Market wars are breaking out. The American Film Market Association (AFMA) is challenging The Milan Film Market in a head-to-head competition in November 2004. The 24-year-old film sales bazaar in Santa Monica, CA is moving from its traditional late February date to a permanent position in November, where it collides with the 71-year-old MIFED Market in Milan, Italy. AFM’s second extravaganza was originally aligned as a scheduling punch against MIFED; at least that was what everyone thought. The announcement was made in late February that MIFED organizers are moving their market ahead, two weeks earlier than in previous years, to October 12th through October 16th. This presumably would allow buyers and sellers to participate in both markets.

AFM November 2004 has at least two major advantages to further differentiate itself from MIFED:

1. AFM will strategically synchronize with the American Film Institute Fest (AFI)

that is scheduled for November 4th through November 14th. The two events will maintain their separate identity but will collaborate under a long-term deal that allows for scheduling, registration, marketing and sponsorship on a closely coordinated basis. The alliance between AFM and AFI will provide daily boost to the grind of deal negotiating and sales schmoozing. AFM attendees will have accreditation for the AFI Fest in Hollywood, thus they will be able to see movies along side an audience or real people with industry buyers and product providers also there; and

2. AFM seminars and panels, that are integrated throughout the week’s activities and are directed towards producers, writers, members of the investment class, and those in the creative community, who want to develop a clear understanding and appreciations for the trade-offs and choices associated with the see-saw balanced between financial mandates and creative choices are simply not available at the other major markets, such as Cannes and Milan. The quality and variety of the seminars at this year’s AFM, that included such titles as Foreign and Domestic Incentives for the Independent; Innovative Models of Independent Film Distribution; The New Cool Corners of Co-Production; and How Do You Budget Imagination? : Screenwriting in the Low and High Budget World.

Additionally, AFM emphasizes on the independent film - and although the definition of an independent has become blurred in recent years with vast increases in budgets to rival that of studio films - there is still a risk oriented, entrepreneurial, ‘bet-the-farm,’ ‘roll-the-dice’ mentality that many independent producers, who congregate yearly at AFM, certainly have. And occasionally these producers can inspire, through their deeds and words, by the distributors, sales agents and financial entities that also prowl the halls of the Loew’s Santa Monica Hotel and the warm and inviting public rooms of Shutter’s Hotel.

Here are ten facts that came out of this year’s panel presentations and also from private conversations with distributors and producers:

1. AFM’s pair of aces. AFM has become a place where two kinds of product continue to sell well, i.e. high-end films with theatrical potential and these films have name talent; and low-budgeted genre pictures that have ancillary value particularly in DVD sales;

2. Wither the presale. In the past four years, producers were bemoaning the demise of presale of products in development. The Market has rebounded this year and presale deals from Japan and Eastern European countries, such as Hungary and Poland, have become available. However, these presale packages offer safe and sure genre films, usually with a well-known name and director attached to the script;

3. The weak dollar. With the weakening of the dollar against the euro, there was greater aggressiveness on the part of European and Easter European buyers, particularly from those emerging markets such as Hungary, Poland and Russia. After four years of steady decline, there were 11% more buyers attending this year’s AFM, pushing the total number of buyers to 1450. The stronger euro has created bargains for film acquisition and purchases for the television networks of Europe;

4. The great balancing act. AFM 2004 saw a balance, according to Jonathan Wolfe, Managing Director of AFM, between over supply and absence of product following a spike of production in the late 1990’s, during which finished movies glutted the international sales marketplace before the bubble burst and left many sales houses struggling to present new product in less economic conditions. AFMA President and CEO Jean Prewitt said, “Production for production sake isn’t always a good thing for the marketplace. There has to be equilibrium; there just can’t be this flood of production.”

5. The soft money imperative. Distribution rights sales from around the world aren’t enough to cover the cost of most independent pictures. Hence the rush to secure soft money. And what is soft money, you might ask? Soft money can take the form of tax subsidies; location incentives that many countries and states are offering; the too-difficult-to-discuss-in-this-space sale-leaseback arrangements available to producers shooting in the UK; labor rebates against the total cost of labor monies spent by a producer in a specific country or state; and even product placement fees that a picture may be able to obtain through the strategic shooting of an automobile or airline logo, for example, or a soft drink or bottle of beer that just so happens to be shot in the hands of your lead actor. Generally it is a combination of soft money, equity and presale that provides the three-legged chair of independent film that moves down the path of hot-script to cool-production;

6. Direct DVD. DVDs sold directly to the end user, you, the noble consumer, is the name of today’s independent game. DVD sales in the past year have surpassed retail box office. As Paul Rosenblum, President of Quinta Communications USA, which finances, produces and distributes films in Europe stated in a recent interview, “No one sets out to go direct to video, but it is a very viable strategy. Everyone has this delusion of having a large-scale theatrical release, just because they want the awareness and bragging rights that accompany that. But when you really study the theatrical model, you realize that it is a brutal, brutal model that devours cash at a huge rate. Direct-to-video works extremely well in certain niches. The urban marketplace, when you make a small film for under a $1M, with recognizable talent, you can do very well with direct to video.”

