Securities/Entertainment Attorney
John W. Cones
Attorney At Law
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WHO REALLY REPRESENTS THE INDEPENDENT FEATURE FILM
PRODUCERS? |
| The following article has been written for the purpose of stimulating
discussion of an important issue for independent film producers. It
first provides an overview of association management generally,
and then provides a critical review of the various currently existing
film industry organizations purportedly representing the interests of
independent film producers in today's marketplace. It concludes with
suggestions relating to what producers must do to create an effective
organization to represent their vital interests and restore some
semblance of health and prosperity to their segment of the film
industry. Such suggestions are based on the underlying assumption that
the independent film world is weaker than it should be and that it will never become revitalized without a single, effective association representing the interests of independent filmmakers. Much of the information contained in this article is based on and extracted directly from the respective Internet web sites of the various organizations discussed. The balance is based on the personal experiences of the author combined with his own opinions. In most mature industries, the people working in those industries have organized professional or trade associations to represent their interests on the important issues of the day. As examples, attorneys have their bar associations, doctors have their medical societies, engineers and architects have their national and state associations, independent insurance agents and adjusters have their respective groups, just to name a few of many thousands of such groups (see The Riley Guide and the Directory of Associations online). These groups are generally organized as not-for-profit organizations. There are literally hundreds of thousands of non-profit organizations registered in the United States. The Internal Revenue Service (IRS) also reports that new trade associations, professional societies, charities, foundations and other non-profits apply for tax-exempt status each year. Just in recent years, the IRS has recognized more than 71,000 organizations as tax exempt under Section 501(c)(6) of the Tax Code. Trade associations, business leagues and chambers of commerce fall under the 501(c)(6) classification. To meet the requirements of Section 501(c)(6), an organization must be an association of persons having some common business interest and its purpose must be to promote this common business interest; it must be a membership organization; it must not be organized for profit; and no part of its net earnings may inure to the benefit of any private shareholder or individual. These professional and trade groups provide numerous services to their members. In addition to the very important legislative advocacy work, they also generally provide group insurance programs, continuing education in their specialized field (lectures, seminars and panel discussions), information relating to the industry (newsletters, magazines, bulletins), certification programs, ethical standards, legal assistance, standardized forms and other services. Most of these professional and trade associations are generally staffed by professional association executives (i.e., people who have the specialized skills and training that help make them effective in this unique work, as opposed to people who come out of the particular industry represented). There are so many professional and trade associations that professional association executives have organized their own associations at both the national and state levels. At the national level the professional association executives have organized the American Society of Association Executives (ASAE), based in Washington, D.C. The majority of ASAE members' organizations are classified as trade associations; individual membership organizations, or professional societies; or philanthropic organizations. More than a thousand association executives have formed a state association of association executives in California (CalSAE), based in Sacramento. This group is the fourth largest society of association executives in the country. Similar societies of association executives exist in most of the state capitols, for the reason that most consider their legislative advocacy programs to be one of their more important reasons for existing. Some of such groups are also organized at a regional, county or city level because their member interests must be protected there too. Association executives who want to be professional in their field and take advantage of the vast resources available through associating with other association executives typically join these associations and participate in their programs, including their professional certification programs. The Hollywood-based U.S. film industry is more than 100 years old, thus surely, it must be considered a mature industry. Other important interests in the film industry, besides the independent film producers, have effectively organized. The major studio/distributors have their MPAA or MPA. The independent and international distributors (along with the foreign sales agents) have their Independent Film and Television Alliance (IFTA -- formerly known as the AFMA). actors, directors and screen writers have appropriately organized in their respective guilds. All of these are powerful organizations that exercise clout on behalf of their members. And, their members benefit significantly. In a recent example of lobbying or