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JOHN W. CONES
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MEMORANDUM

TO: TO WHOM IT MAY CONCERN

FROM: JOHN W. CONES

RE: THE INDEPENDENT FILM PRODUCER'S SURVIVAL GUIDE

DATE: MARCH 7, 2006

At the request of an independent film producer who provided a copy of the book, the following observations are made with respect to The Independent Film Producer's Survival Guide, written by Gunnar Erickson, Harris Tulchin and Mark Halloran, and published by Schirmer Trade Books in 2005.

1. Author Bios--The Independent Film Producer's Survival Guide, can immediately be perceived as more credible than the previously reviewed title: The Producers Business Handbook since in addition to providing more detailed biographical information regarding the authors, this book also includes photos of those same three authors. These appear prior to the Introduction and it's a nice touch.

2. Missing Bibliography-However, just as with the previous book reviewed, there is no bibliography, so that readers looking for additional information where the book does not provide adequate coverage are pretty much left to themselves (except for some limited source information inserted in the text).

3. Too Much Re Majors-This book's title indicates it's about independent film and by definition independent films are those not financed by any of the so-called major studio/distributors. Unfortunately, as you read through the book nearly every section of the book starts off with a discussion of how a particular issue is handled by the major studios. Only then are we provided some limited information as to how an independent producer would handle the issue differently. This is a weakness in both the book and the industry. Too much reliance is placed on how the major studios handle things and too much effort is put into trying to model independent film transactions after the way the major studios handle such transactions. In many instances, independent producers cannot replicate the major studio model, thus purely independent approaches must be created. This book does not take us very far in that direction.

4. Entertainment Law-The book does provide a fairly adequate and balanced presentation with respect to entertainment law issues. The authors have made an effort to present such legal matters in non-technical language that can be easily understood by lay persons. The authors have also avoided one of the major the pitfalls found in The Producers Business Handbook and provided both pro and con arguments for many of the positions discussed in the book. In other words, unlike The Producers Business Handbook, The Independent Film Producer's Survival Guide provides a more fair presentation of the material (i.e., it is not so slanted on any particular entertainment law issue that it becomes an advocacy piece for any given side). The only blatant bias relating to entertainment law issues is the constant reminder that independent producers ought to obtain the advice of entertainment attorneys on these complicated matters. As an attorney, I can only agree with that advice, but repeating it so often does draw attention to it and make the book seem more like an effort to attract clients than to provide thorough information relating to legal issues.

5. Rise of Independent Films-Many books, articles and investor offering materials include statements similar to those found on page xiii of this book (i.e., "The rise of independent films... Despite growing interest in independent film production..." and so forth). On the other hand, I've yet to see anyone make a persuasive case in support of the underlying assumption that the independent film world is significantly better off today than it was ten or twenty years ago, which is what is being suggested. In fact, most of the successful independent distributors have become subsidiaries or acquisitions of the major studio/distributors during that time and many of the more important so-called independent production companies have "first look" or "housekeeping deals" with the major studio/distributors. Further, the production of independent films has increasingly become more competitive each year in the sense that more and more independent producers are seeking to produce more films and a smaller and smaller percentage of that larger film production number are commercially successful. In the meantime, the capacity for distributing and/or screening movies has not increased in proportion, and movie attendance has dropped off. Thus, it is difficult to see how any thinking person can conclude that the circumstances confronting an independent film producer today are more favorable than they were at any time in years past. This appears to be merely a self-serving myth that various writers including these authors take for granted and continue to incorrectly perpetuate. At least, if a writer believes that the independent sector is better off today than at some time in the past, he or she ought to provide some factual support for such a proposition, not just gloss over it.

