Sep 05 2010

Financing & Distributing Independent Films Law (2 units)

The financing and distribution of independent films has become an increasingly popular sub-specialty of entertainment law practice as more and more films are produced and exploited outside of the studio system.

Starting with a discussion of what constitutes an “independent film,” the course will briefly survey the rights and production contractual issues particularly relevant to the financing of independent films, followed by an analysis of the more traditional methods of independent financing such as equity investments, foreign presales, and bank loans.  This will be followed by an exploration of alternative methods of raising production funding, including various foreign and domestic tax schemes and online “crowd-source” financing.  The second half of the course will cover the various business and legal issues which arise in the distribution of independent films, including sales agency and distribution agreements.  In addition, this component of the course will examine the increased importance of film festivals as a means of obtaining financing and distribution deals, as well as the ascension of digital distribution and “DIY” (do-it-yourself) marketing.

COURSE OBJECTIVES - click to expand

  • At the completion of the Financing & Distributing Independent Films Law course, the student will be able to:
  • draft and negotiate option, shopping, and development agreements as well as advise clients with respect to the various issues that arise with each;
  • advise clients on which business entity best suits their circumstances, draft an LLC Operating Agreement for a film production, draft a Private Placement Memorandum for equity financing in an independent film and advise clients on which securities law exemptions might be used to raise such financing as well as prepare any resulting documentation which would need to be filed with the SEC or equivalent state agencies;
  • advise clients on the steps which must be taken to prepare a proposed film project for pre-sale financing, as well as draft, review and negotiate pre-sale, co-production or negative pick-up agreements and related documentation;
  • advise clients on the types of bank loans which might be utilized to finance an independent film, including pre-sales loans, gap and bridge lending, and on how such loans require the coordination of various third parties, including the bank, buyers, and sales agent;
  • review and negotiate loan documentation, including security interests, and review and negotiate interparty agreements;
  • advise clients on the terms and conditions standard in completion guaranties (between the lending bank and the completion bond company) and the completion agreements (between the completion bond company and the producer), and review and negotiate such agreements;
  • advise clients on the different types of production incentives available n different states and foreign countries, including rebates, refundable and non-refundable, and transferable and non-transferable tax credits, as well as the issues which arise when selecting an incentive plan, including liquidity of the incentive, and crew and stage availability;
  • advise clients on whether alternative sources of financing such as grants, fiscal sponsorship, or crowdfunding may be appropriate for their project;
  • create both a traditional crowdfunding plan and one which takes advantage or the new exemptions to the securities laws passed as part of the Jobs Act which would allow producers to raise up to $1million per year online, as set forth in 15 USC 77d and 15 USC 77d-1;
  • advise clients on setting up a distribution plan for their independent films and on the quantitative and qualitative distinctions between independent film distribution and studio distribution;
  • assist the producer’s representative and sales agent in devising a film festival plan for an independent film with an eye towards maximizing distribution revenue;
  • advise clients on whether they should engage a producer representative, and help clients choose producer representatives as well as draft, review, and negotiate producer representative agreements;
  • advise clients on how sales agents are integral to certain types of independent file financing, whether and if so, at what stage of production, should they engage a sales agent, help clients choose producer representatives and draft, review and negotiate sales agency agreements;
  • draft, review, and negotiate the basic terms of distribution agreements;
  • draft, review, and negotiate a long form distribution agreement including the specific provisions for territorial and media licensing of an independent film;
  • advise clients on alternatives to “all-right deals” including a fragmented approach of licensing of VOD  (Video on Demand) and EST (Electronic Sell Through) rights as well as advise clients on the terms and requirements of some of the main platforms for such distribution, including Amazon, iTunes, and Netflix, and review and negotiate related license agreements; and
  • advise clients on how the current trends in independent film might affect the future financing or distribution of their independent film projects and incorporate the impact of those trends into financing and distribution plans for their clients.

GRADING POLICY - click to expand

  • This course includes three ten question multiple choice quizzes given at regular intervals throughout the course (each quiz counting for 5% -- for a total of 15% of the final course grade), three writing assignments which will each account for 5% of the overall grade, (collectively totaling 15%); and the final examination, which will account for 70% of the overall grade.
  • The multiple choice quiz questions require the student to show knowledge of the applicable statutory and case law and to apply that law to a specific fact situation.
  • All of the writing assignments require the student to write a memorandum advising the client on the finance and distribution issues raised in the assignments. Each writing assignment will be weighted as follows: 25% on understanding the issues; 25% on knowledge of the legal and business options discussed in the course lectures and materials which are relevant to said issues; and 25% on the practical application of such knowledge to the fact pattern presented.
  • The final examination is open-book.  “Open-book” means that students may use any of the assigned course materials as well as their own notes and outlines that they have created themselves from course materials.  The final examination is graded as follows: 1/3 on identifying the issues raised in the essay questions; 1/3 on the knowledge of the legal and business options discussed in the course lectures and materials which are relevant to said lectures; and 1/3 on the practical application of such knowledge to the fact pattern presented.