Tuesday: Distribution conference part 2: "Monetizing New Global Platforms"

American Film Market 2011 conference: unofficial notes
Nov 8, 2011 9 AM: Distribution Conference notes part 2, "Monetizing New Global Platforms"
Notes by B. Hahne

The original blog location of these notes is: http://2011afm.blogspot.com
This is day 5 of a 5-day series.

Clarifications or pithy comments by the note-taker will generally appear in [square brackets like this].

These notes are copyright (c) 2011 by Bruce Hahne. Noncommercial, nonprofit redistribution and/or pointing people to the blog is permitted and encouraged.

Disclaimers: "Free notes, you get what you pay for!" There notes are a summary, not a transcript, and represent my best effort to capture the panel discussion plus Q&A. They also probably contain errors. I'm not in the film industry, nor am I affiliated with AFM / American Film Market or with any of the firms associated with the panelists.

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Moderator: Brad Kembel, Executive VP for International Distribution, Summit Entertainment.

Panel:
- Erik Brannon, Analyst, IHS, Screendigest
- Dan Cohen, Executive VP for Pay TV and Interactive Media for Disney/ABC Domestic TV
- Elisabeth Costa de Beauregard Rose, Executive VP for International Sales, Lakeshore Entertainment
- Jon Ferro, SVP for Program Sales, EntertainmentOne

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Intros:
Brad: we're the studio that does Twilight.
Dan: In English, I license the TV shows that ABC makes and some of Disney's content for subscription, digital, etc.
Elis: We finance and produce films.
Jon: Licensing TV rights.

Brad: This panel is about digital future, or maybe it's the "digital now" - mostly VOD here. Complicated new business model and the marketplace is a mess. We've asked Erik to give us a 10-minute primer.

Erik:
- IPTV: TV content delivered through the internet
- Pay TV on demand aka VOD: transactional rental of movies via closed networks
- EST, electronic sellthru: sales via open internet [I think he means like buying a digital download - he doesn't mean buying a DVD online.]
- Digital rental: rental via open internet e.g. Xbox and Amazon
- Digital subscription: CinemaNow, StarzPlay, uses open internet

"Pipelines": a content distribution method including IPTV or cable or open internet or satellite.
"Platforms": device-specific reference such as an ipad or PC or IPTV.
"Cloud-based": like UltraViolet: content you purchased delivered any time to any device of yours.

We predict $48B consumer spend on home video in 2011. 2007 was $54.6B. So slight declines, but not the end of the industry. Physical disc sales and rentals will remain predominant form of film consumption in near future.

There are challenges everywhere:
- Physical: pricing and piracy
- PayTV and VOD: pricing and sticker shock
- Internet-based solutions: interoperability

"Redbox society": consumers expect to be able to rent for very low price, very close to home.
Internet solutions not compatible with each other, e.g. iTunes content can't play on your TV unless you have an Apple TV. [Yes, Apple does closed ecosystems buddy, that's how they play, it sucks.]

Physical: 83% of all home video transactions in 2011.
All electronic transactions growing to 25% by 2015.
iTunes, Xbox, and PS3 stores dominate for internet sales.

Pricing is hindering internet and payTV pipelines.
Sticker shock: cost to rent an SD title is $5 on your pay TV system. So 4 titles is $20.
Internet EST: interoperability is really curtailing EST.

South Korea: Government mandated broadband upgrades for the whole country, and people shifted away from buying HD content (disks), now they pirate it. [Shifting towards EST here?]

Moving towards:
- Less sellthru, more rental.
- Less total revenue for the business. We see 4% declines YoY.
- More electronic, less physical

Social media can offer a stopgap measure.

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Brad: Streaming / VOD, please comment.

Jon: Netflix has proved to be a good rerelase platform for old content. Library revenue matters for a studio - it's an underlying economic engine. The CW did a deal with Netflix. At the highest level, maybe this is the same thing as the consumer going to the video store. With video store you'd often rent 3 titles and only watch one. With VOD you make the buy decision on the spot, you don't rent 3 titles like that. And people can also walk away from the VOD web page, but they don't usually walk away from the bricks-and-mortar store emptyhanded.

Dan: VOD used to be pay-per-view and started at a fixed time. VOD you can watch any time + rewind. For our catalog, we always keep it out there where people can rent it via VOD. I do all digital licensing for Disney movies, i.e. iTunes downloads. We've had more people get copies via Digital Copy / Digital Download (where you buy the DVD in the store and it comes with a coupon for digital copy) than people who are using EST. Netflix has changed the TV landscape in the past few years - they're a new platform for us.

Dan: I think the pie is growing, that Erik's opening remarks aren't right. Shift from ownership to rental, shift from physical to digital. VOD is a big growth business for us. But the VOD isn't offsetting loss of DVD sales, so for movies it's true the pie is NOT growing. Disney sold Miramax and reduce the number of films we make, focus on big franchise movies for us.

Elis: I deal heavily with non-US, not US. Fall in DVD revenues is significant in Europe, Asia, etc. The drops are much more than in the US, which is weird since there's not a proliferation of big brand-name VOD companies. We have independent VOD players though, smaller. The revenue isn't there yet. Yes, it's an alternate form of revenue but the levels aren't there. Big impact of piracy. Korea, piracy very rampant, you're lucky if you can sell 500 to 2000 units. Maybe Disney can get 10K sales, I don't know. DVD sales decimated by piracy. The one upside of piracy is that people are learning how to download films on the internet - it builds awareness, it's training people to get used to downloading films, no more discs. Next re-education is to teach people that they need to PAY for that content. In the future, VOD has big potential.

Jon: Indy perspective is different. We have Margin Call and Trespass doing day-and-date with theatrical, price $7 to $10 on VOD, slightly higher pricepoint. Those films are changing the economic model. DVD component might not be as important. Blockbuster rental situation is changing - if Bbuster had died it would have hurt direct-to-DVD industry. VOD isn't helping direct-to-video industry much due to movie saturation, so everybody earns less per film. Margin Call and Trespass did OK due to the theatrical releases.

Dan: Re "Redbox World": the major studios have treated them differently. Warner + Universal are windowing Redbox by 28 days. Paramount + Sony did rev-share deals with Rbox. I have an out put deal with Starz and I was crying about Redbox and Overture said "we love it, we get more distribution through Rbox than through traditional means." For an indep film, Rbox might be a great thing, or a similar kiosk player in an international location. Treat them as part of the sales ecosystem for your movie.

