Navigating Business and Legal Affairs for Independent Film Projects

Independent film projects deal with business and legal aspects all the time.

Bigger production companies generally have an in-house or external business and legal affairs manager.

This is however less common for small production companies.

In this article we will discuss the role of business and legal affairs in independent film, and explore the areas covered by a business and legal affairs department or manager.

Business and Legal Affairs in Independent Film

Business and legal affairs can be defined as managing the legal aspects, business assets, affairs, liabilities, financial conditions, prospects, and results related to business operations of a person, which can be company or an individual.

In the context of the film industry, business operations can be carried out by the traditional studios (such as Universal, Paramount or Disney), streamers (like Netflix, Amazon, and Hulu), independent production companies, sales agencies, talent agencies, institutional financiers, companies that provide services to the independent community, and individuals (which include individual producers, writers, directors, and actors).

Business and legal affairs can be carried out in-house, or externally. Sometimes a law firm or an individual lawyers effectively carries out (part of) tasks typically pertaining to business and legal affairs.

The landscape of independent film production consists of a multitude of small to very small companies. Business structure, back-office and profiles consist of a high level of informality. Whereas business and legal affairs is essential for studios, streamers, and bigger production companies, it is often informally organized or non-existent for small companies and individuals.

Legal and business-related decisions are taken constantly during several stages of filmmaking: development, pre-production, financing, production, post-production, distribution, and management of revenues.

While we walk through the several areas, I will be cutting business and legal affairs in two, whereby we will look separately at the business affairs part, and then at the legal side.

Business Affairs: The Commercial Side

Business Affairs deals with the commercial side of production and filmmaking, which may include:

• Relationship management of multiple players in the film industry.
• Networking.
• Attending film markets and film festivals.
• Deal making and negotiations.
• Obtaining knowledge, expertise, education, and learning.

Dealing with Multiple Players

Independent film production entails managing relations with multiple players in the film industry that contribute to the production, financing and distribution.

These industry players include co-producers, other production partners, investors, financiers, film funds, sales agents, distributors, guilds, talent (directors, screenwriters, and actors), talent agencies, lawyers, service providers, streamers, completion guarantors and state agencies.

Networking

A definition of networking is the exchange of information or services among individuals, groups, or institutions, and more specifically, the cultivation of productive relationships for employment or business.

For a business and legal affairs perspective, networking takes place during all the stages of film production and distribution.

The objectives of networking can be:

• The search for co-production partners and strategic partnerships.
• Exploring financing opportunities for a film production or a slate of projects.
• Finding distribution and sales opportunities.
• Looking for new partners and maintaining existing relationships.

Networking can be in-person and online, on platforms (Stage 32 is a great example!) and on social media (LinkedIn, Facebook and Twitter).

Attending Film Festivals and Film Markets

A film festival is a space to showcase films. Examples of international film festivals are the Cannes Film Festival, the Toronto International Film Festival, the Berlinale, and the Venice Film Festival.

A film market is a marketplace for buyers and sellers of films. It is often a hub for all other kind of business aspects of filmmaking including production options and film financing.

Examples of international film markets are Marche du Film, the European Film Market (EFM), and the American Film Market (AFM).

Film festivals and film markets can be physical or online events and are excellent places to network.

For more talks about film markets, film festivals and networking please check out this article.

Negotiations and Deal Making

Business and legal affairs can be involved in negotiations and deal making with co-producers, financiers, sales agents, distributors, and others.

Deal making and negotiations are done in close coordination with lead producers, executive producers, CFO’s, and external lawyers, depending on the topic and the infrastructure of the project.

Business and legal affairs can have a leading and / or coordinating role on negotiations and deal making.

Knowledge, Expertise and Education

Business and legal affairs can play an important role in the creation and consolidation of business knowledge and expertise for a production company.

Education and learning about co-production models, financing structures, tax incentives, distribution models and legal aspects of production is essential for business activities and continuation.

Legal Affairs: The Legal Side

Legal Affairs deals with the legal side of production and filmmaking.

This which may include:

• Drafting and negotiating multiple agreements.
• Dealing with multiple jurisdictions.
• The legal aspects of film financing.
• Elaborating and closing co-productions.
• Working on distribution rights & license deals.
• Putting together financing plans and recoupment schedules.
• Dealing with and advising on legal matters and arbitration.

Dealing With Multiple Agreements

Just like managing relations with multiple players in the film industry, an independent film project consists of multiple agreements.

Examples of agreements are the production agreement, the sales agency agreement, distribution agreements, finance agreement, guild basic agreements, talent agreements, the interparty agreement, security agreement, the completion bond, and the CAM Agreement.

Multiple Jurisdictions

An independent film project deals with multiple jurisdictions:

In case of a co-production, a project is produced by two or production companies from different countries.

If a film is shot abroad, for example because of the unique storyline or because of attractive tax incentives, the production deals with a foreign jurisdiction.

If the film is distributed internationally, especially in the case of an independent distribution model, the production will enter into distribution agreements with foreign distributors.

Some of the cast and crew may be from abroad. In such case, the production is likely to deal with the jurisdiction from which the individuals are from.

Financing and Financial Closing

Legal and Business Affairs can be involved in the legal aspects of the financial structuring of the film, and ultimately, financial closing.

The finance structure of a film can consist of hard or soft money, or combinations of both: private loans, bank loans, tax credit loans, pre-sale deals, a distribution MG, equity investments, crowdfunding, co-production funds, and film funds.

The financial closing is the process with a closing date on which the finance-related agreements are (simultaneously) executed and therewith, all conditions precedent have been satisfied by the production to drawdown on funds available for financing of the film.

For more info on the multiple sources of financing and an in-depth explanation about hard and soft money, check out this article about film financing.