6. Independent Film--Just as with The Producers Business Handbook these authors are somewhat careless (i.e., less than precise) in discussing what is an independent film. (1) They state and assume that all independent films are "designed for release in movie theaters". That's just false. If these authors want to limit their discussion to films that are intended for theatrical release, that's quite all right, but to limit the definition of independent films to only those "designed for release in movie theaters" is not their prerogative. Hundreds, if not thousands of motion pictures are produced in the U.S. each year that are not intended for a theatrical release. These are not major studio productions, thus by definition they are independent films. The essence of an independent film is that it is not developed or produced by a major studio/distributor. (2) Further, it is possible that a major studio/distributor may acquire the rights to distribute an independently produced motion picture. And, just because a major distributor distributes an independent picture does not make it a major studio production. It is a major studio release, but the production was independent. So, when defining what is an independent film, we need to just consider the development and production phases of that film, not its distribution arrangements. (3) There are all sorts of complicated arrangements when it comes to financing the development and/or production of an independent film, some of which rely in one way or another on the vertically-integrated major studio/distributors.

Unfortunately, no authoritative organization active in the film industry (nor these authors) have yet come up with a sensible way to distinguish between major and independent productions in such circumstances. For example, if an independent producer arranges for the financing of the development phase of a motion picture, then approaches a major studio with a completed script and package (i.e., one or more actors and a director attached) seeking a production-financing/distribution deal, it would appear that such a film would be considered a major studio production and a major studio release, should the deal go through. However, if an independent producer arranges for the financing of the development phase and approaches the same major studio/distributor with the same package, not seeking a P-F/D deal, but a worldwide negative pickup in which the production financing is actually provided by a third party entertainment bank (lender) using the major studio's distribution commitment as effective collateral in support of the loan, is that an independent production with a major studio release or because the major studio/distributor's backing was involved, is it a major studio production?

In the next hypothetical, let's say an independent producer arranges for the financing of a film's development and packaging and takes the package to a major studio/distributor seeking a negative pickup deal for the domestic rights, but then goes to an independent distributor seeking a negative pickup for the foreign rights. Is that an independent production with a major studio domestic release and an independent distributor release in the foreign marketplace, or what?

In a third example, let's say an independent producer arranges for the financing of the development and packaging of a motion picture and gets a domestic negative pickup from a subsidiary of a major studio/distributor, but pre-sells the foreign rights to six territorial distributors and uses all of those distribution contracts to obtain loans from one or more third party entertainment lenders. That's closer to being an independent production, but it still relied heavily on the domestic distribution contract of a major studio/distributor subsidiary, otherwise the film's production may never have been financed, so is it fair to say that a film produced in that manner is an independent film?

These are questions that these authors simply skipped over. As a consequence, the book's readers have an overly simplistic idea of what an independent film is.

7. More Major Confusion-Just as with The Producers Business Handbook these authors are somewhat confused about what companies are major studios, but in this case, the confusion is either a mere reflection of the film industry, or just a timing problem (see page 1). For example, after this book was published, both Dreamworks and MGM have been purchased by other major studio/distributors, and it is no longer fair to claim that a subsidiary of a major studio is also a major studio. That means there are only six remaining major studio/distributors, not eight. Of course, there has always been confusion about use of the term "studio" since it originally reflected the reality of the existence of a physical studio (with sound stages) where some or all of a motion picture could be produced on sets in buildings on the studio lot. As time went on, more and more companies wanted to claim that they were "studios" in the sense that they produced and/or distributed motion pictures, but in reality they did not have the physical buildings or the lot which could accurately be called a studio. Thus, the term "studio" has been misused or at least used in two different ways for many years. For this reason, it may not be fair in the more limited sense of the term to say that Dreamworks was ever a "studio", since it never had a studio facility with sound stages. It was a significant film production company in the sense that in many of the years during its independent existence its films have generated a significant share of the overall box office revenues. But, there is also some question as to whether Dreamworks maintained a full, worldwide distribution capability during all of those years, thus in that sense, it may have not been fair to consider Dreamworks a major studio/distributor on an equal footing with the other major studio/distributors, at least not for all of the term of its existence to this point. In any case, the classification of "major studios" is also not as simple as these authors would lead us to believe.

