Making A Movie Doesn’t Make Business Sense by Houston Howard

Watch the video interview on Youtube here

Film Courage:  You mentioned briefly that finding production funds for an independent film is harder these days. Hasn’t it always been difficult?

Houston Howard: It absolutely has always been difficult. It’s never been easy. But what’s happened is it’s an already difficult task that has become more difficult because to really engage investors and business men and business women you actually have to make the whole venture make business sense. Now there are always going to be some investors that have discretionary disposable income that can just believe in your project and dump money into it whether or not they get a return or not. There’s going to be that marginal group that you know “Hey, you put my granddaughter in your movie then I’ll put $100,000 in, sure!”

Or they just believe in the purpose of your project and they’ll dump it in. That is a rarity and what we have to do is approach the business of filmmaking from a perspective of an investor and learn what motivates an investor, learn the value propositions behind the business model so that they can feel comfortable with giving you their money that they’ve worked very hard for and once they give you your money, you as a filmmaker have…here I’ll give you a law school term, what is called a fiduciary responsibility. You have a fiduciary responsibility, which is a legal and ethical responsibility, to be able to take care of that money, take care of the investment and do everything that you can to get a return on that investment.

Watch the video interview on Youtube here

And so I never take anybody that gives me money lightly at all. It’s one of the highest compliments and one of the biggest responsibilities that you have as a filmmaker. Now in order to get that you have to have the whole thing make business sense, so you have to imagine what motivates an investor. It’s probably not your three-act structure. It’s probably not your really amazing B-story plot, it’s not your interesting sub-plot, it’s not your plot twists and your Act 3, it’s how do you get them a return on investment. It’s the amount of ROI. It’s how long is this going to be in the marketplace? Is this a short term investment or is it a long-term investment, it’s how big is the market that you’re trying to attack? Is it very small or very large? There’s these things that we’re trying to figure out.

Filmmakers hate this stuff because they’re creatives, right? That’s why directors and writers need good producers because producers can think this way. But from my perspective, if a creator, if the writers and directors, if you can be thinking this way from the beginning and approach the creative decisions that you make in your story in such a way that it optimizes your IP [intellectual property], your script, your project for larger investment and larger revenue potential, all of the sudden that’s the best because you’re not just leaving it to the “bean counters” to figure out, you’re not leaving it to a producer to sell the investment. The creative is optimized for the investment.

For example, going back to the principles of George Lucas. Darth Vader…the scene in THE EMPIRE STRIKES BACK where Darth Vader is talking to the bounty hunters, could have been between Darth Vader and Boba Fett, there didn’t have to be any other characters there. Just Darth Vader saying Bob Fett go catch Hans Solo. But Lucas made the creative decision in the story to have Boba Fett and eight other bounty hunters there in that scene.

What that did, that creative decision then spurred a whole other product that was part of the business plan which was this anthology of short stories that existed in the marketplace that engaged the fan base and generate revenue, that all was premised and created and birthed out of the creative decision of the writer and director to have multiple characters in the scene.

So a lot of times there’s been this divide, this thinking that there’s a divide between the creative and the business. But if the creative can understand the business and create it in a way that optimizes the project for the business, then there’s so much opportunity out there because if it’s not built right creatively, then that will maximize or limit the type of business opportunities that you have down the road.

So if you can just build the project, present it right to an investor and it makes business sense…I was talking to an investor in Canada recently who…we were part of a project and I call him. He’s this big-time angel investor and has ten thousand angel investors underneath him and his network of angel investors. This guy’s a big guy.

And I got on the phone with him…he said “Hey, Houston. I’m going to give you 10 minutes.” And I said “Okay.” And he said “I charge $10,000 an hour for my business consultation. I don’t speak anywhere for less than $25,000 per event and it’s not fair to all those people that pay all that money that I give you a bunch of free time.” But because we had a little bit of a relationship because we spoke at this similar event a few year’s prior, he said “I’ll give you 10 minutes free.” And I said “Okay.” This was a straight business guy.

