be a good movie, and you think it will get its money back. Of course, according to our governmental regulatory bodies (e.g., the Securities and Exchange Commission), if you're going to tell them this, then you must tell them with equal vehemence that they might lose all their money. In fact, any suggestion to your investor that they'll get some money back, not to mention a profit, could be considered fraud by the SEC if it wasn't accompanied by an equal warning that they might lose everything. Nonetheless, there are still people around with money who enjoy the challenge and creative spark transferred to them by an involvement with as huge and appealing a project as a motion picture production.

In 1997, I was involved with four movies, two of which I effectively produced, all of which were funded by different private groups and investors, and none of which had distribution commitments or pre-sales going in. In each case, the investors were convinced, largely through the quality of the personnel we had rounded up through the thoroughness of the business plan, that the movie was a reasonably good bet. Plus, they all got the pride of ownership of being involved with a creative enterprise and putting to work a lot of young people just starting out. As of this writing, two of the four pictures have so far been selected for festival screenings and are beginning to see offers come in from distributors.

Another item to consider is this: should you sell your film piece by piece (i.e., country by country, medium by medium, etc.), known as "fragmenting the rights," or should you retain the integrity of all the rights? This is not a simple question to answer. There are ample instances of success and failure with both approaches. Of course, there is the Chasing Amy dream of most independents, where one big distributor comes in and, with cash, puts you in a substantial profit position right off the bat. But there are also those who have waited without Mister Big ever showing up. Overall, it seems that if you and your investors have the patience, fragmenting can be equally or even more profitable, but could take much longer and involve much more bookkeeping. This issue should be decided on a case-by-case basis-there is no general rule that applies.

A final point is this: assuming you make your deal with a distributor, and assuming he makes the deal with an exhibitor, how do you know you will ever see any money? This is called "collection power." The sad truth is: you don't. There are values like trust, confidence and gut feel-but, ultimately, when you let go of your film, you cannot assume you will ever see money, even if it is owed to you. (This, by the way, is a phenomenon not just in the film industry-it is common to book publishing and music recordings as well). The best way to collect what is owed to you is to be perceived as a source of continuing product, such that they who owe you money would rather leave the door open to get more of your future work than risk entirely alienating you at the outset of the relationship. Therefore, as you're seeking and making your deals, it doesn't hurt to broadcast the fact that you have other projects written and/or in development.

The first half of this century, the film industry created artists on one side and business people on the other. More recently, moviemakers who enjoy lasting success take the time to become knowledgeable in both areas.

William Goldman's famous dictum "nobody knows anything" has been modified in the '90s by the rising aspirations and victories of the independent moviemaker. MM

Eric Sherman is the son of Hollywood Golden age director Vincent Sherman (interviewed in MovieMaker #21). He serves as a consultant to the studios and to numerous independent directors, producers, and companies. He also serves as the Chief Consultant for The Gallup Organization's Motion Picture Industry Research Division. He teaches production, directing and film business at Art Center College of Design in Pasadena and the California Arts Institute in Valencia. His own films and television programs have been shown at more than 50 festivals, and his series "Futures" with Jaime Escalante won the Peabody Award for Broadcasting. His books, "Directing the Film" and "Frame by Frame-A Handbook for Creative Filmmaking," are used at film schools around the world, and his book on film financing, marketing and distribution (from which the ideas in this article were taken) "Selling Your Film-A Guide to the Contemporary Marketplace," was just revised and updated this fall. It is available through Acrobat Books.