Brad: Elis, you and I represent the high end of AFM sellers here, it's a well-understood model, we sell our own films and other people's films, foreign presales, and you use those presales to get financing to make your movie. We're removed from this new revenue since we sell to the distributors, we don't do VOD directly. This is 1st year that I'm hearing $100K+ VOD reported from our distributors, no longer $10K's, but not millions yet either.

Elis: DVD has fallen so much in many territories that VOD doesn't work as "additional" financing, we're just trying to get back to where we were. The thing with VOD is you can micro-target the customer, you know who they are. I think that in the future this approach will pull a lot of ad dollars away from traditional TV due to the ability to micro-target the customer. That's 10-15 years out, but it will take away from free TV and pay TV revenues.

Brad: US exploitation / rights management issues, please comment.

Jon: Difficult to manage these days, they're complex. Take a TV series - who has the right to put something on iTunes? Who has the right to put it on Xbox? [I think his point is that the internet is doing its thing by blurring the concept of national boundaries.] These are turning into complex negotiations because they impact the basic value of the series to the studio. We're now holding back rights, or charging more for full rights. Negotiated country by country. Rights management systems are a pain point also - there are solutions out there but they're expensive.

Dan: There's also clearance issues. Sometimes your music isn't cleared for putting the stuff on the internet. We spend a lot of time on rights + clearances. Disney sold the Miramax library earlier this year -- some of that is governed by a Starz output deal from 1999! The buyer is starting to distribute through Lions Gate but there are there governing rules from 1999 when most of the technology didn't exist. It all had to be interpreted + negotiated. And Netflix wasn't doing pay TV back when we negotiated some of these deals.

Another example: TV show airs on ABC, then it's on iTunes the next day, what do we do with Hulu, what about Hulu+, what do we do for NetFlix? Right now we don't give it to NetFlix the next day. VOD: movies are different results. Cars2: VOD same day as DVD. Pirates 4: windowed for VOD, not same-day.

Brad: What's the future of some of the big players like Google, Amazon? Amazon bought LoveFilm in the UK but didn't rebrand it.

Jon: Google + Youtube are huge but they have a lot to prove. Youtube hasn't yet proved that they're efficient at delivering audience for premium content. They're great for viral video, 20M hits on some viral thing, but not efficient at selling VOD. We're watching them closely, partnered for VOD, using them for anti-piracy, monetizing clips on Youtube, like if a user makes a clip with one of our TV shows, there's a revenue share. If one of those clips goes viral and get 10M views, we get some of the ad money. Youtube has to convince people who have been watching for free to start either watching massive amounts of ads, OR pay for the program. How do you convince a Youtube person to pay $4 to consume a product when they used to get stuff for free? That's a big jump for the consumer. Youtube has good management and good engineering, but the engineering is difficult to make its way through right now. 5 years from now they could become the equivalent of Comcast, it depends on who has the rights. If ESPN glues itself to the satellite distributors, Google probably can't get the rights. But for NFL you can watch those on your Playstation now. The cable operators are looking 10 years out and knowing it will be a big fight for the consumer dollar.

Elis: How will consumers find what they're looking for, how do they even know what they're looking for?

Jon: Netflix and Youtube aren't programmers. They're using a different algorithm. But we're reliant on "programming" for people to discover our content. Example: Comcast, we have a deal and maybe we want to be on The Barker channel. But Netflix + Youtube have been anti-program in the past -- "if you like product X then you might like product Y". If Google isn't going to promote our content then it falls to us at Reliant to market the content more ourselves, which changes the relationship to our broadcaster.

Dan: I handle VOD and e-sellthrough. Youtube has been modest in its success for me so far. They launched a small store last year and I'm OK with that. Our first movie deal was with Xbox 5 years ago. My guy came in and said "we're going to offer the movie on Xbox" and I said "huh, Xbox is a game console, say what?" Xbox has been good at the technology: you can watch it on any of their screens, and also doing good things with discovery. You're going to see some voice-activated discovery coming out soon, and Kinect. If you can speak "pirates of the Caribbean" and everything related to that movie comes up, that's great for us. Also these companies are becoming global players: iTunes, Xbox, more. So for Disney we have to coordinate a lot - my Xbox guy will want to do a deal in Japan, and that's not my territory.

Brad: Elis, can you see "rights for Google" being sold separately in the future?

Elis: Not really. I think there will be less ad revenue for TV in 10 years. For next 5-10 years we can do [legal] holdbacks. NetFlix was trying to launch in Spain but recently put that on hold due to recent NetFlix issues. This was a big hit to us, they were going to do a lot in Spain, there's no competition for pay TV and Netflix was going to compete, so our distributors were actually getting negotiating power since the monopoly was about to not be a monopoly. So once the major players go internationally there might be more leverage [for some players]. But we won't be carving out special revenues very much.

Dan: Consumer electronics companies are starting to pay attention to content now too - Samsung etc, they put NetFlix onto their TVs. But the CE firms are starting to look at their own content also. Anecdotally, I have a lot of people say "yes I have netFlix" and I say where, and they say "it's on my TV" - NetFlix has been really smart about getting their application onto all of these devices, and the CE firms are thinking "well, maybe we should have our own movie store online."

Brad: microbudget, low budget, can you sell your product directly on the internet, cut out the distributors, everybody on the panel?

Jon: Difficult to believe you can earn back your production budget by selling on the internet today, if you spend $100K to millions, we've never seen anybody make that kind of money [by selling on the internet]. iTunes doesn't want any more deals now, they want to deal with aggregators. NetFlix has been pretty good about sharing the money, but NetFlix distribution won't cover your production costs, and NetFlix is going to start pulling the money back in. People with a film need to look at all the opportunities: do you do theatrical, VOD, go directly to Comcast, something else? You need expertise. What are the Netflix windowing rules? You need somebody who knows that.

Brad: Jon + Dan created new platforms: Epix, and FearNet through Lions Gate. Please talk about complications in creating platforms etc.

Dan: We launched Disney Family Movies a few years ago. We took an opportunity to release some older titles on VOD: Dumbo, the original Alice in Wonderland. Made it available just for 1 month via Comcast VOD, and they took the top slots. So we created an SVOD (streaming VOD) service, subscription-based, monthly fee. We have to constantly market this to overcome churn, but it's revenue, it's growing. Consumers do like subscriptions - this is something that works well for NetFlix. Cable operators not good at selling transactions but they know how to sell subscriptions.