I said “Well I want to talk to you about this film project that we have going on.” And he stopped me 90 seconds in and he said “Listen, out of my 10,000 angel investors, I could probably only think of 4 who would even consider investing into entertainment at all.” He said “It’s just to risky. If you get a return, you’re not going to get a return for about a year and a half after it’s release. It’s a difficult market and it’s a difficult investment to make. But maybe there is 4, and if everything goes well, you may be able to get $100,000 or $150,000 dollars out of each of them. So we’re looking at $200,000 or $250,000 investment if all goes really super well.”

And I said “Well, I appreciate that but really what we want to do is this really isn’t going to be a film project, this is going to be what we call a super story. It’s going to be this large scale transmedia project that’s going to have all of these different things as a part of it.” And I sat there and talked to him for 90 minutes and I started talking about the different revenue opportunities, the different markets that we’re going to touch, the shelf life of the project, how we’re going to build the pre-awareness while the movie is going to be produced, how we’re going to shift some things in the advertising budget to more content story stuff that we can release simultaneous to the film so we can extent the experience. And then we’re going to release other things after the film that’s going to bridge the gap to the next film. And he said to me “In 30 years of investment, no one’s ever approached me with an entertainment pitch that has sounded like this. This sounds like a franchisable business more so than it does a movie. Based on this, I think we can do two rounds of financing. I think we could do a 75 million dollar round of financing and a second round at 50 million dollars. I could probably give you access to 4,000 of my angels because now it makes business sense.”

And I didn’t even get into talking to him about the creative. This guys doesn’t even care about my characters, he doesn’t care about the story, he cares about the model of it. But the creative decisions were the things that created those opportunities for those other products and other things. So it works together so you can never really separate it. And so that just shows you and like the example of the guy going after the $10,000 investment, getting a $231,000 investment, that’s the other end of the spectrum but the result is very similar. One thing doesn’t make business sense but when you can now create a project that makes business sense now everything makes much more sense and what it does it hedges the investment, it makes the investment more secure because all investors are risk-averse, they don’t just want to throw their money away. And so if you can make them more comfortable with the fact that the investment is secure, now they say “I’m part of this for the long term, there’s an opportunity here, here, here and here.” Now it just makes a lot more sense for them.

It’s still difficult, don’t get me wrong. It’s still difficult but you just increase the chances for success and also separate yourself in the marketplace.

And so Tim Kring (the guy who created Heroes), he just got a 50 million dollar investment into a transmedia company that he started with another guy here in town called Zach Kasten and they created a whole transmedia company and they went to an oil man in Texas and the oil man said “I’ve never invested in entertainment, ever in my whole life, but when they approached me with this transmedia model it made business sense.”

And so he dumped 50 million dollars into their venture.  So what it does is it gives you? Access to a different type of investment and more investors when you can really understand how markets work, how we can get more audience, how we can get different types of audiences, how we can diversify income, etc.

All this sounds very uncreative, right? I mean you know I can see screenwriters watching this video and probably cringing right now. But what was really interesting is none of these other opportunities of the tie-ins or the spin-offs or the other products that you can surround your project with, those won’t be possible (or at least possible in a good way), if you don’t create the story to be able to optimize it from that.

Go back to the Lucas example. He made the creative decisions to have 8 characters in a scene rather than 2. That then fueled hundreds of thousands of dollars worth of revenue and engagement opportunity for the fanbase. So the story drives the business.

Question for the Viewers: Have you ever invested in a movie and gotten your money back?

Watch the video interview here on Youtube

Check out Make Your Story Really Stinkin’ Big: How To Go From

Concept To Franchise And Make Your Story Last For Generations

Check out You’re Gonna Need a Bigger Story: The 21st Century Survival Guide To Not Just Telling Stories, But Building Super Stories

Special thanks to The LA Film School for allowing us to film this video interview on their campus.