Philippe Martinez, a newcomer to Hollywood, won the film by outbidding seasoned art-house studios and by gaining the trust of the movie’s writer and first-time director, David Ayer, who had financed the film by mortgaging his own house.

“I thought, ‘We can be neophytes together and reinvent the system,’ ” Mr. Ayer said in an interview last week at his Silver Lake office, where a folded and framed American flag hung behind his desk.

But the system, he has since learned, is not so easily reinvented. Now, “I want the warm, loving embrace of the studios,” he said. “Studios are the way they are for a very good reason.”

More than a year after Toronto, “Harsh Times” is just making its way toward a Nov. 10 release, with scant public awareness, a nest of tense financiers and a handful of abandoned release dates in its wake. …

The complications over “Harsh Times” — which at first light had some festivalgoers talking Oscar for Mr. Bale — are symptomatic of the perilous road that Hollywood newcomers and independent producers face. Almost everyone involved was new to some aspect of the business: Mr. Ayer was a first-time, self-financing director, Mr. Martinez a brand-new distributor who promptly handed over actual distribution to the newly pared-down MGM.

Read the full story at the New York Times [subscription required]: http://www.nytimes.com/2006/10/26/movies/26hars.html

This article in the New York Times discusses the financing and distirbution of Harsh Times, from first-time director David Ayer and starring Christian Bale. I think it underscores the point that obtaining an acquisition deal, seen by many filmmakers as the end of the journey, is in many ways just the beginning.

Casting a major star in the film, and getting a $4M acquisition deal, has not automatically led to a lucrative film that enables investors to recoup their investment and turn a profit.

Australian stories drown in sea of American films

“WHILE many are talking about the resurgence of the Australian film industry, revenue from overseas sales has slumped.” …

“The soaring number of “independent films”, produced cheaply with international stars outside the Hollywood system, had made it harder for Australian releases to attract attention overseas.” …

“Under the Government’s review of film funding, the corporation has lobbied for a new tax offset that would attract more private investment to the industry.

It has also argued that the existing tax offset for higher-budget productions be increased from 12.5 per cent to 15 per cent to rival the incentives offered by other countries chasing offshore Hollywood productions.”

Garry Maddox, Film Writer, Sydney Morning Herald, October 27, 2006

Great post from the CinemaTech blog:

- The Audience Database

It seems that one of the most important assets for a filmmaker in the 21st century isn’t going to be a camera, a great casting director, a well-connected producing partner, or a relationship with a distributor. (Though all those things are nice to have.) It’s going to be the audience database: a collection of the e-mail addresses and ZIP codes of the people who’ve seen your previous movies, purchased them on DVD or as a download, or expressed interest in your work.

Arin Crumley and Susan Buice, the filmmakers behind `Four Eyed Monsters,’ are already converts. By accumulating enough e-mail addresses and ZIP codes of people who wanted to see their movie this year, they were able to arrange 24 theatrical screenings of `Monsters’ in September, which netted $13,000 in combined box office. “We have this audience base,” Crumley said, “and we know how to communicate with them.”

This is a very insightful post. Go read the rest!

We will be posting an article in the next week about using online strategies to build a following for your film. In the meantime, check out this cool online promotional feature:

Film Grants in the State of New York:

As one of the world’s largest and most important production centers, New York City is the ultimate place to break into the media and entertainment industries. To help support the City’s rising film, theatre and broadcasting stars, numerous organizations offer fiscal sponsorship and a variety of other resources. Here’s where to go for more information on grants and sponsorship:

The New York Foundation for the Arts (NYFA) is a non-profit organization dedicated to supporting artists in New York State. NYFA Source is the organization’s online database listing thousands of grants and sponsorship opportunities available to artists in a variety of fields, including film, theatre and broadcasting. The database allows users to search by discipline, geographic area and other criteria to develop lists of grants for which they are eligible to apply. Through NYFA Source Live Assistance, the organization provides free advice via telephone and e-mail to help artists with this process.

NYFA also awards more than $11 million in grants to individual artists annually, and offers fiscal sponsorship to emerging media and artistic organizations. NYFA sponsorship provides these organizations with the legal status and 501 (c) (3) non-profit, tax exempt status required to apply for funding from many organizations. For more information, visit http://www.nyfa.org.

New York State also awards grants to non-profit arts organizations. The program is administered by the New York State Council on the Arts (NYSCA) and funded by the Governor, New York State Legislature and National Endowment for the Arts. For more information on these awards and on other resources available to artists in the State, visit www.nysca.org.

Source: http://www.nyc.gov/html/film/html/incentives/film_grants.shtml

New York City, with a population of over eight million people, is located at the mouth of the Hudson River Estuary which stretches 153 miles inland from the Atlantic ocean and includes a wide range of wetland habitats. Home to more than 200 species of fish, the Hudson River Estuary serves as a nursery ground for sturgeon, striped bass and American shad. It also supports an abundance of other river-dependent wildlife, especially birds. (Photo: Stanne/NYSDEC)

The Quebec government is counting on a new deal with big-budget movie producer Joel Silver to kick-start the province’s film industry.

Societe generale de financement du Quebec, the provincial government’s investment arm, is spending $18 million Cdn in a deal with the producer of both The Matrix and Lethal Weapon series on a a project it hopes will bring $170 million in investment back to the province.

Read the full story from the CBC

This is a very interesting development in the current trend of outside funding sources bankrolling Hollywood films.

It is not that unusual that a Canadian government entity would play a role in film financing. What is interesting is that they chose to partner with a U.S.-based producer, instead of investing directly in the work of their own local filmmakers. This is a shift from the kinds of traditional government programs of the past.