Jon: FearNet was for horror films, but not the greatest advertising platform obviously. Did a partnership with Sony which also has a good horror library. Build an ad-supported VOD platform. We wanted dynamic ad insertion, which hasn't been available through Comcast. FearNet relaunched as a linear channel - like you break up the movie into TV chunks [and show ads like commercial breaks?]

Epix was Paramount, MGM, Lions Gate, all finding their output deals expired at the same time. Realized that they'd have more market power if they worked together.


Brad: About the "digital file owned in a cloud locker", please comment.

Dan: Will be a few years before consumers get that and can use it effectively. It's about interoperability. If I buy a DVD, I can watch that anywhere. With digital, that doesn't happen. But if I buy it digitally, I should be able to watch it anywhere - that's the goal of UltraViolet. Consumers have had storage issues, so the cloud stuff helps. Apple hasn't launched its cloud movie product yet, there are licensing issues WRT output deals that will get resolved.

Apple has dominated the E-sellthru business so far, but if it stays that way it's not good for the industry. We need more stores AND interoperability.

Brad: Why is UltraViolet attached to the sale of a physical DVD?
Dan: We're not part of UltraViolet so I can't speak for them. You could in theory put in a piece of paper with a code, but our marketing people believe that the consumer wants a physical disk - we sell "E-copies" which are just "digital copies" and we could just put in a slip of paper, but right now that's not what we do.

Dan: We do our deals nation by nation. With iTunes we have an overarching agreement on ground rules, but still negotiate territory by territory.

Jon: Amazon has done well selling books digitally, consumers do get it.

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Q&A

Q: Re windows, do we the filmmakers have anything to say about them?

Elis: If you want to be involved in the process you can, we give you your options.

Brad: But frankly you want us to do this for you.

Elis: Right, there's a lot of product out there and if you're slow, the buyers will just move on to some other product.


Q: Re social media and targeting, for independent distribution models, can that approach work?
Elis: I think so, there are fan bases on the internet. Youtube, Fbook, if you get enough views it can take off.

Brad: Yes but you have the discoverability problem, how do you drive eyeballs to your film?

Jon: There are firms starting to look at this, I haven't seen anybody succeed well, but people are looking at the question of low-cost and social media to reach niche audiences.

Elis: There are a lot of internet talk show hosts out there who have >1M subscribers each, and it's growing.


Q: I can imagine VOD displacing everything. What will that do to film budgets + distribution?

Elis: I don't think that will happen, movie theaters aren't going away, which is good since if theaters go away it hurts the industry. DVD will go away, very small in the future, like LPs.

Q: So won't that impact budgets?
Elis: Yes, maybe positive, maybe negative.
Jon: VOD has better margins.

Dan: I'm the digital guy at Disney. The physical DVD business is still enormous and will be big for at least 10 more years. So don't forget that there will be a lot of DVDs sold.


Q: Re data cap [Comcast stuff], this is impacting cloud model, what can you/we do?
[Nobody on the panel is savvy in this area.]

Dan: There's more competition today and there's a desire to sell bundles. Comcast wants to sell you a bundle including voice and internet. What you're raising is a big issue - it's not what we on the panel do, though.


Q: Re VOD, can that help short film business? Short films become more popular?

Elis: Large demand for short films over the inet - see Youtube. In TV that hasn't worked, the advertising deals haven't worked out well

Q: But could it become transactional?

Elis: Advertising. [No panel support for transactional revenue model for short film.] You can get awareness, use it for marketing.

Dan: For Tron, and I Am #4, we made the first 10 minutes for free on demand. A lot of people sampled this content and we got a lot of rental from these.


Q: How can I protect against consumers recutting my film?

Dan: We don't allow that, and in our deal with Amazon we don't allow them to allow the customer to do that. We're just barely now getting the idea that people might want to do chat around the movie.

Elis: Our agreements are that people can't air in a non-linear format. The only cutting you get is for censorship reasons.

Q: Virtual worlds, virtual environments?

Jon: You could do avatars, Sony is sort of in this space, Fbook has been seen as being a way to do this, but not taking off right now.


Q: Re piracy, how much is it impacting the bottom line and what resources are being put into defense?

Elis: Used to sell 2x or 3x as many DVDs as theatrical. DVD still OK in Australia but sales still down. Lots of distribution companies went out of business, though QwikFlix has started in AU recently.

Q: What's the safest form of protecting the content?

Elis: There isn't. There are firms that will do takedown notices for you.

Brad: There's a huge industry around this: MPAA, AFM, many players working the piracy issue. But international is UP across the board, up 20%/year overall, multiplex buildouts happening. [Really?]


Q: All this streaming - shouldn't the film industry be getting a cut of data streaming revenues? We should get a cut of the cable revenues etc.

Dan: In the early days, Comcast etc. said "why should we allow internet VOD, we have our own VOD service already, maybe we'll block that content". Thankfully better business heads prevailed, Comcast is starting to say maybe I don't care if my customer buys from iTunes.


Q: About 3D, how will that impact bandwidth issues etc?

Jon: It doubles the file size, one for each eye, it's not as bad as SD to HD transition. 3D demands a fully-engaged experience - is that how you watch movies? Most people don't watch that way, they're getting up, moving around, talking to people in the room. Sometimes 3D will be a great experience but I don't think it will become the norm.

Brad: Can stay as a novelty in theaters since the screens and gear are there. International was booming, but starting to wane now. Will probably be specialized, like Imax movies, you go pay more for a specialty experience.


Q: If you have $500K marketing budget in the US, how are you allocating for theatrical vs. VOD?
Elis: Depends on the film, the genre, the audience, the demographic. If you're going online, who is the online community.

Q: Is there a minimal spend in the VOD arena? [He really seems to mean "what does my internet advertising budget look like for a small indy film?]
Jon: I've seen success with $0 and with well under $500K.


Q: Do you envision in the future that projects will be driven by content, not by A-list stars?
Brad: No, star power will still matter.
Elis: But concepts matter, ultimately it's about the script, your foundation, the story, most important thing. You can do well even without a star, but everything else has to come together.

Tuesday: Distribution conference part 1: "Limited and Specialty Releases"

American Film Market 2011 conference: unofficial notes
Nov 8, 2011 9 AM: Distribution Conference notes part 1, "Limited and Specialty Releases"
Notes by B. Hahne

The original blog location of these notes is: http://2011afm.blogspot.com
This is day 5 of a 5-day series.

