FILM

&
VIDEO
BUDGETS
4TH UPDATED EDITION

DEKE SIMON
WITH MICHAEL WIESE
 TABLE OF CONTENTS

Acknowledgments xi

Introduction 2
How to Use This Book 5

1. Setting Up a Production Company 7

Incorporation 9
Federal ID 10
Business License 10
Bank Account 11
Corporate Taxes 11
Accounting Software 11
Accountant 12
Attorney 12
Employees 12
Becoming a Signatory to Guilds and Unions 13
Bon Voyage 16

2. Pre-Production 17
Legal 20
Rights Acquisition 21
Staff Contracts 22
Music Clearance 22
Feature Film Clips 23
Archive Film Clips and Stock Footage 26
The Script 27
The Script/Budget Connection 27
The Summary Budget 28
Negotiations 30
Negotiating with Crews 32

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FILM & VIDEO BUDGETS / SIMON AND WIESE

Unions 43
Payroll Services 44
Productions for Large Companies 44
Below-the-Line Rates 45
Negotiating for Equipment and Services 45
Production Schedule 46
Cash Flow Schedule 46
Casting 46
Post-Production 49
Booking Post-Production Facilities 51
Completion Bond 51
Insurance 52
Locations 54
Budgets from All Department Heads 56
Art Direction/Production and Set Design 56
Credit Accounts with Vendors 56
Production Forms 56
Purchase Orders 57
Check Requests 57
Tracking Costs 57
Contact Sheet 58
Conclusion 58

3. Development/Marketing 59

4. High Definition 69

5. Line Items 79

6. Sample Budgets 215

1) $5 Million Feature Film Budget 219

Shoot: 35mm film
Post: Film
Rationale: 238

viii
 TABLE OF CONTENTS

2) Documentary — Tape Budget 271

Shoot: DVCam
Off/On-Line: Nonlinear to DigiBeta
Rationale: 278
3) Digital Feature Film Budget 289
Shoot: HD
Off-Line: Nonlinear Avid MC
On-Line: Nonlinear Avid DS Nitris
Rationale: 298
4) Digital “No Budget” Feature Film 325
Shoot: MiniDV
Off-Line/On-Line: Nonlinear Final Cut Pro to DigiBeta
Rationale: 333
5) Tape-to-Film Blow-Up 353

6) Industrial Budget 367

Shoot: DVCam and Super 16mm telecine to DigiBeta
Off-Line: Nonlinear Avid XpressPro
On-Line: Nonlinear Avid MC to D2
Rationale:
Rationale: 375

7) Music Video 389

Shoot: 35mm film telecine to DigiBeta
Off-Line: Nonlinear Avid MC
On-Line: Nonlinear Discrete Logic Fire to DigiBeta
Rationale: 397

8) Student Film 413

Shoot: Super 16mm telecine to BetaSP
Off/On-Line: Nonlinear FCP to BetaSP
Rationale: 421

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FILM & VIDEO BUDGETS / SIMON AND WIESE

Appendix 435
Desperate Measures & Money Saving Ideas 437
Resources 443
Directories 445
Trade Publications 447
Miscellaneous Resources 449
Trade Associations 450
Camera Speed/Time Tables 454
Commercial Budget Bidforms 455
Series Budget 466
Budgets for Grants and Donations 474
About the Authors 477

x
SETTING UP
A PRODUCTION
COMPANY

7
 SETTING UP A PRODUCTION COMPANY

Chapter 1

SETTING UP A PRODUCTION COMPANY

He has half the deed done, who has made a beginning.
— Horace, 65- 8 BC

Horace had that right. So did Confucius who coined a similar encour-
agement five hundred years earlier: “A journey of a thousand miles
begins with the first step.” So let’s get started.

Everyone has to begin at the beginning. If you carefully follow the

advice in this book these activities will help you get your own production
company up and running. Think of that warm satisfaction that will come
over you every morning, when you read your company’s name on the
door as you enter your office. Hey, we did it! We’re a real company!