8. Pre-Sales-Also on page 1, the authors state that "Typically, independent pictures are financed by 'pre-sales' contracts from distributors . . ." This is simply not a true statement. The authors also provide no factual support for their position. If they had wanted to say that most of the independent films they work on involve pre-sale contracts, or that most of the independent films within a certain mid-level budget range involve pre-sales, or that most of the independently produced films that receive a theatrical release involve pre-sales, all of those statements may be true, but someone would still have to conduct a study to document these statements. No one takes the time to conduct those kinds of studies in this industry. In this particular instance, however, these authors have simply set forth a false statement and failed to provide any support for their view. It is more likely that most independent films are financed with some form of investor financing, but again, part of this statement depends on our definition of what is an independent film, and no one actually knows how a great many independent films are financed. In any given year, for example, if there were 100 to 200 films produced using pre-sales (a fair estimate without evidence to the contrary), but there were somewhere between 1,500 and 2,000 films produced, just in the U.S. (the authors' own statistics) and the majors only produced another 100 or so, it appears quite foolish to state that "Typically, independent pictures are financed by 'pre-sales' contracts from distributors . . ." If someone wants to make such statements, they ought to be backed with factual support, or re-worded to reflect the real world.

9. Recent Phenomenon-At the very bottom of page 1 of the book, the authors state that "Independent film producers are a relatively recent phenomenon." Apparently these authors have not bothered to study the history of the film industry in the U.S. If they had, they would have discovered that Hollywood was founded by independent producers about 100 years ago. The producers that left the East Coast to get away from the Edison Trust, which used ruthless tactics to try to enforce payments from the independent producers for using the Edison Trust's patents on cameras and projectors, were called independent producers. Some of the more successful of these early independent producers became the major Hollywood-based studio/distributors of today. But, the fact is that independent producers have existed in the U.S. for about 100 years and thus to state that "Independent film producers are a relatively recent phenomenon" is simply wrong.

10. Number of Independent Films-On page 2, the authors state that " . . . an estimated 1,500 independent films (are) produced each year in the United States." On page 122, the authors state that " . . . there are over 1,500 independent producers who manage to find financing for their independent features every year." Later, on page 344, the authors state that there are " . . . 1,500 to 2,000 new independent pictures in the marketplace at any given moment . . . " (worldwide - as [per Film Finders). Then on page 351, the authors state that " . . . almost 2,000 independent films (may be) competing every year for acquisitions executives' precious time . . ." Notwithstanding the fact that all of our time is "precious", these numbers are not necessarily inconsistent, even though each statement is slightly different. They are also not unreasonable in light of the following reports from Variety.com which states that in 2006 1,764 U.S. feature film entries were submitted to the 2006 Sundance Film Festival (held in Utah late in January each year and often promoted as the foremost platform for American independent cinema). Also according to Variety.com that was 379 more than for 2005. Unfortunately, we are not necessarily comparing apples to apples here, since the year of submission to a major film festival, may not be the same as the year of production. In fact, it is possible that not all of the films submitted to Sundance for consideration in 2006 were fairly considered as produced in 2005, since it is possible that some were completed (i.e., produced) in 2006 or on the other side, "produced" in 2004. Those of us working in the film industry need to recognize and acknowledge that no one knows for sure how many feature films are produced in the U.S. in any given year and that's why we have to work with good faith estimates. Those good faith estimates, however, must be consistent with whatever other best available information is at hand, and the estimates of these authors meets that standard.

11. Completion Bonds-The authors make statements throughout the text (starting on page 4) that presume that all independent films need or must have a completion bond. Again on page 128, the authors state that "If you finance your film either through equity or a production loan (or a combination of the two), you will need a completion guarantee." These statements are false. There are advantages and disadvantages relating to the question of whether an independent film should or should not arrange for a completion bond. This issue is not fairly discussed in this book. In fact, it is very likely that most independently produced feature films do not use the services of a completion guarantor. On the other hand, nearly all if not all feature film production budgets financed through any form of lender financing including worldwide negative pickups, split rights negative pickups, splits rights deals combining a domestic negative pickup with foreign pre-sales, gap financing, super gap and even insurance-backed schemes are required to have a completion bond in place. That requirement, however, is imposed by the bank as a condition of the loan. Some investor financed independent films may also choose to obtain a completion bond, but in all likelihood, most investor financed independent films do not use a completion bond, although so far as I know, no one including these authors have actually conducted a study of the subject. It is simply not safe for these authors to assume as they so often do, that all or most independently produced feature films are, should be or need to be covered by a completion bond.