While SGF is putting some money on the table, $US15million is not a significant sum. That would not ordinarily be enough to entice a producer of the stature of Joel Silver. I think the Canadian film production incentives are the stronger motivation for doing this deal.

On the http://filmbiz101.com resource website we posted a page that asks:

A distribution or acquisition deal can help you recoup your investment, but how do you get the financing in the first place???

We think this is a critical question for just about every documentary filmmaker. Check out our observations on the state of funding for this genre.

Here is one tidbit:

Private donors are important and you may be able to obtain their financial contributions. In order to offer a tax benefit to donors, you must either establish a non-profit organization or your project must receive Fiscal Sponsorship.

Read the full article on funding documentaries

Entertainment growth factor: Money

Changes in film financing are occurring around the world. In the U.S., private equity is beginning to invest in films. These funds spread risk by investing relatively small amounts in a large number of films. The combined effect of multiple funds will be to make substantial monies available for large-budget productions. It is a boon to studios because such funding lessens their need to pre-sell rights or to enter into co-production arrangements, increasing their share of potential back-end revenue.

In other regions, governments are increasing their support for the production of filmed entertainment. In EMEA, the German government is planning new film financing incentive programs to replace discontinued tax-sheltered film funds. In Ireland, the government offers tax relief, amounting to as much as 80% of the budget. Sweden raised its subsidies to local filmmakers to $40 million annually. Spain, Hungary, and Poland also support the production of local films.

Asia Pacific countries such as South Korea, Taiwan, India, and China all introduced programs to encourage local filmmaking. In Latin America, Mexico, Argentina, and Brazil have similar incentives. In addition, Brazil provides special funding for the construction of new theaters.

View the complete article at:
Hollywood Reporter

The basic issue on DVD sales, Greenfield reports, is that there has been a decline in catalog sales, as the “halo effect” from an expanding DVD consumer base is over. In short, almost everyone now has a DVD player, and they’ve replaced their VHS catalog titles - so now the market will be driven largely by the ability of the studios to produce hits.

http://biz.yahoo.com/seekingalpha/061008/18035_id.html?.v=1

Growth in the DVD marketplace is definitely slowing. However, this is really not a surprise to anyone. The major studios and other distributors forecasted a leveling off of the business several years ago. They thought that a High-Definition format would offer an even better home entertainment experience, and fuel new growth for the industry. The forwat war that has ensued has been a serious obstacle to the industry.

The DVD slowdown has profound, and negative, implications for independent films. Currently, theatrical distribution is often a losing proposition for indie films. The marketing costs to launch a film are expensive and very hard to recoup. However, the theatrical release sets up a film for greater success in other distribution channels. Profits can be obtained from DVD, television/cable, and other ancillary markets.

With deterioration in DVD sales, retailers will start to decrease the shelf space that they devote to movies. The retailers have to maximize the sales per square foot of selling space.  If DVD is not selling, they will shrink those departments and give that space over to other products. This means fewer titles purchased by the retailer, worsening the odds for independent films.

Retailers will try to increase their profit from DVD by negotiating for lower wholesale costs with the distributors.  Faced with the choice of losing shelf space (and the significantly reduced opportunity to sell DVD), or lowering wholesale prices (improving profit for the retailer at the expense of the distributor), distributors will opt for lowering cost/improving retail margin.  This means less revenue flowing to the distributor. As virtually all distribution deals for indie films have a revenue sharing component, this ultimately means less money flowing to independent producers.

Google acquired internet video service. View the wacky message from the founders.

http://youtube.com/watch?v=QCVxQ_3Ejkg

Here is the official press release:

Google To Acquire YouTube for $1.65 Billion in Stock

Combination Will Create New Opportunities for Users and Content Owners Everywhere

MOUNTAIN VIEW, Calif., October 9, 2006 - Google Inc. (NASDAQ: GOOG) announced today that it has agreed to acquire YouTube, the consumer media company for people to watch and share original videos through a Web experience, for $1.65 billion in a stock-for-stock transaction. Following the acquisition, YouTube will operate independently to preserve its successful brand and passionate community.

The acquisition combines one of the largest and fastest growing online video entertainment communities with Google’s expertise in organizing information and creating new models for advertising on the Internet. The combined companies will focus on providing a better, more comprehensive experience for users interested in uploading, watching and sharing videos, and will offer new opportunities for professional content owners to distribute their work to reach a vast new audience.

“The YouTube team has built an exciting and powerful media platform that complements Google’s mission to organize the world’s information and make it universally accessible and useful,” said Eric Schmidt, Chief Executive Officer of Google. “Our companies share similar values; we both always put our users first and are committed to innovating to improve their experience. Together, we are natural partners to offer a compelling media entertainment service to users, content owners and advertisers.”

“Our community has played a vital role in changing the way that people consume media, creating a new clip culture. By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners,” said Chad Hurley, CEO and Co-Founder of YouTube. “I’m confident that with this partnership we’ll have the flexibility and resources needed to pursue our goal of building the next-generation platform for serving media worldwide.”

When the acquisition is complete, YouTube will retain its distinct brand identity, strengthening and complementing Google’s own fast-growing video business. YouTube will continue to be based in San Bruno, CA, and all YouTube employees will remain with the company. With Google’s technology, advertiser relationships and global reach, YouTube will continue to build on its success as one of the world’s most popular services for video entertainment.

The number of Google shares to be issued in the transaction will be determined based on the 30-day average closing price two trading days prior to the completion of the acquisition. Both companies have approved the transaction, which is subject to customary closing conditions and is expected to close in the fourth quarter of 2006.