Clarifications or pithy comments by the note-taker will generally appear in [square brackets like this].

These notes are copyright (c) 2011 by Bruce Hahne. Noncommercial, nonprofit redistribution and/or pointing people to the blog is permitted and encouraged.

Disclaimers: "Free notes, you get what you pay for!" There notes are a summary, not a transcript, and represent my best effort to capture the panel discussion plus Q&A. They also probably contain errors. I'm not in the film industry, nor am I affiliated with AFM / American Film Market or with any of the firms associated with the panelists.

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Moderator: Steve Gaydos, Executive Editor, Variety, who is "stuck in traffic" as of 9:27 AM.

Panel:

David Fenkel, President, Oscilloscope Labs, NY indep film distributor.
Susan Jackson, President + Co-Founder, Freestyle Releasing
Charlotte Mickie, Executive VP, Entertainment One
Tom Quinn, Co-President of New Label, The Weinstein Company

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[Panel starts out at 9:20 AM doing self-intros since the moderator isn't here.]

David: We want to control our accounting, programming, marketing, "beginning and end of the whole distribution process for filmmakers". We also have our own DVD label. Documentaries, foreign-language films. Find films we're passionate about and then try to figure out how to make money on those.

Susan: "Service theatrical company": producers come to us with P&A money - we're like a mini-studio. Just started Freestyle Digital Media., a service, which will complement their theatrical events with VOD.

Charlotte: Entertainment One distributes in Canada, AU, UK, US. Produce and sell for TV. Manufacture DVDs in Canada. What I do is sell feature films internationally to distribution companies. Some docs. Genre films, arthouse films, larger films which have stars.

Tom: At Weinstein for 2 months. Co-president of a new label at Weinstein: multi-platform slate. Previously at Magnolia Pictures as SVP and Head of Acquisitions.

Charlotte: A filmmaker said "I'd really like people to SEE my film, can I just put it up on my website?" And I said no, you need a distributor and VOD deals. But for those of you on the panel, can you explain how the VOD thing works?

Tom: There's a misconception that VOD is magic and you just do it and money starts growing. Many VOD platforms - think of them as theater owners. What do you want from a theater owner? You want your poster out front, you want your trailer playing in the theater. You can put your film onto VOD but if nobody knows it's there, without promotion, it's amazingly invisible, nobody will find it. But if you do it correctly then you get access to 65M customers.

Charlotte: Do they need an agent?

Tom: They need to go through a gatekeeper. I do have friends who got their film onto iTunes themselves, low-cost things that cost them $50K, but it was a lot of work.

David: Lots of work to be done to exploit an iTunes release. Maybe you need college screenings or non-theatrical - get exposure elsewhere OFF of VOD and off of iTunes. If cast is low-end and you have no exposure, you don't want to just put it up on iTunes to see what happens. Invest in some sort of distribution platform.

Tom: Or name your film "Sex and Zen" like somebody did.

Susan: Still need to reach the consumer to let them know your film is available. But VOD can be more cost-effective.

[Panel moderator Steve Gaydos shows up]

Steve: Claim from a friend: "Overall business for independents is down by 75% compared to 5 years ago". Please comment.

Tom: Things have changed a lot multiple times in the past 5 years. In Magnolia our projections were off by 90% in some areas. We moved to day-and-date distribution to bring back the business. Last 10 years of box office in our space: number of films has doubled while the total number of indy films making a reasonable return had stayed flat, and while advertising costs had doubled. It wasn't working out well.

Steve: Lots of confusion about VOD numbers and what "VOD" is, even from experts. What drives VOD success?

Susan: Be earlier in the alphabet. [I.e. she means if the title starts with "A", I guess]

Tom: There can be a pop value based on title or cast, but playability does matter.

Steve: How do you define "playability"?

Tom: [People say] "I like the movie"

Susan: you can get good word of mouth on movies that are hard to market but very playable.

David: If you get your poster up on iTunes and have a strong 1-2 weeks then it feeds on itself.

Tom: Each online VOD store is different: Xbox vs. Comcast vs. etc. I agree there's not enough info, but in 2 years we'll probably have more data.

Charlotte: I have trouble finding distributors for various films that have played well at film festivals, particularly midwestern [she said "heartland"] festivals. Is VOD an opportunity here?

David: Hm, well maybe.

Steve: Is there good news in the industry?

David: In the indy business we can move faster, the studios are slower.

Tom: The independents are now taking over the space occupied by the middle, the mini-majors.

Steve: Somebody comes to you with a film that hasn't been part of a bidding war, and the film has value. What misconceptions do they bring with that film when they talk to you?

Susan: Usually it's that the cast is going to support the movie [i.e. that the cast is going to help you with publicity]. I'd say you should all put indentured servitude clauses into your contracts to make your cast help you market the movie.

Steve: Can you get word of mouth on films today?

David: Sure, but might not be theatrical. Sometimes that does happen, e.g. Black Swan.

Tom: You need to talk about age range. WOM I think of myself + my parents [older], "viral" I think a younger age range. If you can appeal to both audiences then that's where WOM and "viral" meet, e.g. Let the Right One In.

Steve: Can you only spot it in advance? I was at a midnight screening of Midnight in Paris and had a sense of WOM growing in that theater.

David: Sure we "sense" that a lot, but we're often wrong.

Steve: Are you seeing lessons from different countries as you distribute films?

Charlotte: US is far ahead of any other country we work with. VOD is nothing in Australia, very small in Europe, and in Canada there are some market restrictions about doing day-and-date. So non-US doesn't have much to say to the US side right now.

Steve: Any types of films that are doing better?

Charlotte: It's not the films that I have, but endeavor films: Formula 1 racing, boxing, ballet.

Steve: Small film doing a platform release in NY. What are the rules for a NY release?

David: We have films where we don't believe theatrical is a good idea. There are theatres in downtown NY which have cultivated their audience and if the film is a good fit then that's OK. But not always the right thing.

Susan: We have movies that we only release regionally and nobody in the "traditional" world would even know we released them - African-American, or faith-based, and we never go to NY for those. If you open in NY then you have to pay for a 4-wall which is expensive. But some of the output deals we have REQUIRE opening in NY.

Susan: If you pick up a film that's very marketable and you know that the NY Times is going to kill it in the reviews, then you don't go to NY.