12. Producers and Distributors-On page 4, these authors categorically state that "Independent producers do not act as distributors of films." This statement would be correct, if the word "generally" or "typically" were added. After all, in some cases, the producers of independent films do engage in self-distribution, sometimes including four-walling.

13. Development Odds-On page 6 the authors state that "The development fee is credited against a producer fee of probably $100,000 to $250,000, which only gets paid if the studio chooses to make the picture (the odds of this are about one in ten)." The authors do not state where they got those odds. The major studios, on the other hand, traditionally have had somewhere in the neighborhood of some 100 to 250 films in development each year. And only about 2 to 3 of those films will be produced by the studio in any given year. The balance of the films on their slates are either P-F/D deals, lender financed productions, acquisitions of completed films or rent-a-distributor deals (none of which were developed by the studio). Thus, it is more reasonable to estimate that the odds of a studio development deal being produced by the studio at one in fifty, or something similar. The stated odds of one in ten are much too favorable and do not reflect reality.

14. Calculating Odds-On page 9, the authors make a similar statement (i.e., "The lawyer is also going to calculate the odds of your picture being made.") In all fairness, this needs to be toned down a bit, since no "calculation" is actually going to take place and no "odds" will ever be produced. This is more rhetoric than reality. It is more accurate to say that an attorney may develop a subjective impression as to whether a given film project is likely to be produced, but that's about as far as it goes. To pretend otherwise is misleading and unnecessary.

15. Greenlight-On page 11 and elsewhere throughout the book, the authors use the term "greenlight" to describe the decision to finance the production costs of a feature film. This is a term that is closely associated with the production financing approval process at the studios but really does not appropriately describe the process or the decision relating to the financing of an independent film. This is another example of authors showing their bias toward the studio model when that model does not really work for independent films, and their book is about independent films. Studio executives "greenlight" pictures. Independent films raise production money, cobble together their financing, beg, borrow, steal, get approval for or close a bank loan and so forth. Seldom are independent producers in a position to have someone acting as a studio executive "greenlight" (i.e., approve all of the needed production financing in one executive decision) the production financing for a motion picture. The authors of The Producers Business Handbook exhibited the same bias.

16. Odd Use of Terminology-On page 24, the authors state that "If you are not a signatory to the WGA Agreement, then you must legislate how credits will be determined." Isn't it more fair to say that legislatures legislate and independent producers simply decide on what credits will be granted? Even if this is the way members of the WGA talk about this issue, this statement starts out with the assumption that the producer is not a signatory to the WGA Agreement, so WGA terminology is not appropriate.

17. Possible Typo-On page 26, the authors describe the U.S. copyright office as the "county recorder of documents". Maybe that was supposed to be "country's" or "nation's" recorder of documents. Either way, "county" is not the proper term or jurisdiction.

18. More Typos-On page 64, the authors state that the " . . . advantage of the formal agreement is that it leave few, if any, points open." The word "leave"in this context should have been "leaves".

19. Film Finance Bias-This book utilizes four and a half pages to discuss the topic of "private financing" which includes some discussion of promissory notes, non-securities transactions, securities offerings (public and private) and so-called hybrid deals. A little more than two of those four and a half pages are devoted to a topic called "Avoiding Equity Financing Pitfalls". None of these subjects come anywhere close to being adequately covered. There is no way an independent producer can "survive" with this inadequate information on these vital topics. Attorneys who believe they have adequately covered such a technical subject by publishing two and a half pages on equity and other forms of private financing, followed by a little more than two pages on equity financing pitfalls are embarrassing themselves. This absurdity occurs on page 83 through 88. Then, as if to make sure that every reader is even more aware of the bias of these three authors, they start their discussion of "pre-sales" in the middle of page 88 and that runs to page 96, and this treatment of "pre-sales" (a form of lender financing) is combined with an additional entire chapter on the subject of lender financing with the misleading title "Finance Agreements". There is no mention of the various forms of investor financing (finance agreements) in this chapter on "Finance Agreements". It is all devoted to further discussion of pre-sales and other forms of lender financing.