legislative affairs activities impacting the interests of independent producers, Congress passed and the President signed legislation (HR 4520 - the American Jobs Creation Act) containing tax incentives for certain films. In a backstage.com article (Oct. 29, '04) written by Roger Armbrust (with contributions from The Hollywood Reporter's Brooks Boliek) eight different film industry organizations were cited for helping to pass the new law. None of the groups purportedly representing the interests of independent producers were named. "SAG and AFTRA were mainstays of the state entertainment industry's effort to form the legislation and get it approved. . . A broad base of entertainment industry organizations has joined SAG and the DGA in the Runaway Production Alliance, which supported the legislation. They include the International Brotherhood of Teamsters, the American Federation of Television and Radio Artists, and the Writers Guild of America. On the management side, such groups as the Motion Picture Association of America and the Association of Independent Commercial Producers were involved. The Association of Talent Agents may have had its struggles with SAG over a franchise agreement, but the two evidently worked together through the alliance on the new law." Every independent producer should be asking whether any of the group's currently purporting to represent the interests of independent producers were significantly involved in that legislative effort. Unfortunately, the power of any segment of an industry (e.g., independent film producers in the film industry), is partly a function of the number of members an association represents. And, even more unfortunately, independent feature film producers have not been able to create a single, effective association to aggressively represent and protect their interests. Since, independent film producers have not yet been able to bring themselves together under one large organization, they have limited their influence on most matters of importance, and the independent segment of the marketplace has become less and less important. Currently, there are a number of different, small groups attempting to perform some of the important functions that need to be addressed, but each is limited in one or more significant ways. 1. The Producer's Guild of America (PGA) The Producer's Guild of America (PGA) claims to represent more than 1,300 members of the Producing Team (from Production Coordinators on up), including the interests of a substantial number of major producers in the motion picture and television industries. The PGA provides an extensive website that can apparently be used to get in touch with other producers; to gather information on producers and on their productions; to find answers to production questions; to consult with the PGA regarding producer credit issues; to pursue other issues that matter industry-wide; to voice complaints; to explore all aspects of the world of producing and to link to other key industry-related websites. The PGA's Mission Statement provides that "The PGA represents, protects, and promotes the interests of all members of the producing team. However, the first two stated "primary goals" of the PGA are quite limited. Those stated goals are: (1) combating credit proliferation and (2) expanding health benefits. The PGA's third stated "primary goal" is so broad as not to be a goal at all, but something more akin to a mission statement. That third PGA goal is "(3) representing the entire producing team". The PGA defines the producer team to include all those whose interdependency and support of each other are necessary for the creation of motion pictures and television programs (i.e., producers and all those on the career path to becoming producers). The PGA takes the position that as a unit, the producing team is responsible for the art, craft and science of production in the entertainment industry. The producing team includes Executive Producers, Producers, Co-Executive Producers, Supervising Producers, Senior Producers, Line Producers, Co-Producers, Associate Producers, Segment Producers, Production Managers, Post-Production Supervisors & Managers and Production & Post-Production Coordinators. Unfortunately, the PGA appears to be confused about its very nature. The PGA now holds itself out as a "professional organization", but unfortunately retains the word "guild" in its name. In point of fact, the PGA should consider itself a professional and/or trade association (it can be both) and it should take the word "guild" out of the name to avoid confusion and signify its own recognition of this fact. To further enhance this transition, their top executives should join the American Society of Association Executives and the California Society of Association Executives, and even possibly seek to become Certified Association Executives. Elsewhere on its own website, the PGA states that it intends to "act as a trade organization, rather than a labor union." The members of a trade organization are usually companies in the same industry, not individuals. So the PGA should not refer to itself as a trade organization unless its members are production companies. Or, if its members are both companies and producer individuals, it may more accurately refer to itself as a professional and trade association. If its members are individual producers, then it should consider itself a professional association. In other words, if the PGA wants to be an organization of professionals, its memberships should be held by individual professionals and the name should not suggest that it is a labor organization. The group also must do more to "represent the entire producing team" including legislative advocacy in both Sacramento and Washington, D.C., and it should commence negotiations immediately with other groups purporting to represent independent producers to bring about a much needed merger. 