Steve: What are your competitors doing that are good ideas?

Susan: Troll Hunter.

Steve: Why?

Tom: Very unique film, blockbuster in Norway, I saw it in Austin. Sold out around the world in 15 days just based on the trailer. Brought it to AFM and sold it out - Universal took a big piece. We had previously released Let the Right One In head-to-head with Twilight, which you'd think would be a stupid idea, but we know that every review of Twilight would also mention Let the Right One In. VOD and DVD don't always work out - we had a film do $5M box office and the VOD and DVD numbers are horrible.

Steve: Why is that?

Tom: Because my parents just figured out recently that you can rent DVDs via mail, and they don't understand VOD, but they know where the movie theater is.

Steve: So if your demographic is older, you put your energy where that demographic is. [duh]

Tom: And over 50% of that film's revenue was made in NY. So sometimes you go to NY for the revenue.

Susan: There are specialty movies, some do huge numbers on DVD, some do large box office.

Tom: My biggest DVD title last year was made for $50K, no stars, nobody has ever heard of it, my wife told me not to buy it because she hated it, and it addressed an audience that doesn't normally get a movie made for them.

Susan: We had one film do 4x on DVD what it did in the box office.

Charlotte: Winter's Bone, played in NY and in smaller markets.

Susan: That was a word of mouth situation.

Charlotte: How did the numbers play out?

David: $6M box office and then they got a bunch of Oscars.

Steve: How do you decide how much P&A to invest, $1M or $500K or whatever? How do you know when to "up your bet" and spend more on the marketing budget? Since these days $1M box office is considered good.

Susan: We have output deals that require certain numbers of screens and certain amounts of spend [so that sets a floor in many cases.]

Steve: OK well, are there still gamblers out there who will bet more on P&A spend?

David: We only take a small number of films for theatrical each year. Maybe 1 per quarter. At festivals our method is very simple, we look for the best film at the festival, and we hope it has a decent/known cast. We're looking for something we can get into Walmart.

Charlotte: There's still a market for westerns in the US

Susan: Yes, westerns still do well on DVD in the US. Not elsewhere, but yes in US.

Steve: Is there a consensus about what DVD sales are compared to what DVD sales used to be? Are we repeating the music industry story with album sales?

Susan: Bigger movies with names are still selling, A and A- stars.

Tom: For the smaller DVD title, that's a very dangerous business. But there's a good import genre business: Troll Hunter etc. Non-fiction smaller titles, art film, those are dying.

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Q&A

Q: I just finished a documentary, how can I contact people on the panel or people like you?

Tom: An intro is best. Or a succinct email that explains what you're doing.

David: We look at every film that goes to SxSW and Sundance.

Susan: I'm looking for very commercial films, not docs.

Q: What elements do you look for that help you to move the product?

Susan: The filmmakers partner with us in our case. We want the cast to show up [at events, showings] and do Q&A.

Q: Distribution with you folks AND the producer wanting to do self-distribution in smaller markets - can that work?

David: We don't do many split-rights deals like that. Harder for us to get behind a film when we're splitting up digital rights, or regions. If the filmmakers want to be part of the promotion process that's fine, like Buck had all these Fbook friends before the movie launched, and the filmmaker started that.

Q: I have a movie and we split the rights, international vs. domestic who is also handling VOD / online. We were warned against doing theatrical since it might screw us on TV.

Susan: That's French TV, that's your problem. It's about how likely it is that your film will want to air on French commercial TV.

Charlotte: In France they try to protect all the windows and there's a rule that says if the film is distributed theatrically in country of origin, then it MUST have a French theatrical release before it can go to French TV. Though there are some workarounds.

Susan: So it depends on your film - if unlikely to go onto French TV anyway then who cares.

Q: Most of us don't have Natalie Portman so we can't do Black Swan. For a pitch of a project, what elements do you care about?

David: We care about finished films. Most important thing is the trailer to us.

Charlotte: I do pick up scripts. I don't know how much a bunch of business analysis stuff surrounding a script will help me -- maybe for a niche demographic. But for international release I'm more concerned about the quality of the script. And I'd prefer if there's already a director on board, and I care about that director, and I care about the cast. I.e. I care about the creative elements not the business elements [at the script stage].

Q: I made a documentary and got into some boutique theaters and just signed with a NYC theater. Can I use this to talk to foreign markets now?

Charlotte: If the reason you did well in the US is US-centric then not necessarily. But it depends a lot on the movie.

Tom: If this was through Aaron Hill then you have a story right there.

Q: Re US DVDs. Filmmakers who don't get distribution, they go out on DVD, but Baker & Taylor and others won't deal with the indy filmmaker directly. They always send me to a particular aggregator, the same company, same guy at Victory Multimedia. [Nobody on the panel has heard of Victory Multimedia.] I did sign with them and I advise the audience not to. What would you recommend to indy filmmakers to get past these gatekeepers?

David: It's a tricky business. You need to choose a reputable company, like Image, DVD machines, that have relationships with Baker & Taylor etc.

Charlotte: E1 is in that business [that's her].

Q: Do US audiences like dubbed or subbed?

A: Dubbing sucks in US. For first window release, no.

Q: How often does the filmmaker bring their own P&A in deals with you?

Susan: That is my business, I'm a P&A investor.

David: We don't do that much though we're open to it.

Q: So the filmmaker doesn't have to bring that?

David: It's an advantage.

Tom: General idea is that for your $500K film, you should have $100K in that budget for P&A.

Steve: Exit strategy, is it good if the filmmaker has thought of this?

Susan: I'd be happy if the filmmaker just had some decent still photographs.

Charlotte: Or just get the deliverables right.

David: Look around the industry, unit publicity is really important yet very rare in indy film business. If you get ONE striking still photo from your film, Variety will run it.

Charlotte: About deliverables. For US vs. foreign these days you often end up making 2 different deliverables: DCP vs. HD. Expensive.

Steve: Is digital a win?

Tom: Yes, it's a win to not have to be on 35mm film. But... at festivals this makes it difficult to import 35mm - the US theaters are so upgraded that they can't play 35mm film now.

Susan: You have to decide if you're going to cut a 35mm version of the trailer, that's very expensive.

Steve: General advice is if you have any question or budget issues about your deliverables, you have a problem.

Susan: Music clearance is also a killer.

