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Money You Should Never Take to Get Your Film Made

About a year ago, Insider's Guide published an article (you can read it in our archive section at http://www.indiefilmseminars.com/archives/4.html) entitled "Negotiating the Distribution Deal: Clauses the Filmmaker MUST Have!" The article discusses numerous contractual clauses filmmakers should insist on before accepting financing or distribution for their film. Now, after some painful experiences with our own films and discussions with numerous other filmmakers, we no longer feel these clauses provide adequate protection for filmmakers. There are simply too many "tricks," too many scenarios where financiers/distributors can get around even the fairly rigid clauses we proposed.

To illustrate the point, here is a real-world scenario that happens all too often and leaves the filmmaker with few, if any options.

We'll call it the "promises without funding" scenario. Here, a financier contractually agrees to fund a picture in return for 50% ownership of the film, and gives the filmmaker a few thousand dollars to get pre-production underway. The filmmaker starts contracting locations, crewing up, making vendor deals - even as contractually-agreed upon funding commitments from the financier pass without any additional funding arriving in the bank account. The filmmaker, who has his name and reputation on the line with crewmembers and vendors, and who is desperate to make his film and who believes in the financier because of those first few thousand dollars that were funded - tries to keep things together. Maybe he puts some of the budget on his credit card - confident the financier will repay him - and gets crewmembers and vendors to defer their pay. Maybe he cuts the budget back, brings in another investor, family money, more credit card money, maybe he even gets the financier to kick in a few more thousand dollars - anything to keep the film moving forward.

Maybe the filmmaker even gets the film finished, and now, NOW that it's all done, he goes back to the financier and says, "Look, you only put up 1/50th (or 1/10th, or half, or whatever) of the money you promised, you clearly breached our contract, so I'm going to pay you back the few thousand dollars you put into the film and move on."

And the financier says, "No. The contract says I own 50% of the movie, and I'm sticking to that."

Where does it go from here? What are the options for the filmmaker? There's only one, really. He can sue the financier for breach of contract. The problem with this scenario is that it can take years and tens of thousands of dollars to bring a lawsuit to court. And most films don't have a shelf life of several years and most filmmakers don't have tens of thousands of dollars if they could wait years anyway.

The only way a filmmaker can really protect himself from this and similar scenarios is to put into his contract with the financier/distributor a clause that withholds all rights from the financier/distributor until and if he funds all or most of the movie. The clause might read something like this:

"Notwithstanding anything contained herein to the contrary, all rights in and to the screenplay, the producing and directing services of the filmmaker, the film (including location and likeness rights and any other underlying rights) and any film shot or acquired by the filmmakers are the sole and exclusive property of the filmmaker until and if the financier/distributor funds $400,000 of the $500,000 budget. If said $400,000 is not funded by August 15, then this contract is terminated and financier/distributor forfeits forever any rights in the screenplay, the producing and directing services of the filmmaker, the film (including location and likeness rights and any other underlying rights) and any film shot or acquired by the filmmakers."

Many financiers/distributors will find such a clause so onerous that they are unlikely to sign an agreement that includes it. Then again, if they are unwilling to sign it, they are, in essence, admitting that there is a high probability that they won't fund the movie, so, as a filmmaker, you have to ask yourself is it worthwhile being in business with these people…is it worth taking their money. Certainly, at the very least, the financier/distributor will try to water down the clause by reducing the amount they have to fund to trigger rights in the project or by pushing back the date by which they have to provide funding.

If the financier/distributor refuses to include the clause at all, here's another route you can go. Put in a clause that allows either side to demand quick arbitration proceedings, with recourse to injunctive relief in the courts in the event one side fails to cooperate with the arbitration proceedings. The problem with this clause is that, according to our lawyers, getting injunctive relief takes as much time and expense for an attorney as preparing for a lawsuit - in other words, a lot of time and a lot of money.

Perhaps more important than these clauses - more important than anything in your contract - is to take the time to know who you are getting in business with BEFORE you get into business with them. Ask the financier/distributor for phone numbers of three or four other filmmakers he's done business with, and call them. Ask them what it was like making a film with your particular financier/distributor. Also, go down to the courthouse in your area and check to see if there have been any lawsuits against your financier/distributor. One or two lawsuits in five or ten years may not be that out of the ordinary in the entertainment world; nine or ten lawsuits in the same time period would be.

A final suggestion which we hope goes without saying: we are not attorneys, and only offer the advice in this newsletter as guidelines. It is imperative that you hire an experienced entertainment attorney to draft your contract and protect you in any negotiations in the entertainment business. However, if you take the time to explain the kinds of scenarios we've outlined here, your attorney will be aware of the perils of the indie film world and may be able to come up with language that adequately protects you while still being palatable to your financier/distributor. THE END