OVERVIEW OF THE

MOVIE BUSINESS

p r e s e n t e d b y

S t e p h e n C . S o h

C O L I N N G & P A R T N E R S L L P

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CONTENTS

1. Introduction

2. Stages

3. Chain of Title

4. Creative Control

5. Waterfall

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INTRODUCTION

- Trailer for TMWKI

- https://www.youtube.com/watch?v=oXGm9Vlfx4

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STAGES

- Conceptualisation

- Development

- Pre-production

- Production

- Post-production

- Sales & Distribution

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CONCEPTUALISATION

- Original idea

- Option rights

- Books, spec scripts, published works

- Preparation of outline, synopsis &/or treatment

- Pitch

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OPTION RIGHTS

- Exclusive right to purchase an interest in a copyright work, for a prescribed period

- Usually between 6 months to 24 months

- Small upfront option fee payment (usually ~10% of purchase price and paid against purchase price)

e.g. $5k today for exclusive option to buy film rights in 18 months for $50,000

- Allows the producer time to consider the feasibility of the project and to raise funding, before incurring the full cost

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WRINKLES

- Automatic extensions subject to payment of extension fees (not against purchase price) &/or due to force majeure

- Purchase price as % of budget (with floor &/or ceiling)

e.g. $1,000 option for 18-months, against 2.5% of the budget with a floor of $50,000 and a ceiling of $500,000

- Backend participation (out of defined profits) & additional benchmark payments (box office gross sales, DVD sales etc )

- On-screen and advertising credits

- Interest in derivative works

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OUTLINE

- Describes each scene and its important action(s)

- Sample (Big Fish):

“… Seq. 16 – Pages 81-83 In Bed with Will and Josephine

Will explains that he doesn’t truly know anything about his father, only tall

tales and stories with punchlines.

… Seq. 17 – Pages 83-85 Breakfast

Over breakfast Will tries to talk with his father about what, if anything, he

truly believes. Will gets a Jesus/Pinocchio joke for his troubles.…”

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SYNOPSIS

- A short (2 to 3 page) summary of the plot of the screenplay

- Highlights most important elements and scenes

- Used as pitch to agents / producers to generate interest

- Sample:

http://www.writersdigest.com/editor-blogs/guide-to-literary-agents/synopsis-example-ransom-thriller

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TREATMENT

- Longer-form (3 to 5 pages or more) summary of the movie in narrative form

- Used as pitch to producer & prospective collaborators or as precursor to screenplay development

- Superfluous once screenplay is ready

- Sample:

http://www.simplyscripts.com/scripts/SXA-Prometheus-outline.pdf

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DEVELOPMENT

- Rights acquisition

- Development financing

- Commission screen writer

- Coverages & rewrites

- Development hell

- Creative control

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PACKAGING

- Attach `above-the-line’ cast and crew (director, screenwriter, producer and lead actors)

- Deal memos (pay or play)

- Determine above the line expenses (rights to secure material upon which screenplay is based and production rights, compensation for above-the-line cast and crew)

- Budget top-sheet (fixed costs)

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PRODUCTION FINANCING

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PRODUCTION FINANCING

- Debt & Equity

- Grants & Tax Rebates

- Deferments & Service Deals

- Pre-sales

- Negative Pickup

- International Sales Companies

- Gap financing

- Crowdfunding

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DEBT

- Family & friends

- Third party investors and financiers

- Lower risk vs lower return

- Collateral

- Backend?

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EQUITY

- Filmmaker sell an interest in the film or film company

- Interest means a financial participation in the films revenue

- Distributes risk for the filmmaker

- Investor only recoups if the film shows a return

- Higher premium or rate of return reflects the level of risk

- Security laws

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GRANTS & TAX REBATES

- Soft Money

- Tax incentives (credits or rebates) and deductions / allowances)

- Co-production treaties

- % of in-country spending back in rebates

- Can be bankrolled or cash-flowed to offset investor risk

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DEFERMENTS & SERVICE DEALS

- Amounts payable to cast and crew for services rendered that they have contractually agreed to postpone receiving until the film begins generating gross receipts

- The individuals assume the risk that the film does not generate any gross receipts or generates insufficient gross receipts to recoup their deferments

- May be coupled with additional royalties or back-end participations

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PRE-SALES

- Distributor buys distribution rights before the movie is made in exchange for a minimum guarantee

- Producer must show good reputation, script, cast & crew

- Distributor benefits with preferential terms

- No payment until delivery of the completed film

- Producer cashflows the minimum guarantee with a bank, at a discount

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COMPLETION BOND

- Before cashflowing the minimum guarantee, the bank will take collateral and require a completion bond

- The bond issuer guarantees the film will be completed within budget and on time

- If it doesn’t, the bond issuer must either repay the bank or pay the cost of completing the production

- The bond issuer will not issue the bond unless it is satisfied and confident that the producer can complete the film in time and on budget

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NEGATIVE PICKUP

- Movie studio / distribution entity enters into contract with producer to purchase the movie at a given date for a given sum

- The studio / distribution entity is given distribution rights, with net profits split with the producer

- The producer can again secure a bank loan against the negative pickup contract to help meet the production costs

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PRE-PRODUCTION

- Engage below the line cast and crew

- Plan logistical and creative aspects

- Recee locations

- Costume design

- Set design

- Story board

- Insurance

- Filming Schedule

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PRODUCTION

- Principal photography

- Out of sequence

- Continuity

- Retakes

- Overages

- Underages

- Creative control

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POST-PRODUCTION

- Picture and sound editing

- Overlay of adjustments and effects

- CGI, music scoring, sound synchronisation etc

- Credits

- Titles

- Final cut

- Creative control

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SALES & DISTRIBUTION

- North America (Domestic)

- Rest of World (International)

- Sales Agents & International Distributors

- Film Festivals

- Online Distribution Platforms

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EXPLOITATION

- Theatrical

- DVD & Blu-ray

- Cable TV / Satellite (paid)

- Network TV (broadcast networks) / Free to air

- Internet / Digital Distribution (Netflix, Amazon, Hulu, iTunes, YouTube)

- Airlines, hotels, oil-rigs, prisons, etc

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ANCILLARY RIGHTS

- Novelisation rights

- Remakes, Sequels, Prequels and spin-offs

- Internet distribution (OTT, SVOD)

- Soundtracks

- Music scores

- Character merchandising

- Collector editions

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NETFLIX, HBO, HULU …

- Streaming services now account for over 70% of peak traffic in North America, Netflix dominates with 37% (Venturebeat 7 Dec 2015)

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NETFLIX

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STAGES - OVERVIEW

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CHAIN OF TITLE

- Legal documentation establishing proprietary rights to all relevant components of the film

- Original copyright filings, option agreements, acquisition agreements for spec screenplays, work-for-hire agreement from screenwriters, releases from location owners, on-screen performers and other key creative contributors to the project, etc etc

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CREATIVE CONTROL

- Screenplay

- Director’s cut

- Final cut

- Market research

- Test screenings

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THE WATERFALL

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THE WATERFALL

- Senior Debt

- Mezzanine debt

- Preferred shares

- Ordinary Shares

- Deferments

- Net profit participations

- CAMA

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WATERFALL RECOUPMENT

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WATERFALL RECOUPMENT

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THE END!

THANK YOU!

GOOD BYE!

Contact

Stephen Soh

Colin Ng & Partners LLP

DID: +65 6349 8731

Email: ssoh@cnplaw.com

www.cnplaw.com

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