20. Further Bias-Oddly enough, these authors do not even mention the possibility of a worldwide negative pickup (another form of lender financing) and only briefly mention the possibility of a splits right negative pickup deal with distribution agreements from two distributors (one domestic and one international). The preference for these authors is clearly, the foreign pre-sale thus, their bias is not only lender financing, but this specific and narrow form of lender financing - the foreign pre-sale, a form of film financing that varies widely from year to year and country to country with respect to its availability. That is, however, where these authors have some expertise (in addition to entertainment law generally) and even though they are pretending that their book is a "survival guide" for independent film producers, it fails to adequately cover the broader field of film finance. The information relating to foreign pre-sales, however, is fairly good.

21. Continued Bias-Chapter Six of the book is entitled "Finance Agreements". Since this is supposedly The Independent Producer's Survival Guide, a reader might reasonably expect to see a discussion and/or examples of a number of different film finance agreements, after all, there are a variety of ways to finance feature films and not all independent producers or their projects are suited for the single form of film finance referred to as foreign pre-sales. The authors of this book know that. Unfortunately, they ignored the broader truth to focus on a single, self-serving form of film finance: foreign pre-sales - the form of film finance they are most likely to work with in their respective law practices. This chapter runs from page 123 to 166 including an example of a single "finance agreement" the IFTA's International Multiple Rights Distributor Agreement. There is no discussion or sample finance agreement for the worldwide negative pickup. The negative pickup is not even listed in the book's index. There is no discussion or sample finance agreement for a splits rights negative pickup (i.e., a domestic negative pickup with a domestic distributor combined with an international negative pickup with a single international distributor). There is no discussion or sample finance agreement for the possibility that equity (or investor financing) sufficient to cover costs allocated to the domestic rights could be combined with a single international negative pickup. There is very little discussion and no sample finance agreements relating to any specific form of investor (equity) financing: not any of the active investor options such as the investor financing agreement, the joint venture agreement, the initial incorporation or the member-managed LLC operating agreement; not the passive investor options such as the limited partnership agreement, the manager-managed LLC operating agreement or the existing corporation - no adequate discussion of these options and no sample agreements. There is also very little (or a totally inadequate discussion) relating to federal and state securities law compliance for the passive investor options and no sample securities disclosure documents or any significant portion thereof. Discussion of these other forms of film finance are provided in my own book 43 Ways to Finance Your Feature Film and sample agreements associated with these additional forms of film finance are provided in another of my books Film Industry Contracts. If these authors were really interested in helping independent producers survive, they should have included adequate discussions of these other forms of film finance and included some related sample agreements, or in the alternative alerted their independent producer readers to the existence of these other sources. These flawed author decisions make these authors seem more concerned with their own survival than with the survival of independent producers.

22. Loan Repayment-On page 126 these authors, experienced in lender financing, make the statement that "The bank loan normally is repaid from the proceeds from the film . . ." This is not really my area of expertise, but I've read a great deal about the various forms of lender financing, listened carefully as numerous experts on the transaction (including bankers) lecture on the subject and written my own chapters on the topic, and all of that experience has indicated to me that bank loans are normally paid by the distributor when the film is delivered (i.e., that's before the film has been screened for the public and prior to the existence of a film's "proceeds"). In other words, all of that paperwork that the authors describe in Chapter 6 is partly designed to authorize the distributor to re-pay the bank in lieu of the producer all of the bank's principal, interest and fees at the time of the film's delivery. That's what the distributor commits to do. No bank will wait and/or rely on repayment of any significant portion of what is owed out of the "proceeds from the film". Again, these authors know this, but apparently overlooked this critical point in putting together this book. Oops! In fact, on page 128, the authors admit that the agreements include " . . . the distributor's commitment to make payment on delivery of the picture . . ." a statement which is in direct contradiction to the statement on page 126 that "The bank loan normally is repaid from the proceeds of the film . . ." It is true that the distributor will recoup its payment to the bank out of the film's revenue stream, but that recoupment occurs much later in time than the payment that is required upon delivery of the film.

