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

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

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.