Co-Productions

A co-production is a joint venture between two or more different production companies for the purpose of film production.

In the case of an international co-production, production companies from two or more different countries are working together.

A film will need to meet certain requirements to qualify as an official co-production. Requirements may include: a cultural test, domestic creative and technical participation, a distribution deal, certain financing already committed, and the existence of bilateral or international co-production treaties.

The co-producers will enter into a co-production agreement, which is drafted, negotiated, reviewed, and revised by business and legal affairs.

For more thoughts about co-productions, please check out this Stage 32 article about international co-producers.

Distribution Rights and License Deals

The distribution rights cover the right to distribute the film in a certain territory, in certain media, for a certain period.

The distribution rights can be sold directly by the production, or through a third-party sales agent.

Furthermore, the distribution rights can be acquired by a studio or a streamer (like Netflix, Amazon and Hulu), or independent film distributors and TV channels.

Business and legal affairs drafts and negotiates the sales agency agreement with the sales agent, as well as the distribution agreements for the license deals.

For some more talks about film distribution and distribution rights, please read this article.

The Finance Plan

The finance plan combines all the individual financing sources of the film, into one overview.

The finance plan should cover the budget of the film in its entirety and should to the largest extent possible reflect the commercial or distribution value of the film.

Furthermore, the financing plan forms the basis for the recoupment schedule.

Business and legal affairs is generally involved in putting together the legal implications of the finance plan and the underlying finance agreements, as well its reflection into the recoupment schedule.

Management of Revenues

The royalties generated in connection with the exploitation of the distribution rights are the revenues of the film.

The revenues are assigned by the production to (re)pay lenders, investors, production partners, individual producers and talent; together, they are the beneficiaries of the film.

Business and legal affairs typically makes sure that all the deal terms with respect to allocation and disbursement of revenues are incorporated into the individual agreements, a general waterfall agreement or recoupment schedule, and eventually, the CAM Agreement.

The Recoupment Schedule

To make the allocation and distribution of revenues manageable, an independent film project has a so-called waterfall or recoupment schedule.

The recoupment schedule is a payment schedule that shows the order and manner in which the film’s revenues are allocated and disburses amongst the beneficiaries.

The recoupment schedule combines all the single deal terms with respect to allocation and disbursement of revenues, negotiated between producers and the beneficiaries.

Each project has a different production, financing, and distribution structure and therefore, each recoupment schedule is unique.

Business and Legal Affairs puts together and reviews the recoupment schedule to make sure that all the payment and recoupment terms are properly reflected.

For a detailed explanation as to how to put together a recoupment schedule for audiovisual projects, please check out this Stage 32 article.

Legal Issues and Arbitration

Business and legal affairs deals with general legal matters and any specific legal issues related to the project, such as due diligence, compliance and so called Know Your Client (KYC) policies and verifications, but also any legal issues that may come up related to production, financing, distribution rights or intellectual property.

Also, business and legal affairs will be involved in advising on arbitration if there is a conflict between the production and any of its partners which cannot be solved amicably. If the applicable agreement allows so, the parties may opt for (typically, IFTA) arbitration.

Conclusion

Business and legal affairs are carried out constantly, during all stages of the film. Therefore, the role of the business and legal affairs executive is crucial in the independent film industry.

Business affairs covers the commercial side of the film project, and legal affairs the legal aspects.

The business side covers the commercial aspects of filmmaking, dealing with multiple relationships, networking, attending film festivals and markets, negotiating and deal making, and obtaining knowledge, expertise, and education for the production company.

The legal side includes drafting a variety of agreements, managing multiple jurisdictions, working on the legal aspects of film financing, elaborating co-production models, dealing with distribution rights and license deals, being involved in the creation of finance plans, and putting together recoupment schedules to manage film revenues.

Do you have input or feedback on this article, or would you like to know more about business and legal affairs for independent film projects? Let’s connect!

About David Zannoni:

I have been working in film and TV since 2007. Through my consultancy firms XamanHaC and Zannoni Media Advisors, I have been involved as consultant and representative for amongst others Fintage House and Visualnet. For Fintage I negotiate agreements for films and television series, and am involved in business development and relationship management specifically in the US, Latin America and Spain. For Visualnet I expand their business globally and specifically in the US, and work on business development and client prospection.

My focus is business & legal affairs, business development and prospection, and production, distribution and financing in and from Latin America. I have given presentations, workshops and seminars at universities across the globe and at events such as the yearly conference of the National Association of Latino Independent Producers in the US (NALIP), the Winston Baker Film Finance Conferences, the Rio Film Market, the Bogota Audiovisual Market (BAM), and at the Rio Film Market and LATC Program in Los Angeles. Born in the Netherlands and a Dutch-Italian citizen, I am fluent in English, Spanish, Dutch and Italian, and basic in German.

More Stage 32 blogs by David Zannoni:

LIVE from Berlinale: Film Markets vs. Film Festivals - Distributing Your Film Worldwide

The Latin American Film Market: A Complete Guide for Filmmakers & Producers

The State of the Entertainment Industry During COVID-19

Everything You Need to Know About Independent Film Distribution

Everything You Need to Know About International Co-Productions

How International Co-Productions Work

Everything You Need to Know About Residuals & Unions

The Italian and Spanish Film Industry: A Filmmakers Guide

Collection Account Management for Film & TV Producers

2020 Entertainment Business Overview and What to Expect in 2021

How to Protect the Financier's Position on Independent Film Projects

How to Manage Revenue Sharing on Independent Television Productions

How To Put Together a Recoupment Schedule for Audiovisual Projects

Collection Account Management for Animation

How to Protect the Financier's Position on Independent Film Projects

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