For many, starting your own production company may seem daunting.
This chapter will help dissolve that feeling of being overwhelmed. Take
things one step at a time and you’ll get there. Once it’s done, you’ll have
a foundation to build on, dreams to achieve, and a snazzy new business
card to flash around.

Incorporation

To incorporate... or not to incorporate? Most lawyers will suggest that

you incorporate in order to protect your personal assets from liability.

If you are a United States resident, and plan to have 35 or fewer stock-
holders (or maybe just one stockholder, you), most accountants will rec-
ommend a Sub-S Corporation or the new kid on the block, the Limited
Liability Company (LLC). With a Sub-S or LLC, your company owes no
Federal income tax on profit. The profit passes through the company
directly to stockholders (that includes you!). The company will still pay
state income tax which, if you pay out or reinvest all your profits at year
end, may only be the minimum.

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FILM & VIDEO BUDGETS / SIMON AND WIESE

How much does it cost to incorporate? It depends on the state, and on the
fees of the attorney or accountant in charge. In California, the Secretary of
State gets $900, plus $275 for a seal and stock certificates, plus fees. Shop
around for an accountant or lawyer and compare fees. If you already have
an accountant, maybe he or she will do it for you inexpensively.

If you choose not to incorporate, then it’s probably a good idea to name
your company and apply for a “dba” (Doing-Business-As). Your
accountant can handle this for you, or you might have a local newspaper
that will send you the forms and charge $50 or so for the required
announcement in its pages.

Federal ID

Whether you are a dba or incorporated, you still must apply for a
Federal ID number, which you need if you plan to pay the people who
work on your projects. The ID number exists to help the IRS with its
accounting. You can get a File SS4 form from the IRS or go through
your accountant. Remember, if you are a sole owner, you are not on the
payroll. You take your salary from company profit, and yes, you do owe
Federal tax on your salary.

Every payment you receive will now be written to the corporation and
not to you personally.

Business License

If you operate your business out of your house you can probably avoid a
city business license, but strictly speaking, you should have one if you
are a dba or incorporated. It’s a city’s way of keeping track of commerce,
and making a little money — actually a lot of money! In Los Angeles,
the minimum fee for motion picture producers whose productions cost
less than $50,000 in a given year is $158.89. It goes up from there on a
scale. If you are in the maximum production range of $4 million and up,
the fee is $13,665.29, but by then you’re so rich you don’t care. Be sure
to check locally for any special allowances for production companies
or small businesses — anything for a break. For the first year you usually

10
 SETTING UP A PRODUCTION COMPANY

pay a standard fee, then you pay on the preceding year’s gross income.
The City Hall Clerk can get you an application form. They will love to
help you because this is more money for the city’s coffers.

Bank Account

You cannot open a corporate bank account until you have your articles of
incorporation (which you prepare before filing for a corporation), or
your Operating Agreement if you’re an LLC, and your Federal ID number.
The bank will require copies of these documents.

For smaller companies, one business checking account should suffice.

Ask if it can be an interest-bearing account, which might help offset fees
banks charge for business accounts.

If you have a sizable payroll, you may want to set up a separate payroll
account and have a payroll service do the paperwork and actual payments.
For small payrolls, most businesses do it themselves.

Be sure to go to the bank, and introduce yourself to the bank manager, pres-
ident, or vice president. Get to know them. The day will come when
you’ll want to borrow money, set up an escrow account, or employ other
services. All this will come much easier if they feel they know you.

Corporate Taxes

Surprise — your new business owes the state! Your accountant pre-
pares the state income tax return and calculates what you owe. Happily,
there’s no federal corporate income tax if you are a Sub-S Corporation
or an LLC.

Accounting Software

We’ve heard good things about the Quicken accounting program from
Intuit. In most small companies, people do their own bookkeeping, or
hire a bookkeeper who may come in once a week or more.

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FILM & VIDEO BUDGETS / SIMON AND WIESE

Accountant

Your accountant can help you incorporate, give business planning

advice, project a business budget, supply you with W-2 and I-9 tax pay-
roll forms, and file your corporate and personal tax returns.