2. The Independent Film & Television Alliance (IFTA) The Independent Film & Television Alliance, formerly known as the American Film Marketing Association claims it is the trade association for the independent film and television industry. It claims to represent both independent producers and distributors. IFTA's global membership distributes internationally (and often produces and finances) the films and television programs that are produced outside of the seven major U.S. studios. Members control the exploitation of their programs by licensing on a territory-by-territory basis to third-party national distributors, rather than through corporate networks. The IFTA suggests that these economic characteristics define the world's independent industry. The IFTA defines an independent film as a film or program for which more than fifty percent of its financing comes from sources other than the seven major U.S. studios. Independent productions cover all budget ranges and genres and are aimed at wide, as well as niche, audiences. In reality, the IFTA is a trade group dominated by international distributors and foreign sales agents, some of whom also produce. On the other hand, it is next to impossible for a single organization to effectively represent the interests of both film distributors and producers - that combination creates too many inherent and irresolvable conflicts of interest. The IFTA should not even attempt such a feat, since it will inevitably fail on some specific issues, and therefore the organization will not be able to effectively represent the interests of producers as opposed to distributors or vice versa. Any production companies that also have distribution arms should have the producing group join a professional/trade association specifically devoted to protecting and promoting the interests of independent film producers. Furthermore, an association of independent producers should not also include or claim to include "major" production companies as members, since those companies are already members of the MPAA, the same group that has engaged in anti-competitive business practices for years that have resulted in a less potent independent sector. 3. Association of Independent Feature Film Producers (AIFFP) The AIFFP started with an informal network of global indie filmmakers and allied personnel who sought to create worldwide connections to people who could learn together, work together, and succeed together outside the major studios. They believed that an organization like this could forever change the way independent films are made. The Association of Independent Feature Film Producers (AIFFP) claims to be "The Voice of Independent Feature Film Producers Worldwide". It is difficult to substantiate such a claim in light of the fact that the other organizations discussed in this article, also purportedly represent independent producers at some level and make similar claims. The AIFFP, however, is a California Non-Profit Educational and Advocacy Organization based in Hollywood. It is supposedly dedicated to the advancement of the business of independent feature film production; the advancement of the profession of the independent feature film producer; the education of the independent feature film producer and allied professions; the advancement of the application of technology in independent feature film production and the advancement and use of new media in independent feature film production. The AIFFP leadership feels these goals can be achieved through: educational opportunities provided by AIFFP and coordinated with approved learning institutions; a certification program for independent feature film producers, news services for members; publications; online discussion groups and communications capabilities; tools for production organization and awards for excellence. The AIFFP takes the position that independent ("indie") filmmakers are those not associated with a particular major studio. They contend that indie filmmakers are individuals who have, without the massive resources of a major, developed and produced feature films for theatrical release. The "indie" umbrella covers almost anyone who could not or would not work in the factory-like conditions of Hollywood. Capturing and telling stories of every kind, in every language, involving every aspect of the human condition and the world around us, is what drives indie filmmakers (according to the AIFFP website). While most filmmakers would like to be creating product that sells and pays the bills, the majority of what drives an indie filmmaker is the passion of the art and science of filmmaking. The AIFFP further takes the position that "independent" filmmaking is actually a misnomer, since there is no other art that is so dependent as indie filmmaking. The AIFFP suggests that indie filmmakers are dependent on like-minded individuals who work with them at every step of the way, from finding the money to make it happen, production, post production and sales. AIFFP is an entirely volunteer organization. Focusing on the business aspects of producing, AIFFP states that it leads in education of its members in filmmaking, as well as global advocacy for freedom of the arts in oppressed countries. The AIFFP seeks to support global independent feature filmmaking through education, information, networking, analysis, exposure and advocacy for both equal opportunities for independent feature filmmakers at studios as well as freedom of artistic expression for feature filmmakers in countries that oppress and/or restrict filmmaking. The AIFFP encourages diversity in independent feature filmmaking. The AIFFP provides no membership numbers. It's chief staff executive has been a producer (as opposed to a professional association executive). It may also be inaccurate to state that the AIFFP is a trade organization, since it may more accurately be described as a professional association. The group is self-described as a mere Internet presence, thus like many film industry organizations, its rhetoric (although well-meaning) is much more expansive than its reality. 