23. Joint Venture-On page 169 the authors discuss general partnerships and joint ventures, but they fail to point out that a joint venture is merely a specialized form of general partnership. Instead, they suggest that the joint venture is just another form of partnership of equal status with a general partnership. This is a technical distinction (i.e., of little practical importance to the reader), but lawyers should know this.

24. Fictitious Name Filing-On the same page and elsewhere, the authors refer to DBAs (for doing business as), whereas in California, the term is "fictitious name company". It's the same thing, and DBA is the more popular terminology around the country. But, in California, it's "fictitious name company".

25. Legal Entities-On page 170, the authors make the point that a corporation is " . . . an artificial, separate legal entity formed under procedures set up by state law." They fail to point out that the same attributes apply to limited partnerships and limited liability companies, thus other attributes need to be discussed to distinguish between these entities.

26. State Authorities-At the top of page 171, the authors state that a corporation's articles of incorporation are filed "with state authorities". There is no reason not to go one step further and just state that the filing is with the state's Secretary of State. That's more specific, accurate and more helpful to independent producers trying to survive.

27. Two Types of LLCs-On page 171, the authors make the really useful point that there are two types of LLCs, the member-managed LLC and the manager-managed LLC. On the other hand, they fail to explain why it is important to know the difference. Ultimately, this distinction determines, as a general rule and to a large extent, whether the units being sold in the LLC are securities. As a general rule, units in a member-managed LLC are not securities. Also as a general rule, units in a manager-managed LLC are securities. Thus, in the latter instance compliance with the federal and state securities is required. In other words, the authors should have pointed out to their readers that there are significant implications associated with the decision to use one form of LLC over another. They should also point out that if a producer is trying to form a member-managed (active investor) LLC, all of the investor/members must remain regularly involved in helping to make important decisions relating to the project, and that if even a single investor is actually passive (or incapable of actively participating in that decision-making due to lack of business experience), the LLC units may be considered by regulators to be securities. In such a situation, where there was no effort made to comply with the securities laws, the independent producer may be inadvertently guilty of selling an unregistered security - an action which in some circumstances may be a felony. If the authors are trying to help independent producers survive, let's at least keep them out of jail. Further, even though we don't know precisely where to draw the line, too many presumably "active" members of a member-managed LLC will allow securities regulators to take the position that the units were actually securities. Thus, to be safe, it's best to limit the number of member/investors in a member-managed LLC to a relatively small number. The authors also fail to mention this important point.

28. Another Typo-On page 185, under the heading "Financing" the word "load" apparently should have been "loan".

29. Financing-Also under that same heading relating to the "Production Checklist" the authors should have at least listed the other many forms of film finance options that are available instead of trying to mislead the readers that this is actually a comprehensive production checklist. In the alternative, they could have stated that in this instance the authors presume that foreign pre-sales are the preferred form of film finance, but recognize that other forms of film finance do actually exist out there in the real world.

30. Tricked?-On page 334 in discussing profit participations the authors make the rather bizarre statement that profit participants are sometimes " . . . tricked into getting a percentage of 'producer's net profits". Why would these authors make unwarranted assumptions about the motives of the people who draft profit participation agreements? This sort of subjective editorialization has no place in such a book. It's entirely possible that the people negotiating and drafting such an agreement realize that the production entity for an independent film has no control over a film's revenue stream at the net profits stage, and thus it makes little sense to commit to pay a percentage of a film's net profits, if only a portion of the film's net profits come under the control of the production entity and the production entity is responsible for paying the profit participations. It appears that these attorneys are so stuck in a rut with their thinking about the many ways profit participations can be paid that they assume people drafting language creating obligations to make profit participation payments at any other time must be trying to "trick" somebody. What a narrow point of view!

31. Continued Studio Bias-In the profit participation examples appearing on pages 336 and 337, the authors again are biased toward the major studio perspective. These examples are not that useful for independent productions.

