Woodstock Panelists Advice to Indy Filmmakers: Don’t Count on Studios’ Specialty Divisions

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Woodstock Film Festival panelists discussing the Future of Independent Filmmaking seemed to agree that the specialty divisions of the major studios are selecting many fewer films for broad theatrical release, perhaps as few as twenty per year.   For independent filmmakers, the current environment is almost like going back to 1975, before the establishment of specialty divisions, such as Fox Searchlight and Sony Classics.  But there is one notable difference between then and  now: the affordability of equipment and editing software has greatly reduced the economic barriers to aspiring filmmakers.   The recession has considerably tightened up funding sources, but for an independent filmmaker who is still able to raise $250 thousand to make a film, it would be responsible to try to raise an additional $150 thousand Prints and Advertising (P&A) funds at the onset, to increase their chances of getting the completed film into distribution, advised panelist Richard Linklater.  One encouraging development is the rise of “service distributors”,  some of whom have previously worked with the studio’s specialty divisions, and now are on their own, and able to provide expertise in independent film distirbution.  In addition to Richard Linklater, the other panelists were John Sloss, Ira Sachs and Peter Saraf, all moderated by Scott Macaulay, the editor of “Filmmaker Magazine.”

Entrepreneurship Down, and Skewed to Low Income Areas

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SBA and Kauffman Foundation studies both indicate that entrepeneurship trended down in 2008.    Business starts were down 14% in the third quarter of 2008 versus the same period a year earlier, Brian Headd, an SBA economist told the WSJ online.   According to Robert Fairlie, a University of California, Santa Cruz, economist, working with the Kauffman Foundation, the number of low income potential new businesses, such as baby sitting and house-cleaning services, grew in 2008, while those with higher income potential did not, suggesting that new business starts were driven more by necessity than opportunity.  The recession is taking its toll: according to a Federal Reserve July survey of 53 lending officers, “more than one third reported tightening terms for small-business loans in the prior three months, while only one reported easing terms.”

Comfort Restaurant looked to Customers for Financing

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After Comfort Restaurant in Hastings-on-Hudson was denied more traditional financing needed to move into a bigger space on the other side of Warburton Avenue, chef owner John Halko successfully tapped his loyal customers for about $25,000 of precious capital, by selling them V.I.P cards, good for discounted meals for up to two years.  As a result, Halko was able to open Comfort Lounge in May of this year.   In a recent review, “NY Times” critic Emily Denitto told readers that Comfort Lounge is “serving up intriguing food with a refreshing focus on healthy ingredients and various cultural influences.”  Decor is still being worked out, reported Denitto, “cushions are planned for the banquette, and there is a promise of some kind of art for the walls.”

Why Businesses go Bankrupt: Tavern on the Green

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Manhattan icon Tavern on the Green filed for bankruptcy under chapter 11 earlier this month, with chief executive Jennifer Oz LeRoy citing “extreme financial distress brought on by the current financial crisis and the City of New York’s decision not to renew our lease, as the dual factors behind the decision.” Described as “more spectacle than restaurant” in the 2008 Zagat guide, Tavern was informed by New York City’s Department of Parks and Recreation on August 28th that its lease would not be renewed, with the new 20-year lease for the space instead going to Dean Poll, who runs the Boathouse restaurant in Central Park.

A visitor to Tavern from Cave Creek, Arizona told Zagat in May of 2009: “The only thing worse than the food was the service!!! Absolutely a waste of time, after such a big build up. Food was bland, served lukewarm, like a low budget cruise ship or Las Vegas hotel. When I asked the waiter about a wine pairing, he pointed at the menu with his pen and rolled his eyes. Absolutely no substitutions or accommodations from the kitchen, [the] waiter explained that the kitchen staff is miserable.”

The kitchen staff probably became even more miserable to hear about the bankruptcy, especially given that Tavern owed $1.7 million to the pension and health benefits funds managed by the New York Hotel & Motel Trades Council, the union that represents Tavern’s 400-plus employees.  Ms. LeRoy, who is hoping for a busy final four months until Tavern’s lease expires at year end, said in a statement that the restaurant plans to honor all of its obligations to its loyal employees.

Lesson Learned: In today’s recessionary environment, customers are looking for tasty food at prices that represent a good value, as opposed to glitzy decor.  As “Entrepreneur” explained in their November 2009 article about new trends in the restaurant trade: “Plush dining rooms, star chefs and menus built around foie gras and truffles feel outdated – while rooms that are simple, with a personal touch, feel right.”

Why Businesses go Bankrupt: The Tribune Company

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When Sam Zell completed an $8.2 billion acquisition of the Tribune Company with an equity investment of only $315 million, he was described alternately as “reckless” and a “genius” by the financial press.  Zell’s main strategy was to sell assets and deleverage his position, but plans to sell the Food Network fell through, while plans to sell Wrigley Field and the Chicago Cubs were delayed, and Zell took the Tribune Company (excluding the baseball franchise) into bankruptcy in December of 2008.  On October 13th 2009, a U.S. bankruptcy judge ruled that the Tribune Company could sell the Chicago Cubs to the Ricketts family for $845 million.  In conjunction with the sale of the team, the Chicago Cubs filed for a separate bankruptcy, designed to protect its new owners from claims from Tribune Company creditors, the “Chicago Tribune” reported.

Lesson Learned: Allow a little extra time for the sale of complex assets in your business plans, especially if that is critical to your financial survival.

4/19/2011 update:  The Wall Street Journal reported today that the Tribune’s former creditors are suing the banks who financed Zell’s acquisition, and the former shareholders who received the $8 billion payout, under a legal concept known as “fraudulent transfer”, arguing that the deal was so fundamentally flawed, they should have known it would destroy the Tribune.