Q: Films successful in a certain market like W. Africa, has nothing to offer in the US, is that of interest to you on the panel?

Tom: That can be interesting to me, if it was very successful in its country of origin, but at the end of the day we do the same US analysis.

Q: Do you offer up-front fees when acquiring?

Tom: Yes.

David: About this, "Welcome to the Sticks" did very well in France, beat Titanic. IFC bought it but never released it in the US.

Tom: Why not?

Steve: It's really local. Local success. A lot of European filmmakers think "my film did really well in Holland, so now I'm going to get a lot of money!" and they're wrong.

David: We get pitched a lot of documentaries and my pet peeve is the pitch "there are 10M wrestlers in the US, if we get 1% of that market we'll make all this money!"

Tom: Right, that formulaic assumption. Bowling movie: we figured out too late that although there are a lot of bowlers in the US, they don't like documentaries.

Charlotte: This is back to the business plan - in some sports or hobbies nobody goes to see movies, and in others, everybody goes.

Q: What works within each genre? [That's not a distribution question].

Charlotte: Most of the people up here on the panel like sophisticated films, but stupid films can sell well too.

Tom: All of the films I've bought that turned out successful were films that nobody else was bidding on, so I don't know. Let the Right One In, nobody else wanted that yet it did really well. On the other hand I paid a lot of money for Signal, and that lost a lot of money.

Q: I have a western set in Germany, will that work?

Charlotte: If you have a great western it could work in Europe. And Germans like westerns.

Monday: Production Conference part 2: "Agents and Packaging"

American Film Market 2011 conference: unofficial notes
Nov 7, 2011 11 AM: Production Conference notes part 2, "Agents and Packaging"
Notes by B. Hahne

The original blog location of these notes is: http://2011afm.blogspot.com
This is day 4 of a 5-day series, check back at the blog for more as the days go by.

Clarifications or pithy comments by the note-taker will generally appear in [square brackets like this].

These notes are copyright (c) 2011 by Bruce Hahne. Noncommercial, nonprofit redistribution and/or pointing people to the blog is permitted and encouraged.

Disclaimers: "Free notes, you get what you pay for!" There notes are a summary, not a transcript, and represent my best effort to capture the panel discussion plus Q&A. They also probably contain errors. I'm not in the film industry, nor am I affiliated with AFM / American Film Market or with any of the firms associated with the panelists.

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Moderator: Paul Hertzberg, President/CEO, CineTel Films. Paul is also IFTA chair (!)

Panelists:
Jay Cohen, Head of Packaging and Finance, Gersh Agency. Consults on indep films and works on finance. Works with equity funds.

Gary Randall, Co-founder, Boardwalk Entertainment Group, a production + media company. Executive producer of Saving Grace.

Rena Ronson, Co-Head, UTA Independent Film Group, United Talent Agency. Works on global film finance for independent + co-financed productions. Formerly with William Morris working on finance + distribution for >500 titles.

Hal Sadoff, Head of International + Independent Film, ICM. Formerly in the banking business. Formed Cobalt Media, which does film financing.

Eric Schotz, President + CEO, LMNO Productions. 9 Emmy awards, producer/director for non-fiction + reality TV. "Kids say the darnedest things" etc.

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Paul: About "packaging" - we'll discuss that from agent and producer view.

Paul: And BTW I have pre-production artwork from my upcoming movies:
- The 12 Disasters of Christmas
- Snowmageddon

Paul: to my panelists, what's your definition of "packaging"?

Rena: Let's talk about what the agents on this panel do. "Packaging" and "finance" are similar. We work with filmmakers. Packaging is the director, talent, script, etc. all of that coming together to get financing.

Hal: And typically we don't get involved until at least one of those elements is involved, not just a script.

Eric: I'm on the TV side, it's different. To "package", somebody has to add value to what I've already got. If I wrote it and my agent is in the room and I cut a deal, that's not a "package".

Hal: for indy films, our role is like an exec. producer. We don't get credits for it but we play a similar role.

Paul: Difference between TV and film packaging?

Gary: In TV if the agent makes one call, they claim they get to call that a "package".

And then "package" is 3% of license fee, with another 3% deferred, and 10% of modified adjusted gross, and the agency gets to define "modified adjusted gross".

[Gary being pretty hostile here, he seems to have had some bad experiences in the industry.]

Jay: It's putting together elements to allow the TV show or film to get made.

Rena: in film it's a different dynamic, we might work on a film for 12+ months, you can't compare to TV packaging, it's not my area.

Jay: there would be many TV producers who do need packaging, Gary here doesn't.

Jay: When we put movies together we go to other agencies for help. We represent 7 equity funds who invest in movies. We try to be agency-neutral, we'll put money anywhere, our investors don't care. We work with ETA, UTA, etc. [Need to look up these different organization names - too many TLAs]

Hal: Our clients are the projects, we work to put them together in the best way to get them financed.

Paul: How many films do you package in a year.

Jay: We work on 25 movies at once. Last year we had 40 movies at once.

Rena: "working on" is different from "putting together". We got 14 into Sundance and 3 into Cannes, but we have a team of people doing this.

Hal: 15-20 films/year get made, and 30-50 "working on" at any given time.

Paul: Shortest and longest-duration packages you've worked on?

Rena: I had one that crossed my job change, 2 agencies. 7 years, went through 3 directors and different casts and finally it's showing now in N. Carolina.

Jay: Client said he wanted to do an all-improv comedy. One of our equity clients said yes, we'll fund that. There was no script. Took us 3 months.

Rena: It can take 12 months, 18 months, depends on the budget, the names [stars], you may have to wait a year for somebody's schedule.

Hal: Could take several years - took 5 years to make Crazy Heart because different elements shift in and out [of the project.]

Jay: Film is different from TV. In TV you always have a need for product, in film you can live off your libraries.

Gary: That's insane, you can't keep going forever on just your library for long.

Gary: We're now packaging our own features. We raise our own independent financing. We determine our distributors, we're doing our own thing. We ARE sometimes working with packaging agencies.

Paul: You went from being an agent to being a producer - what are you working on?

Gary: I went from agent to producer because I didn't want to be the suit who showed up on the set and was "the lunch guest" - I like getting my hands dirty, I like figuring out the material and how to finance it.

Rena: We get to do that stuff too, it's a good job.

Gary: Right, the indy side is different from the mainstream packaging.

Eric: The blame for crappy packaging usually goes to the producer, they never blame the agent. Just saying.