Your accountant will become one of your greatest allies. First, he or she
will help you set up your business, making sure you don’t miss any filing
or tax deadlines. This is their business. What may be hard for you is
extremely easy for them. They will enjoy their relationship with a film
or video producer because in the same way that numbers baffle you,
movies baffle them!

Attorney

Your attorney should be an entertainment attorney, as distinct from the

garden variety corporate type. Entertainment attorneys know things the
rest of us don’t but should — like production contracts, options and
rights acquisition, licensing, releases of every stripe, and where to have
power lunches.

Your attorney should be someone whom you know and respect.

Someone who can get things done in the entertainment community.
Even if this costs more (on an hourly basis) you will be way ahead of the
game when you want to do something whether it’s closing an investment
deal or getting a distribution contract. In addition, as you work with
your attorney you will gain a great deal of knowledge yourself that will
be of immeasurable benefit over the years.

Employees

Even in Hollywood, many incorporated production companies are made

up of no more than one or two people. When you are in production you
have many people on salary. When you are developing your projects you
want to have few employees to keep your overhead costs down.

In the beginning you will probably hire a full-time secretary or assistant to

help with the administrative chores, which will be many. As your business

12
 SETTING UP A PRODUCTION COMPANY

grows, others will be brought on. Here’s where you want to hire the right
people for the job. You want people that supplement — no, complement
— your skills. If you are not extremely well organized, then look for this
quality in those you hire. If you are well organized, then you may want
more creative types for those aspects of your business. Do not hire some-
one just like you, because your aim is to balance your company.

Create a fun atmosphere for people to work in and your productivity will
soar. Make sure they are free to make contributions to the projects and
credit them appropriately. Giving credit is one of the easiest (and cheap-
est) things you can do. It’s a way of saying thanks that goes a long way.

Becoming a Signatory to Guilds and Unions

You may or may not have to deal with guilds, but in case you do, these
are the main guilds (see Appendix for addresses): the Writers Guild of
America (WGA), Directors Guild of America (DGA), Screen Actors
Guild (SAG), and the American Federation of Radio and Television
Artists (AFTRA).

The prevailing wisdom is that by using guild members, you get more
experienced actors, writers, and directors, and that’s mainly true. On the
other hand, it all boils down to who you want to work with. Guild mem-
bership doesn’t instantly qualify anyone for anything. You have to meet
your prospective collaborators and decide for yourself.

Technically, guild members are not supposed to work with a production

company that has not signed an agreement with their guild. A writer,
actor or director may do it anyway, and sometimes use another name in
the credits. Some work non-guild jobs happily, others do it grudgingly.
Still others choose not to work with non-signatory companies at all.
When guild members choose to work on a non-guild project, make it
clear that they do so at their own risk, not the production company’s.

One producer we know has three different companies: one signatory to

SAG and AFTRA, one signatory to SAG, AFTRA, and the DGA, and
one that is not signatory to anything. Why go through that paperwork
nightmare? He wants to avoid dealing with residual payments for certain

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FILM & VIDEO BUDGETS / SIMON AND WIESE

projects, and avoid paying the extra expense of pension and health
(P&H) that guilds demand — usually around 10% to 13% of the mem-
ber’s gross salary. (For really high salaries, like stars, there is a cut-off
beyond which the company does not have to pay P&H. Check with each
guild for what it is.)

WGA – Writers Guild of America — To become signatory and hire WGA

writers, your company must be legally structured, as in a Sub-S corporation
(not a dba). Simply call and request the application forms. There is no fee
to become signatory. Your company cannot disengage from signatory sta-
tus until the current WGA agreement expires, and these agreements run
for about five-year terms. You get a copy of the agreement when you join,
or you can buy one in advance for around $15 to check it out.

AFTRA – American Federation of Radio and Television Artists and

SAG – Screen Actors Guild — The company must be legally structured
(not a dba, although there may be exceptions). There are a number of
contracts companies can sign, depending on what type of programming
they produce (i.e., free TV, cable, public TV, interactive, etc.). There is
no fee, but a new company may have to provide a bond to cover payment
of actors. Bonds can be in the form of a certified check, or a letter from
a payroll service attesting that money is on account.