4. Association of Independent Video and Filmmakers (AIVF) The Association of Independent Video and Filmmakers is a membership organization serving local and international film and videomakers - from documentarians and experimental artists to makers of narrative features. The AIFV seeks to enhance the growth of independent media by providing services and resources, including: Informative seminars and networking events Trade discounts and access to group health and production insurance; A public resource library Publication of essential books and directories, including The AIVF Guide to International Film & Video Festivals, and The AIVF Self-Distribution Toolkit. The Independent Film & Video Monthly - national publication dedicated to the diverse issues facing the independent media field. Media advocacy for independent artists. Information services including advice and referral for independent filmmakers and media artists. The AIVF eventually evolved from a president- and board-led local entity with an active membership to a national executive-directed operation with a largely passive national membership. In sheer numbers membership increased dramatically, but apparently few members attend meetings. By 1980 the AIVF changed from an organization of meetings, screenings, workshops and membership activity, to a group run by office staff, an executive director and a magazine that has since become the focal point of AIVF activity. AIVF observers point out that some of the inspiration and creative energy evident during the organization's formation stage has been lost, and that when filmmakers have to choose between career and voluntary service to the community, they would inevitably opt to take care of their own needs. Of course, the whole concept of professional association management as applied to this industry and context is to allow the independent filmmaker to continue to pursue his or her career and even enhance those career possibilities, while service to the association tends to occur along the way, but without detracting from the career. Now the AIVF has an in-house library, a festival bureau and its own publication, The Independent. The organization also provides a certain level of comfort to members who know they are not alone in their struggle as independent filmmakers. One of the inherent problems with a New York based film producers group, however, is that the center of the film world is still in Los Angeles. Thus, from time to time, some of the producers who have contributed significantly to the strength of the AIVF have left New York for Los Angeles and thus the AIVF is periodically weakened by such losses. 5. Independent Feature Project IFP is a not-for-profit service organization dedicated to providing resources, information and avenues of communication for its members: independent filmmakers, industry professionals and independent film enthusiasts. It is committed to the idea that independent film is an important art form and a powerful voice in our society. IFP provides services to independent filmmakers of varying levels of experience, which assist them in expressing their unique points of view. It facilitates a connection between the creative and business communities. Other goals of the organization are to expand and educate the audience for independent film, and to encourage the diversity and quality of independent production. IFP has six chapters located in Chicago, Los Angeles, Miami, Minneapolis/St. Paul, New York and Seattle, and the organization recognizes that American independent filmmaking has no one address and speaks to people everywhere. Offering assistance, information and access to the world of independent film, IFP programs strive to help members make connections, and find out the latest on who's who, who's buying, who's financing and who's making what features, shorts and documentaries. IFP claims to be " the leading resource of the American independent film movement today". Again, such claims are difficult to substantiate since there are competing associations. The IFP's 9,000 filmmaker and film industry members participate year-round in activities ranging from popular screenings to "cutting-edge" workshops and seminars. That's the hype. Here's the reality. Incredibly, the IFP can't even come up with an objective and easily understood definition of an independent film even though the entire organization is based on that single concept. The IFP takes the position that an independent film is one that exhibits uniqueness of vision, contains original, provocative subject matter, was produced using an economy of means (with particular attention paid to total production cost and individual compensation) and then requires only that some unstated percentage of financing come from independent sources. That means that at the discretion of the IFP, films partially financed by the major studios