7. Promotion and marketing. More than ever, it is incumbent on the producer to be prepared when discussing with sales agents and distributors, the hook of his film. What are the selling points and the graphic image that will be on the VHS box or the DVD sleeve? What does the poster look like? Prep your sales agent on how your genre creature film is different than other creature films that have ever been on the market. What is your unique selling proposition? If your film has a budget for $1M, what is the production value of the film vs. films that have been made for $3-5M? And also, why can’t you shoot that film for $500K - and maybe you should be considering HD cameras and postproduction.

8. Walk in the shoes of your sales agent. Have a complete and thorough understanding of the track record of the sales agent that you are selecting to represent your film. Look at the last twelve or the last three years of films that your sales agent has been selling. What has he been using to promote those films? What is the genre of the films that he has had success with? What are the buyers from Hungary or Thailand or Mexico, for example, saying about your buyer? Is he aggressive? Does he play fast and loose with his deal making? Is he interested in a long-term relationship? Does he service the same buyers year after year, or does he burn through buyers? Talk to the producers whose films the sales agent is representing. Does the sales agent provide timely reports, at least quarterly to the producers? And most importantly, are the producers getting their money?

9. Don’t hire an attorney on the cheap. Select an entertainment attorney that you have to pay good money to have represent you. Once you have checked out an attorney who has familiarity with the work that you need to have done; for example, identifying soft money deals in Eastern Europe or finding a co-production partner in Canada, or extracting equity investment from a German film fund - by the attorney’s experience. Don’t try to reinvent the wheel. Independent filmmaking is a global experience. You need a solid entertainment attorney, who knows how to get a deal done and not just bill monthly against your retainer. You don’t want to learn at your expense. Find the attorney who has experience in financial match making and in global production deal making. The great advantage of AFM is you can see a number of these attorneys in action as they appear on panels and moderate the panel discussions.

10. Have your house in order. Prior to coming to AFM or any of the markets, it is essential that if you are a screenwriter, have a producer along side you, or a director attached who’s name will help get your picture made, before talking to the distributors and financing entities that are at the market. Do your spadework before coming to AFM - and then make your appointments at AFM to see acquisition executives in the last days of The Market, when they have a chance to breathe and when their primary sales responsibilities have been completed. If you are a producer, have a clear idea of the financial resources you can draw upon that will provide the foundation for your film production. Do you have private equity, such as from friends and family? Do you have a credit card that you can max out at say $100K? Do you have a co-production partner in a European country that will provide you with 15% of the budget through soft money contribution? Do you have a star tentatively committed to the project, if you could raise a certain amount of money or go into production by a certain date? Most importantly, what is your track record in managing other people’s money - and I am not just talking about movie money. Have you acted as an entrepreneur before? Have you raised money, for let us say, a real estate syndication? Have you been a successful executive in corporate America? Does you personal biography inspire trust and confidence, when you are asking other people for their money? That is the bottom line.

Crunch Entertainment was formed in 2003 by Marc Aramian. Marc has vast experiences in the post-production world and has written a number of articles on producing films based on interviews that he has done with distribution executives. AFM 2004, however, was his first Market. Here are a few of his observations that are relevant to a number of IMAGINE readers:

“I went to get my feet wet. My partner has written a great genre script, but we weren’t quite ready to fully participate because we had no star attached. I was able to engage a few distributors in theoretical conversations based on the possibility that my pay-or-play deal came through. I expect to have my film cast by Cannes. At that point, my team will be fully engaged in presale activity. All the presale deals that I observed had dynamic marketing campaigns and ingredients, such as a big name star, a great poster, a great trailer or a tried-and-true genre. Our presentation included a poster and a wish list of lead actors, comparable films with audience demographic breakdowns, box office analysis, a log line and synopsis. Our presentation in Cannes will also include a market profile of our lead actor’s most recent films, in place of our present wish list.

Our team definitely learned a lot at The Market, has we met with dozens of potential investors and distributors. I am enthusiastic about the process. I am glad that I attended. There is no other market that I could learn, in one time in one place, what I need to know, competitively, to move my project forward to production.”