32. Investor Negotiation-On page 339, the authors stated that "investors . . . usually negotiate the best definition of profits." This is another example of language that tells us where these attorney/authors would like to be in the film industry, but it is totally misleading to independent producers, the very people these authors claim to be helping. An investor who might have an opportunity to negotiate a definition of net profits would have to be a very big and powerful investor with lots of leverage. The truth is that few people in the film industry, much less anyone outside the film industry has the kind of leverage it takes to negotiate the distributor's net profits definition, or negotiate the "best" definition of net profits. That's a fantasy, or just a mis-statement of fact! On the other end of the spectrum, where most independent producers work (the actual audience for this book) investors are not even offered a participation in a film's net profits (at the net profits stage), much less given an opportunity to negotiate. In limited partnership, manager-managed LLC or corporate stock offerings, investors are generally offered an opportunity to participate in the offering on the terms set forth in the offering document. There is rarely an opportunity for negotiation of the profit participation and even if there is it's not at the "net profits" level of the revenue stream.

33. Talent Deferments-At the top of page 340, the authors state that it is " . . . least favorable for talent . . . to be paid (a deferment) immediately prior to payment of net profits." Again, these authors are not thinking about the vast majority of investor financed independent films, for this language certainly does not describe the opportunities to pay talent deferments in such instances. The vast majority of independent films are produced without the financial assistance and control of a distributor. These films are acquired for distribution after they are completed, if they are distributed at all. In such circumstances, the independent producer would be in an extremely weakened bargaining position if he or she was burdened with the need to make the request or demand that the distributor pay talent deferments prior to net profits (described by the authors as the "least favorable" position for talent). Such a demand is more likely to be a "deal breaker" (i.e., make it impossible for the independent film to get distribution). The independent producer seeking an acquisition deal from a distributor rarely has that kind of leverage and the distributor has little incentive to undertake that responsibility. It is more likely, again in the vast majority of cases involving independently produced feature films, that the production entity will have to pay whatever talent deferments are committed to out of that portion of the film's revenue stream actually controlled by the production entity, and that is rarely going to be 100% of the film's net profits. Even though it is impossible to know with certainty, it is very unlikely that any distributors seeking to acquire distribution rights for an independently produced feature film will allow 100% of such films' net profits to flow to the production entities. Thus, this author statement simply makes no sense, except it simply represents a habit of thought for attorneys who are more used to working with or aspire to work on major studio/distributor deals as opposed to the acquisition of independently produced feature films.

34. Delivery Schedule Issues-Although the discussion of delivery schedule issues starting on page 356 is excellent information for independent producers the word "studio" appears throughout where it should be "distributor". The word "studio" in this industry generally is used to refer to the major studio/distributors. The word "studio" is not synonymous with "distributor". There are many independent distributors that cannot be fairly referred to as "studios". Since this book is supposedly for independent producers, most of whom will not be delivering film items to a "studio", the term "distributor" should be used here instead of "studio".

35. Summary-In the final chapter starting on page 399, the authors pretend that they are summarizing the contents of the book including all of the various forms of film financing that they have supposedly discussed. They say: "We have talked about financing, private funding, equity financing pitfalls, obtaining money from family and friends, pre-sale contracts, international sales agreements . . ." and so forth. Unfortunately, the only form of film finance that is granted adequate coverage in this book is the foreign pre-sale - that single form of film finance preferred by the authors. In all other respects (relating to film finance) the purchasers of this book have been cheated and misled.

36. Final Insult-On page 400 at the very end of the book, the authors rip off a closing statement I've consistently used in more than 300 lectures on the topic of film finance since 1987. We'll just assume that's a coincidence.

Conclusion-Other than as noted above, this book contains a great deal of valuable and useful information. On the other hand, in the specific area of film finance, it falls far short of a supposed "survival guide" or any other appropriate description of written material purporting to relate to the topic film finance. This book, however, is in my judgment a better effort than the previously reviewed The Producers Business Handbook which is even more biased on matters relating to film finance. If the authors wish to use any of the above information to improve future editions of their book, they have my permission, so long as my contribution is properly acknowledged. I'd even be willing to review and make comments on their next draft to help them fulfill their promise to independent producers.

Best wishes,

John W. Cones

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