can compete for IFP awards. Thus, the IFP is literally inviting the major studio/distributors to gobble up even more of the attention and marketplace desperately needed by independent filmmakers. Further, the IFP/LA places so much emphasis on making more and more money each year, partly so that staff executives can continue to increase their salaries, they have chosen to allow some of their seminars to be sponsored by law firms and other organizations for a fee, then, taking their "sell-out" to commercialization one more step, to allow those seminar sponsors to serve as panel discussion moderators or panel members regardless of whether such sponsor groups have bona fide expertise on the subject of the panel discussion. So "cutting-edge workshops and seminars" is an absolutely false claim in some instances. This unseemly practice has resulted in not only poor to inadequate seminar presentations on more than one occasion, but actual misinformation being presented to independent producers. Thus, the IFP, has failed to serve the needs of its producer members by actually misinforming them about some important legal matters, and has failed to institute reasonable safeguards to prevent the harm caused by these obvious conflicts of interest. Another problem with many of the IFP/LA seminars is that they are panel discussions. As a general rule, the entertainment industry panel discussions provide less substantive and reliable information than prepared lectures by people with bona fide expertise in a given area. From the IFP/LA's and the panel presenters' point of view, however, the panel discussion requires less preparation and is therefore easier to present. Unfortunately, the IFP/LA has also repeatedly chosen to populate its panel discussions, particularly those relating to the fairly technical subject of film finance, with independent producers who may know something about producing a film, but have little, if any, actual expertise on film finance. Thus, this feature of IFP/LA panel discussions often results in more misinformation for the IFP's own dues paying members and seminar attendees. The truth is that producers cannot reasonably expect the IFP to support them on important issues. It is an organization whose membership is too broad. Members include actors, directors, cinematographers, writers and producers, thus, the organization is paralyzed when it comes to effectively representing the interests of independent producers. For this reason alone, it engages in little, if any, true advocacy on behalf of its members. Further, the IFP/LA staff and board of directors is dominated by actors both at the executive staff level and on the board of directors. It appears, the IFP/LA has succumbed to the temptation facing most professional associations, that is for the executive staff to protect their own jobs by bringing on friendly board members. Thus, independent producers should abandon the IFP and either start their own organization or move over to the PGA, if and when it comes up with a suitable name for its organization, or to the AIFFP. Summary In summary, some of these organizations purporting to represent the interests of independent film producers have difficult problems to overcome. The Producers Guild of America will never be able to effectively represent the interests of professional independent producers until it has the courage to remove the word "guild" from its name, quits acting like a guild and quits relating to other professional and trade associations in the film industry as a guild. The IFTA will never be able to effectively represent the interests of independent film producers because the organization is dominated by distributors. The IFP/LA will never be able to effectively represent the interests of independent producers because the organization is not strictly a producers' group, it is quite confused as to what constitutes an independent film and its executive staff is too busy trying to protect its own interests and sponsoring too many seminars for the primary purpose of making money, as opposed to insuring that the information provided is accurate and dependable. Another one of the problems for independent producers is that the leadership of these groups tends to become entrenched, and after awhile, they start to place and protect their own interests before those of the producers they supposedly serve. Thus, the question of trying to merge existing groups as opposed to starting anew is a difficult one. But it is up to the producers themselves to take charge of their segment of the industry and their own collective careers. Independent producers must insist on an effective professional association of their own. It could be the PGA with a new name and expanded mission. It can't be the IFTA or the IFP/LA because their organizations have too many built-in conflicts of interest, and the IFP/LA in particular has for many years been managed in an unethical manner. It might be the AIVF but that group is primarily an East Coast organization which took a wrong turn in years past toward attempting to fund independent film, a move that was inevitably destructive. It could be the AIFFP, but they appear to be fairly small are not much more than an Internet presence. So, it's difficult to know whether to encourage all independent film producers to move to one of the existing organizations and (despite the efforts of their management to prevent such action) seek to merge with the others, or to start from scratch with a new group. Ultimately, that's up to the producers themselves. At minimum, independent producers must be talking amongst themselves about these issues. Here are some suggestions, however, for creating a properly oriented professional association of independent film producers: 1. Producers have to decide whether the group is a labor union (guild), a trade group or a professional association and understand the difference. 