DGA – Directors Guild of America — The company could be a dba or

incorporated or a partnership. The application requests information
about stockholders and ownership. It asks for documentation, like a
copy of the fictitious name statement or articles of incorporation. In
most cases, the company must have a project lined up in order to
become signatory. They want to know what the project is, what DGA
member functions you’ll be hiring, where the financing comes from, and
if you have a distributor. Basically, they want to make sure members will
be paid. If the financing looks shaky, they may ask to put the DGA money
in escrow. For TV movies and features, they may demand a security
agreement that puts a lien on the film in case you go bankrupt. That way
they can better collect any residuals. There is no fee to sign up.

14
 SETTING UP A PRODUCTION COMPANY

IATSE — The crafts people and technicians who work in television and
movies are represented by the International Alliance of Theatrical and
Stage Employees (IATSE), and a host of other locals, including the
Teamsters (the people who drive all the studio trucks and vans). Because
it is such a complicated web, it can be extremely frustrating to get
signatory information. You may end up gabbing with the secretary at
the Plasterers and Cement Finishers local.

First of all, if you’re a small production company doing low-budget

projects, you probably won’t want to become signatory to the IATSE.
The problem for little guys is that the sometimes restrictive practices
and benefits packages make it too expensive. But just in case you need to
know, here is some information.

Why become signatory to IATSE? The theory goes that union crews
(camera operators, sound mixers, grips, electrics, etc.) are more experi-
enced, hence more efficient. This is usually true — although there are
plenty of excellent people who are not union members.

When you hire union crews for scale (some feature productions are
over-scale), there's no negotiating; you pay whatever the going rate is
for that job, plus the usual payroll taxes. Plus you’ll pay union fringes:
Health/Retiree Health and Pension, Vacation/Holiday. Check with your
local to get all the current rates, rules and regulations.

To become signatory, write a letter expressing interest in becoming

signatory. The address for the Los Angeles office is in the Resources
section, but there are offices in most major cities. They send back a
three-page questionnaire. If you are approved, you’re in. For pro-
duction companies, there’s no fee. If you can’t find the right office,
call a payroll service (a company that handles union and non-union pay-
roll for production companies), since these people seem to know the
most about unions.

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FILM & VIDEO BUDGETS / SIMON AND WIESE

Bon Voyage

It may take you a week or two or several months to do all the paperwork
required to set up your production company and become signatory to
some or all of the unions.

If you are just getting started and want to get your feet wet on a pro-
duction or two, then you probably won’t go through this step. When
you do set up your first corporation you’ll find that it isn’t as intimidat-
ing as you thought, and you’ll feel empowered because now you are just
like the big guys with all the same rights and privileges. Not only that,
as president of your own corporation your parents will have something
new to brag about around the neighborhood!

What follows is the nuts and bolts of budgeting; a potpourri of ideas that
will help you think through and prepare your own production budgets.

If you come in under budget you’ll be a hero. If you go over budget, the
reputation will come to haunt you. This book is designed to help you
become remembered for your remarkable foresight and ability to deliv-
er a project on time and on budget. That’s what clients, backers, and
employees expect.

By careful planning and researching you can create a very accurate

budget before the cameras roll.

16
PRE-PRODUCTION

17
 Chapter 2

PRE-PRODUCTION
I know... why don’t we put on a show!!

Ask any production veteran — Pre-Production will make you or break

you. This is where you make the plans you live with in Production and
Post. It’s a grand scheme made up of a dizzying number of details.
One production manager we know made big points with the executive
producer by handing him a cup of espresso while on location in the middle
of nowhere. Of course, that wouldn’t have amounted to a hill of coffee
beans if the guy had forgotten to order lunch for the crew.