Gary: Head of Columbia Pictures at one point banned packaging, he said "we won't do it". That job didn't last long.

Eric: A good agent is making your project better, that's the end goal, they're bringing something to the table that you can't get, whether it's TV or film. "Can you bring me a writer or director that I can't get?", that's what they do.

Gary: We did some work with CAA and they did some packaging for us, that helped. There have been other circumstances, primarily in TV, where the agents have overreached [in their demands?]

Rena: We're talking here about clients who need our help. Gary, you're a producer who knows how to do it, you don't need the assistance.

Jay: Even some of the more successful producers don't know how to make a $10M or $6M film, they come to us for help. For indy films we do offer some leverage, we're doing business with a lot of buyers: China, Qatar, Europe, etc.

Paul: What budget ranges are best for packaging success? Easier to get financed.

Hal: Big disparity in budgets - lots of films under $2M now, with bigger talent.

Rena: Crazy was made for under $2M.

Hal: Homework went at Sundance, sold to Fox Searchlight, went onto 600 screens, made for under $2M.

Eric: Do people [talent] want to be associated with $200M films or $2M films?

Hal: studios are focusing on giant tentpole films, Batman etc., and a lot of talent is willing to do smaller-budget films.

Rena: We get a lot of good projects coming our way. And we show people how they can make their film for lower budgets.

Jay: You have to ask the business model for each movie. Budget is relative to the genre.

Rena: Lots of high networth individuals want to get into the business now and they'll put up $500K each, and they'll band together. And these films are starting to have success at Sundance.

Paul: Gary, how do you use music?

Gary: We're music-centric, affiliated with Sony, BMI, BMG, etc. Our music partners don't get much synergy from their parent corporations and are looking to film and TV to get exposure for their music. "Majors and Minors", kids show, financed by 4 music partners. We've got Justin Timberlake in a project, Casablance Story, P&A funding is coming from the music business. When we announced his involvement, we got an unsolicited call from somebody who had just sold her tech company for $400M and she's a fan. I thought it might be a prank call or somebody spoofing us. She looks like she might be legitimate and we're vetting her right now - we might have an angel investor.

Hal: Nowadays it's high net-worth individuals: people will put in $100K to several millions, and that's how most indy films are getting made these days. [Scary. This 1%/99% dichotomy is really coming out in a big way here at AFM.]

Paul: Talk about the back-end - what do you pay a packager?

Eric: I have no idea what they make. I have yet to make ANY money from any backend deal I've ever made.

Gary: As a former agent I can tell you the agent's definition of "back-end", and it's different from what the filmmaker thinks it is. We used to joke at William Morris we used to say that "our [moviemaking] clients are taking 90% of our income" [i.e. we want it all, not 10%].

Jay: We had a situation where we did the right thing for the client and didn't make anything.

Eric: We may hate agents, but I've never LOST a project due to a package.

Gary: And the CAA did help me on a kids show.

Paul: what do you charge, as agents, as a packaging fee on a film project?

Rena: % of budget, it depends on the budget. You need a greater percentage on a smaller-budget film. If we sell it, there's a sales fee.

Jay: Packaging is 1-3% and sales is 5-10% typically, but changes for international.

Rena: Every project is different. You can defer, waive, etc.

Jay: Recent project I'm working on, we did 100% of the budget, brought the whole team together. Packaging departments are expensive to run - we go to Cannes, we got to Toronto, we do a lot of work to learn what the buyers want.

Gary: As a former studio president, the problem we had with packaging was that we took all the risk and the agents get paid no matter what. At William Morris we said "we commission failures too".

Rena: We don't get paid unless the film gets financed.

Gary: But the movie hasn't made money.

Rena: Everybody else gets paid, the producer gets paid, are you saying we shouldn't get paid?

[This has turned into a panel fight over compensation in the packaging / agent industry. Moderator should be intervening but he isn't. Audience finally coaxed him to do something.]

-----

Paul: What's the best way for our audience members to discuss a concept with you?

Jay: If you've never produced, go find an executive producer who can help you put your movie together. If you have a SF movie, get an exec producer to read the script and like it and say "I'll make some phone calls to help you make this picture."

Eric: In the history of all panels like this, nothing has ever been sold in the room. If you pitch something to me now, I don't know what to do with it. It's hard for us to take a cold pitch that comes from nowhere.

Hal: Right, we don't take unsolicited scripts, we work with exec producers who have relationships [are we sensing a theme here?] with us, we know htem.

Jay: In my previous role I'd go to places where I knew producers would be and I'd talk to them.

Gary: Everybody can make a movie today, everybody can put it on the internet.

Eric: We use sizzle reels to sell stuff. You can say "I have a 5-minute sizzle reel" - don't make it 7 minutes.

Jay: Yes, reality TV, people will spend lots of money to make 10 sizzle reels and see what sticks.

Rena: I'll take calls from producers I know [and not from people I don't].

Paul: Jay, talk about these 6 equity firms you work with.

Jay: They're all different with dift objectives. Some want senior investment, some what subordinated debt. We've funded 9 movies in past 18 months ranging from $500K up to $35M. Hedge funds. Our agency isn't full of big stars. We don't tell our investors what to invest in. We'll take money from X, Y, Z

Gary: You're not taking money from me. [Doesn't help that Gary is sitting right next to the guy whose industry he hates.]

Jay: We had a situation and we did the numbers for the star and the director, the star averaged $12M/picture and the director averaged $18M/picture, but we did the math and we needed $38M revenue to make it profitable, and we told the investors "do you really want to invest in this, we recommend against".

Hal: VOD starting to generate real revenues, so downside risk on indy films is going down, you can get real revenue now compared to a few years ago, and that helps the indy film business.

Jay: The packaging depts are changing as the industry changes, we're becoming more like producers. I can handle the numbers, but I still need somebody who can talk to actors and writers. We bring in creatives to help movies get where they need to go.

Gary: I think you've successfully replaced what the studios used to do.

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Q&A TIME

Q: What are the key terms between producers and a sales agent?

Jay: depends on whether the sales agent is financing the movie, or is just representing the movie. 10-15% if they're not financing. If they are, then 20-25% sales fees. For the top tier agencies.

Q: Do the agents put up money in advance?

A: No, but we introduce you to people who put up money.

Rena: I've been doing some presales for producers recently. Quietly and selectively, with our relationships overseas. This gives us more leverage for the filmmaker when we make the package, we can say "we already have 50% of the funding for this film".

