This is part of a series of book excerpts from The Independent Filmmaker’s Law and Business Guide: Financing, Shooting, and Distributing Independent and Digital Films
designed to introduce filmmakers and others interested in creating content on the legal issues involved in the filmmaking process.
A budget consists of the summary page, known as the top sheet, and a series of department-by-department itemizations for that budget. Even if a film’s expenses top $200 million, every roll of tape must be budgeted, receipted, and credited to its particular account. The numbers may get large, but the need for attention to detail never diminishes. Each day throughout the course of the production, the actual expenses are reconciled with the budget to calculate the production’s accuracy in planning and to make the necessary adjustments to keep the project on time and on budget.
Every budget contains several different types of expenses. Above-the-line expenses are the major costs that set the scale of the production; they include the salaries of the director and leading cast members, the cost of the script, and the producer’s fee. In the studio world, they are often negotiated in coordination, so that star salaries are proportionate and the director has a deal somewhat similar to those of the other above-the-line participants. Below-the-line expenses are typically the production expenses, which include the remaining cast, locations, sets, costumes, permits, and equipment rentals. These costs tend to vary less than above-the-line expenses; the cost of a location permit, for example, does not change based on the fame of the cast. The budget must also reflect postproduction expenses, including the editing, sound, addition of special effects, and titles.
In addition to the production and postproduction expenses, significant other budget items include the various forms of insurance which must be maintained, legal fees, accounting expenses, and a small budget for capturing film and video content to be used in the publicity of the film and as extras on the DVD or Web site.
Traditionally, the scale of a film was set by above-the-line costs, which represented the most significant portion of the budget. In today’s movie-making environment, however, this may not be the case. The visual effects added in postproduction can equal or exceed the cost of production and may represent expenses as great as the salaries of top-name star talent.
Music has always been an important part of filmmaking. The film score can influence the emotional impact of a scene, shaping audience reactions at a subconscious level. Featured songs can carry the audience’s emotional associations with those songs into the film’s world of suspended disbelief. For instance, when Wall-E incorporated a video clip from Hello Dolly, it helped to bridge the audience age gap and served as instant shorthand for the values learned by the main character, a self-aware robot, during his 700 years of isolation.
The details of music licensing for the film score, featured songs performed for the movie, and needle drops—prerecorded songs played during the film—but because music has become not only a vital aspect of independent filmmaking but also an expensive one, the filmmaker should pay particular attention to its role in the budget process. The budget should separate out the payments to the composer of the film score from the budget for featured song and needle drops.
Budgeting for needle drops requires the filmmaker to identify the rights holder, which is typically the record label. The record label will want information on the planned use of the recording: “opening credits,” “end credits,” “background,” or “featured in the scene.” The label will also want to know the budget for the film and the planned distribution.
The record companies understand that motion picture promotion can lead to great sales for songs and records. But their goal is to maximize the revenue, so songs that are already more popular among filmmakers demand a high premium. In addition, it costs money for the companies to review the music license rights for each song, so they tend not to be particularly helpful unless the filmmaker already has a distribution agreement in place.
For filmmakers who do not have distribution agreements, the record companies’ compromise is to offer a festival license. For a modest fee, the record company gives the film company permission to use its song in one or more film festivals. This gives the film company the authorization it needs to proceed, implying permission to copy the song onto the audio tracks of the film, edit the song to the appropriate length, and otherwise exploit the song enough to prepare the film for its festival release and screen a rough cut to potential distributors.
The significant downside to the festival license is that it does not state the cost the filmmaker will have to pay to use the song in theatrical distribution or in any of the other media for which a license will ultimately be needed. The festival license leaves the filmmaker at the mercy of the record label, perhaps even creating a risk that the film rights will be sold for a price below the cost of the music rights. Unfortunately, few record labels are motivated to provide complete fee schedules to low-budget filmmakers.
Filmmakers must anticipate the financial challenges of music acquisition. If they hope to use popular recorded music, they must set aside a budget for this purpose. Wherever possible, they should avoid relying on popular recorded music unless they can establish the price for the music’s use. If the music is featured in a scene, then the film is put at great financial risk unless the filmmaker can rely on a fixed price to acquire the music. Filmmakers should use other music sources to the greatest extent possible to avoid the licensing trap created by the festival license.
* Jon Garon is admitted in New Hampshire, California and Minnesota.
Adapted from Independent Filmmaking, The Law & Business Guide™ for Financing, Shooting & Distributing Independent & Digital Films, A Capella Books (2d Ed. 2009) (reprinted with permission). Jon Garon is professor of law, Hamline University School of Law; of counsel, Gallagher, Callahan & Gartrell.