2. Producers have to decide the scope of its membership: does it cover "media", "film producers", "feature film producers", "all members of the producers team", "documentary film producers" or what? 3. The association should be managed by professional association executives, Certified Association Executives, if possible, or at least people whose career path is association management, as opposed to acting, producing, directing, screen writing or practicing law. 4. The association should focus on the needs of the independent film producer, not those of actors, directors, screen writers, distributors or other segments of this highly competitive film industry. 5. The association's management must maintain the highest ethical standards when designing its seminar programs and avoid the inherent conflicts of interest commonly found in the IFP/LA model whereby seminar sponsorships are sold to the highest bidder and tied to seminar moderator positions regardless of the level of expertise of the seminar sponsor. 6. The organization must avoid the quagmire inevitably associated with becoming directly involved in funding film projects or even conducting itself as some sort of joint business venture. 7. The association must strive to provide objective and comprehensive information to its members regarding subjects of interest (e.g., film finance and production related information). 8. Recognizing that film finance is the one topic that film students and producers get little or no training in, such an association of independent producers should place a strong emphasis on providing comprehensive and reliable information on this important topic. It is important that an association of independent producers not get stuck in a relationship with just one or a few sources of film finance information, but explore all possible sources of such information. 9. The association management must be professional and ethical enough to reject the temptation to create private alliances with service providers such as attorneys, law firms, bankers, completion bond companies and others, so as to favor any such service provider over another, since such favoritism is in direct conflict with the interest of the producer members the group is supposed to serve and may, in fact, be an antitrust law violation. 10. The association must avoid the inherent conflicts of interest stemming from allowing its own board members to personally benefit financially from serving on the board. All board members should benefit from such service, but those benefits must be of an indirect nature. 11. The association executive for the independent producers group should have a copy of the ASAE's "Association Law Handbook" handy for reference to important articles on fiduciary duties, conflicts of interest, confidentiality, executive employment contracts, association taxation, association antitrust laws, ethical standards, political action committees and lobbying, among others. 12. The association should strive to become involved in advocacy on behalf of its members (as soon as practicable), establish a legislative program and engage lobbyists to represent its interests in Sacramento and Washington, D.C. About the Author John Cones is a securities/entertainment attorney who has practiced in Los Angeles and area for seventeen years advising independent feature film producers and others on matters relating to investor financing of feature film and other entertainment projects. He has prepared or participated in the preparation of business plans and/or the required securities disclosure documents, along with Blue Sky compliance for more than 250 such offerings during his 18 year securities law career, including public and private production-money offerings for feature films, television pilots, documentaries, infomercials, live stage plays and Internet companies. Other such offerings have been conducted for development, packaging, completion and distribution funding. In a broader sense, Mr. Cones also works with entrepreneurs on investor financing of business startups. Mr. Cones has lectured more than 300 times to an aggregate audience of approximately 5,400 on topics relating to film finance and distribution for the American Film Institute, the UCLA graduate level Independent Producers Program, UCLA Extension, The USC Cinema/TV School, the USC Cinema/TV Alumni Association, IFP/West, American University (Washington, D.C.), the Nashville Bar Association, Cal Western School of Law, The University of Texas Entertainment Law Institute, North Carolina School of the Arts, California Lawyers for the Arts and other film industry organizations. He has also published several books and articles on those same topics including Film Finance and Distribution--A Dictionary of Terms, Film Industry Contracts, 43 Ways to Finance Your Film, The Feature Film Distribution Deal and How the Movie Wars Were Won. He also hosts a Q&A Internet site about investor financing of entertainment projects at http://www.mecfilms.com/guide4.htm and maintains a web site at http://www.mecfilms.com/coneslaw. He is a member of the California and Texas bar associations and the Independent Feature Project/LA. Mr. Cones resides in West Los Angeles, California. |
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John W.
Cones, Esq. has also contributed on-line
content on Business
Plans |