Our chance to rebuild the independent film industry.


FILMMAKERS, this is very important:

WHAT CONGRESS DID
The house has passed the Entrepreneur Access to Capital Act which offers a tremendous opportunity to rebuild the independent film industry. The Act is designed to allow businesses to raise capital through crowdfunding. Under current securities laws, filmmakers can only ask for donations, and donors support the film without any participation in its potential profit.

This legislation will allow businesses to use crowdfunding to sell unregistered securities (equity investments as participation in the financial rewards–if any–of the film) to raise up to $2 million.

WHAT CROWDFUNDING IS
Currently, the only way most filmmakers can even make a film (but without any profit), is to use crowdfunding, which is a process of creating a web presence on specific sites and then vigorously and broadly requesting donations from the public. In place of financial participation, gifts known as perks are given the donors. Crowdfunding efforts are considered very successful if they top $50,000 in donations, and some have raised over $100,000 in donations. A million dollars in donations is almost unheard of. All of this effort is strictly controlled to avoid coming under the very strict rules and regulations governing the sale of securities. Offering any equity position of any form is forbidden.

STATUS OF THE INDIE FILM BIZ
The common thinking in today’s independent film business is that the pre-2008 logical range of $3 to $5 million for good production value has now dropped to $1 million or less, so this legislation hits the “sweet spot” for independent filmmaking. It could mean real money for real budgets, with salaries (now rare) for workers, which in turn will mean re-building the infrastructure of the independent film business.

POSSIBLE PROBLEMS
Congress has passed the Act, but now it goes to the Senate. President Barack Obama has endorsed the bill, saying it would reduce “the red tape that prevents many rapidly growing startup companies from raising much-needed capital.” But, we never know what the Senate will do with the bill. They need to know you support it.

Also, “Hollywood” is often ridiculed in today’s political environment, and the presumption that everyone is as rich as Steven Spielberg is popular. In this environment, it is possible that independent filmmaking could be excluded from the ultimate bill.

WHAT YOU MUST DO
In this environment, and with something this important to our future, you need to contact your representatives. Thank your congressperson for passing the Entrepreneur Access to Capital Act and explain your optimism for the indie film biz. Encourage your Senators to pass the bill and assure that filmmaking is not excluded.

FIND YOUR CONGRESSPERSON AND SENATORS HERE: http://www.contactingthecongress.org/

For a couple sample letters to inspire you to email, fax, or mail to your representatives, download here: http://www.box.net/shared/mqd6ltrou4p8r8ozndyb

SYNOPSIS OF THE ACT: http://www.cbo.gov/ftpdocs/125xx/doc12514/hr2930.pdf

ALSO: the Entrepreneur Access to Capital act is *endorsed* by the National Taxpayers Union http://www.ntu.org/news-and-issues/economy/yes-on-hr-2930-2940.html

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3 thoughts on “Our chance to rebuild the independent film industry.

  1. As an indie producer, I want to support this bill. However, part of me worries. There’s a reason these rules were set up. They were setup so the equivalent of snakeoil salesmen couldn’t just bilk the elderly and the uninformed out of their retirements, pensions and savings. While I believe a lot of us are all in the business for good and for profit (for our investors), I know a lot don’t understand how to run a business and these funds will just go wasted creating a larger sour taste about investing in film. Maybe I need to learn more but this potentially hurts us in the long run as some waste others hardearned cash.

    I’d much rather concentrate on renewing Section 181 of the Job Creations act, which gives wealthy investors tax breaks for investment in film and manufacturing (we are creating an asset), creates jobs, and enables us to make films.

    Those are my quick thoughts, I’d love to learn more and open to discussion.

    Thanks for discussing and creating a forum to discuss business issues relating to film.

    Best

    Like

    • Thank you, Milan.

      Here’s my reaction that I posted on Jeff Steele’s FILM CLOSINGS blog about the S.1970 (a bill to amend the securities laws to provide for registration exemptions for certain crowdfunded securities):

      It is significant that this is possibly the most bi-partisan effort of this era, supported by Obama, the Democrats, the Republicans, and even tax-payer groups. It will not have any measurable cost to taxpayers.

      I believe this could be the most significant boost to the independent film industry since digital cinematography. One million dollars has been considered to be today’s “sweet spot” for competitive production values. Unfortunately for our infrastructure, that target budget is usually achieved with volunteer labor, borrowed minimal equipment, in-kind, and gifts.

      This ability to raise real funds for real budgets will result in rebuilding the infrastructure of the indie film biz.

      Of course, this is important news for the “ROI” filmmakers rather than the hobbyist filmmakers. It will require the skills, details and commitment of those filmmakers knowledgeable about Return on Investment, breakdown and scheduling, budgeting, cash flow forecast, comparables, distribution channels and windows, and production disciplines. These are all skills producers used to be presumed to have until the current malaise destroyed hope for ROI.

      The biggest threat against the ENTREPRENEUR ACCESS TO CAPITAL ACT is the boogie-man issue of fraud.

        First, fraud is a function of bigger money (Madoff and his ilk always exist and seek huge dollars).
        Second, fraud is mostly based on the greed of investors, easily exploited by evil people (caps per investor make this less attractive).
        Third, crowdfunding has proven people DESIRE the opportunity to participate in filmmaking even when aware that there will be NO return (crowdfunding growth has been explosive).
        Fourth, unreasonable fear about small funding investments has crippled growth for small business (fraud should be dealt with via public education, not further reduction of opportunity.)

      This is new hope for rebuilding the independent film business infrastructure. Every filmmaker should write their senators and tell them to support the act and assure inclusion of filmmaking. It is very possible we could get excluded if we do not raise our voices.

      Like

  2. As mentioned, I want to believe this will be a great thing. I disagree that fraud is a function of bigger money. It’s actually harder to deceive the rich and well informed. Of course there is more press when it is perpertrated and discovered but millions of the “poor” have been deceived with get rich quick schemes, etc. A lot don’t have the power to have their voice to be heard and a lot are ashamed that they’ve been taken advantage of. So does the bill create some sort of control for fraud? Some basic file reporting?

    Trust me. I want more funding for film. I work everyday on my business plan, packaging, scripts etc. to show to my accredited investors that maybe film isn’t as crazy as some presume. Especially with the fraud in the stock markets that’s currently either legal and/or undetected.

    I’m a huge proponent of crowdfunding. I’m friends with 2 of the founders of indiegogo. Heck, I’ve even asked them when we’d be able to get investors through a site like there’s. I still worry about laxing the SEC rules of 1933 and 1934. They were put as a safeguard post-the great depression.

    I’ve talked to a lot of producers/filmmakers/etc. I would say still over half don’t think about the business, finding a market, creating a market, knowing a market.

    Are there any updates on Section 181. That’s really been my godsend in the 2 films I’ve found investments in and the one I line-produced more recently. Also, I live in LA but have done my most recent 2 films in NY. Largely in part of being able to get investors when they offer tax incentives that work. I hope people are writing their reps about that. Incentives work period. Those statistics that say they don’t are often because the incentives aren’t set up right namely, no one should be able to sell tax credits to a third party. When they do, someone that owed more pays less. That’s how you get a deficit. I’m rambling now but as previously noted I welcome further discussion on this.

    I actually read your article the first time it came out on Filmclosings which I think is the best site for talk about the business of film. That’s what got me thinking about it. So, thank you for your article.

    Like

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