Pre-Production is made easier by having a checklist that contains

practically every personnel function, every service, and every piece of
equipment you might use. For our purposes, that’s the budget Line
Items section in this book. Use it to help you think through every phase
of Pre-Production, Production, and Post. What you don’t need from the
list, discard.

We find it helpful when doing a budget to actually visualize a shoot, day

by day, hour by hour, imagining what everyone is doing at any given
time. This kind of detailed thinking also helps to work out the daily
schedules and avoid conflicts.

It’s important to think about contingencies during this phase. What if the
weather turns bad? Do we have an alternate location ready to go? Is there
something else we can shoot so we don’t waste the day? What if we need
something we don’t have? Where are the nearest hardware stores, gas
stations, restaurants, groceries, rental cars, and so on. If a crew member
gets sick, do we have a list of people we can call? (For more tips and wise
thoughts from old-timers, see the Money-Saving Ideas section.)

While the budget Line Items is the ultimate Pre-Production checklist,

here are some other goods and services you’ll need during this stage.

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FILM & VIDEO BUDGETS / SIMON AND WIESE

Legal

If you don’t have one, find an entertainment lawyer you can work with.
Don’t be afraid to call several. You can find them in or around the larger
entertainment industry cities like New York and Los Angeles. Explain
that you are interviewing prospective lawyers and you’d like to meet
and talk about your project. Our experience has been that they are nice
people who won’t eat you for lunch — they may even take you to
lunch. If you’re not familiar with things legal, don’t be afraid to ask all
the questions people are too afraid to ask, like “Are you charging us for
this meeting?”

In the meeting, explain the project, and ask about what services your
lawyer will perform, and how much it will cost. For budgeting, you’ll
need to know how much to allot for the entire project. Some lawyers
charge by the hour, but many accept a flat fee for a project, or a percentage
of the budget. An average TV movie, for example, might have a budget
of $2.5 million, of which 1% to 1.5% might go for legal fees. Once
you’ve interviewed a few attorneys, you’ll have a good sense of the range
of prices for your project.

Your lawyer will probably generate various deal memos, contracts,

personal release forms/materials releases/location releases, rights
options, and the like. Tons of carefully worded paper will cross your
desk and make you cross-eyed. Eventually you'll get used to it. Then
it’ll actually start to make sense.

One way to save money in the future is to enter these documents into
your computer. On your next project, you may need to merely alter
some details. Discuss this with your lawyer first, because laws change,
and you may waste time generating your own document only to have
your lawyer recommend a new one. In any case, you’ll still want him or
her to review documents before they go out for signature.

Some specialized stationers and bookstores, like Enterprise Stationers

and Samuel French Books (see Resources section), have sample contract
books for sale. These can often get you started, but the safest tack is to
have your attorney examine any proposed contract.

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 PRE-PRODUCTION

Rights Acquisition

Is your project based on a book, article, stage play, screenplay, radio play,
or someone’s life story? If so, you’ll need to get the rights to produce it.
If it’s published, call the publisher, and ask who owns the rights. If that
doesn’t work, try a large copyright search firm like Thomson and
Thomson (800) 692-8833. If you’re really desperate, try calling the U.S.
Copyright Office, Washington, DC, (202) 707-3000. (There’s a research
fee of $20 per hour, and you can talk to the research people there for an
estimate of how long it will take.) When you’ve tracked down who
actually owns the rights you can negotiate to buy the rights or buy an
option. You’ll probably want your lawyer to advise you, since rights
acquisition can be tricky.

An option gives you the exclusive right to later acquire the rights to a
book or some other property. Here’s how it works. An option allows you
to tie up the property for a specified period of time (usually a year or
two). This means no one else can take the project from you. During the
option period, you will look for financing, write script drafts, and attract
stars. The option agreement usually states that if the term ends with no
production agreement, and if the option is not renewed, then the rights
revert back to the original owner. If, however, the project goes forward,
the option will spell out the terms for actually buying the rights, includ-
ing how much money and profit participation (if any) the owner will get.
Option agreements can be simple or complex, depending on the proper-
ty and who is involved. We’ve bought options for a dollar. We argue that
our time trying to get the property into production is worth something
and refuse to pay for an option. Other times, when it’s clear the proper-
ty has immediate value, you must pay for an option. If it’s Liz Taylor’s
life story, expect to pay a few hundred thousand.