Q: Hal, I want an A-list actor from your stable, can you help us? [Boo.]

A: I'd look at the script etc.

Q: How do you want the package presented to you, if there are already elements attached?

Hal: We want at least one significant element attached, but it all begins with a script and have to believe that the script can attract talent, directors, etc at the budget that you want.

Jay: A well-known producer also counts as "an element" here.

Q: Do you agents explore co-production opportunities?

Hal: yes, that's a big part of what we do. Hotel Rwanda was UK - S. Africa - and other locations.

Q: How do I get a big-name producer?

Jay: look at the producers who make the type of movie you're making.

Q: I'm confused, getting mixed messages - do I start with agents, or start with talking to producers, or are you on the panel the actual producers, what to do?

Eric: There's no "right way".

Q: So no agents are taking submissions these days?

Rena: If we got email from 50% of the people in this room, what would we do? We'd be overloaded. You need to find somebody with a relationship with us who has made a successful movie.

Jay: There are only so many movies made each year. If a newcomer producer brings me a project, and somebody who has produced 10 movies does it, I have to go with the 10-movie producer, it's a time thing.

Gary: Hollywood is run by the assistants, that's the big secret. If you attend the mixers at the film schools, USC, align yourself with assistants at the agencies and get somebody to love your project, you will find what you need, you'll find the powerhouse support.

Rena: That's 100% true.

Eric: Everybody on this panel was an assistant at one point.

Q: I had a bad experience with a packaging agency. How do you keep them on timetable?

Paul: You said you have $4M already - you don't need a packaging agent, just make your movie.

Q: Yes but I think a better agency would have got me better stars.

Jay: I don't know where your money is sitting, but put it into Citibank Beverly Hills or Comerica or some entertainment bank, then you put some in escrow and make pay-or-play offers with drop-dead dates, you'll see that money spent very fast, it will happen. The trick is if it's offshore, people don't necessarily believe that it's really there.

Q: Re the "sizzle reel", explain that, what works?

Eric: Very subjective, they can be done for a lot of reasons. One might be for buyer. One might be a casting reel - "here are the people I'm looking for". It depends on what you're trying to sell. I try to have 1 thought per reel rather than 30 things going on. The reel shows your idea visually. For every idea there are a lot of people doing that idea, you need to show me

Q: Spec script selling? Now you seem to need a video, is that a necessity to sell a script?

Jay: First-time director or what?

Q: The script is good [yeah right] and want to look for people to do it.

Jay: So you have a spec script you want to sell. Publishers are now cutting trailers for their BOOKS to get people to buy their book. So create something, a one-sheet, a poster, whatever.

Eric: If you walk in with an amazing reel, the chances of your script being read are orders of magnitude higher.

Q: VOD?

Hal: We're seeing sometimes millions of dollars coming from VOD now, which is making a difference, people are willing to pay for that, there's a floor value from VOD.

Q: So that works if you do theatrical also?

Hal: there's day-and-date, all kinds of experimentation right now.

Paul: We had huge VOD larger than box office on one of my films, larger even than DVD. People might have been embarrassed to go see this particular movie in the theaters [cough cough, this is the type of movie his studio makes, weird slasher and disaster stuff]

Q:

- What do you look for in a script?

- I've shot an instructional video, does that build credibility for directing a feature film?

Jay: The instructional video won't help for feature, it doesn't help us convince actors. Re script, if you give me a period drama, go away, I'd be shot.

Q: I usually do action + horror.

Jay: OK you're in the right place.

Gary: If you're a filmmaker, make a trailer.

Eric: And don't tell us how much you suffered to make your previous video, it doesn't help your case.

Q:

- Series of fantasy books similar to Harry Potter, is that an idea you like?

- Do I need a script?

Jay: Source material gets you in the door - graphic novel or series of books. We aren't in the development business.

Rena: We have a book department, that's what they do - they did Twilight and The Host.

Eric: My problem is people pitching ideas when they don't have the rights to make the movie from the book. Do you have the rights?

Q: We're hopefully signing today, this afternoon.

Panel: No, that's the problem, it's the "we think we're signing today" thing, you get it signed and then talk to [people like] us.

[This is turning into a non-Q&A session in which every person with a "question" is really looking to pitch their project, they want help making their movies from the panelists specifically. Questions are too project-specific.]

Q: - I've done 100 projects already. Do I need a sizzle reel?

Jay: probably not if you've done all the things you've done

Q: In the packaging process, how important is soft money? Do you get involved in where, physically, the film might be shot?

Rena: it makes a difference. and Japan is down, Spain is down, they're not buying, so soft money is becoming more important. We might suggest that you shoot in Canada, etc. That's part of what we do, help you do the film in the best way.

Hal: We know all the incentives for the venues, that's what we do.

[Discussion about where their various projects are shooting due to tax incentives.]

Q: I've shot the entire film on SD, 2 years in S. Africa, we have the foley etc, it's a spec piece so that we can make the movie [in HD]. I got told "you're a first-time director, we don't like that". What are the chances that I'll be kicked off the project?

Jay: Nobody can kick you off your own project if you own the rights to your material.

Eric: Do you want to MAKE this movie, or DIRECT this movie? Are you willing to stand down so that you can your film? That's your question - maybe you're now the producer, not the director.

Jay: I had exactly this situation and had to tell a director to step down and become a producer, we had to have a Latino director. He chose to step down and the film went forward.

Eric: But if your goal is to be the director, then chase your passion.

Q: Re assistants. How do I become an assistant? In the agency world.

Rena: Every agency has an HR department and training, we're always taking applications.

Jay: And if you don't need money for a while, work as a free intern for a few months and you're generally guaranteed an assistant job.

Gary: Stay away from the WME - they have lots of assistants and promote very few of them.

Q: What should be on my resume to work on your teams as an agent or assistant?

Jay: Film school might be a good start.

Eric: There's no single path ABC. Don't become an agent unless you like to read, that would be a bad choice.

Q: I can't get my calls returned for this book I've optioned, what should I do?

Hal: Normally you go to literary agents within the agencies, or the book departments - that's not us.

Q: [This is a panelist from a previous day] Do you recommend having a top sheet on your package that lists your genre and historical box office / revenue for this genre?

Rena: Good idea, anything to help us out, our attention spans are short.

A2: But don't make up figures, that will come back to bite you.