On the other hand, if the property you want to produce has been
published in another form, then you must acquire the rights. Having
control of a property is the first element you need to begin to leverage
your project into reality. If you don’t write a script yourself then
you’ll have to option or buy the rights to one.

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FILM & VIDEO BUDGETS / SIMON AND WIESE

Staff Contracts

If your company has become a signatory to one or more of the guilds,

you may want to use standard deal-memo forms for personnel such as
writers (WGA), directors, stage managers, associate directors, unit
production managers (DGA), and actors, dancers, narrators (SAG and
AFTRA).

Call the guilds (see Appendix) and ask for copies of the standard forms
appropriate to your project (i.e., feature film, videotape music concert,
etc.). Have your lawyer review the forms just in case they need to be cus-
tomized. If a guild doesn’t have forms, it’s up to your lawyer to create the
contract, which, in most cases, is fairly simple.

The deal memos state that you agree not to pay less than the guild
minimum scale. To find out how much that scale is, as well as basic guild
rules, you need to refer to the appropriate rate cards and Basic
Agreement books, which you get from the guilds. (Also see Resources
section for The Labor Guide.) We advise getting the books and cards,
even though you may wind up calling back several times to confirm the
rates, residuals, and other matters for your specific project. It’s now a
running joke in our office that whoever gets to confirm rates with a cer-
tain guild (which shall remain nameless) also gets a free hour of psy-
chotherapy and a group hug. That’s because the rates seem to change
overnight depending on whom you talk to. We usually go back and forth
a few times until it’s finally settled. (Also see “Negotiating with Crews”
later in this chapter.)

Music Clearance

If copyrighted music is an important part of your project, start the clearance

process as soon as the script is “locked,” that is, approved. Why start early?
Some music may be too expensive, or perhaps the owner won’t give per-
mission for its use. Until you know what you can use, and how much it
will cost, your budget — and your show — will be incomplete.

When you clear a piece of music, you pay a license fee to the copyright
owner in exchange for the right to use that music in your show. The

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 PRE-PRODUCTION

price depends on what medium you use (i.e., feature film, television, home
video, CD-ROM, the Internet, etc.), what territories you’ll distribute to
(U.S., North American, European, etc.), and what term you want, or can
afford (three years, five years, perpetuity).

Many producers use a music clearing service to track down copyright

owners and negotiate prices. If your needs are at all complex, this is the
way to go, since it is a specialized business. If clearances are not obtained
correctly, and if you’re caught, owners can get nasty and throw injunctions
at you, forcing you to re-edit or even destroy release prints or dubs.

Music clearance services do charge different fees for their work, so call a
few to compare. If you’re in New York or Los Angeles (or at your public
library), check the Business to Business phone directory for either city
to get a listing. Clearance services are also listed in such production
guides as LA 411, The NYPG (New York Production Guide), and The
Hollywood Reporter Blu-Book, available at many bookstores.

It is prudent to contact a clearance service or your attorney, even if you

believe your music to be in the public domain, or if you intend to claim
“fair use.” Public domain music must be verified as such, and “fair use,”
while it may apply to limited use of music in news, criticism or scholarship,
may or may not be appropriate for your project. And one last little tip.
Somebody started the rumor that producers can use up to eight bars of a
song without paying for it. Sorry — no can do.

Feature Film Clips

If you want to use clips from Hollywood feature films in your project,
you may be in for a trip on a long and winding road. With patience and
perseverance you will prevail. The cost per clip depends on the rights you
or your distributor need. So the first step is to call your distributor and
find out. If you don’t have one yet, then anticipate what rights you’ll
need by talking to a few producers of similar projects who have been
through the distribution wars.

What rights are there to be had? The big banana is “worldwide” (or as they
sometimes say, “throughout the universe”), “in all media, in perpetuity,”

23