Down to Business: A Conversation about Film Financials with Red Sanders

One of the strange things about filmmaking is how the business side of things can be just as much an art form as the films themselves. The process of getting something made no matter how tedious or uninspirational it might be — and no matter how many legal documents and spreadsheets are involved — is still creative. You’re still creating something. Film and business are, in many ways, symbiotic.

We reached out to our friend Red Sanders, president of Red Productions, to pick his brain about the nitty-gritty of film financials. After years of getting things made — whether it be commercials, short films, feature films, documentaries, you name it — we thought Red might have some quality advice. We weren’t disappointed.

If you’re ready to get down to business, here is our conversation with Red Sanders.

Let’s start with a little background.

Sure thing. So I started Red Productions right out of college. I went to TCU; and when I graduated, all my friends moved to L.A. and New York. But I thought, You know, it might be fun if we started something here in Dallas–Fort Worth. I don’t regret that decision. It’s been such a fun ride.

There are two sides to Red Productions: one side is commercial production where we work with brands like Red Bull and the Dallas Cowboys. The other side is a film development company, which produces short films, feature films, documentaries. A couple years ago we produced a feature called Searching for Sonny. Then we’ve got our newest one, Intramural, which is going to be released this spring. Long story short: we tell stories and we try to have fun doing it.

What advice would you give filmmakers about film financials?

Well, it’s good to remember that early on, you’re going to bleed financially. When you’re starting a film, the first money in is usually the hardest to get. With Searching for Sonny, we put our own money in to do a teaser trailer, hire a lawyer to draft all the legal documents for raising the actual money, and hire a casting director.

So you paid to produce a trailer for a film you weren’t even sure was going to happen?

Right. We then had the pieces in place to go raise the rest of the money in a legal way. You can’t just take checks from your friends and family, put them into your checking account, and go, “We’re making a movie!” I mean, you can do that, but you’re exposing yourself to a lot of risk. We don’t know what we don’t know, so we hired a securities lawyer who did know all that stuff.

A securities lawyer.

Yeah. That’s the specific type. I mean, if you have just one or two people investing in the film, you don’t need the securities lawyer. You don’t need to spend all that money. It’s just a simple partnership agreement. But if you have, say, 20+ investors each putting in a small amount, now you need a PPM, a private placement memorandum, that goes into a lot more of the terms and conditions, and breaks down the risk for everyone to make sure everyone is on the same page. Films are one of the more risky investments, especially in the low-budget arena.

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“In this day and age, if you aren’t filming in a state that gives film incentives, you are throwing money away. ”

Tip #1: Location Is Key

What are some smart decisions filmmakers can make financially?

One thing you really have to think about is where you’re shooting your film. If you’re shooting in your hometown, there are a lot of people that are willing to get behind you and help you make it happen. If you’re shooting out of state where you don’t know anybody, it’s going to be harder.

And the other big thing to think about is film incentives. In this day and age, if you aren’t filming in a state that gives film incentives, you are throwing money away. A lot of states, Texas included, have really great incentive packages to attract filmmakers. You can get up to 22.5 percent of your budget back. Cash rebate.

If you do opt for the rebate, though, you’ve got to make sure your books are really well documented because the state is going to audit them before they give you a check. The other thing you have to remember is to apply for the incentives ahead of time. You can’t shoot a film and then retroactively say, “Hey, we shot this film.”

How would people find the film incentives for their state?

Just Google a state’s name plus “film incentives” and you’ll find them. They’re easy to find.

“No matter what, whether you get a big distributor on board or self-release, you’re going to have to spend money on marketing.”

Tip #2: Don’t Skimp on Marketing

Do you try to get most things for free, to keep your budget down?

Actually, one thing I would advise, having done it both ways, is to budget so that you can always pay for locations. Even if it’s just like $50 or something. If someone says, “Yeah, come film at our place!” a lot of times you’ll end up getting a call the day before shooting: “Oh, sorry. I talked to my wife, and she doesn’t want you to film here at the house.” You weren’t paying him, he’s just a friend, so there’s nothing you can do.

Is there a percentage you advise setting aside for marketing, festivals, stuff like that?

No matter what, whether you get a big distributor on board or self-release, you’re going to have to spend money on marketing. What usually ends up happening, though, is most filmmakers will set aside some marketing money as their last line item, and then they rob from that fund throughout the film.

One good strategy to avoid doing this is to go to an investor, someone who says, “I want to invest, but I don’t want to be the first money in.” Or maybe she just doesn’t want to put her money in right now. You can say, “Well, look, we’re going to need $5,000 for finishing funds, and most of that is going to go toward marketing.” You can also let her know you won’t need that money until you’re ready to release. This way she won’t be out her money for as long, and you won’t be tempted to steal from your marketing fund to pay for production. Or, if that’s not an option, take that marketing money out of your account and hide it somewhere.

The point is it’s not enough just to get your film into festivals. Sometimes there are 150 films playing at these festivals. You have to spend money to market. You need street teams, social media videos, advertising, Google pay per click, Facebook ads. See what you can do to really get the word out in the industry. If you can, I think some of the best money spent at the end [of production] is for a publicist. They have a whole Rolodex you’d never have access to. Just make sure they have experience in the film space. Preferably someone in a city that’s got a thriving film environment. See what you can do to really get the word out in the industry about it.

“The bigger your budget, the bigger the actor you’re going to need if you want to make your money back.”

Tip #3: Provide Snacks (and other essential investments)

Looking back on the films you’ve made, are there certain things you would say are definitely worth spending money on?

Yeah. Let’s go through each stage. Right from the beginning, a casting director is so worth your money. They’re going to open up a totally different world for you. They can get your script in front of known talent. So you’re going to want someone in L.A. or New York who’s cast other films. Or, better yet, find an associate casting director who’s worked under a big-name casting director.

The fact is, the bigger your budget, the bigger the actor you’re going to need if you want to make your money back. If you’re going to make a film for over $500,000, don’t do it unless you’ve got some named talent. Named actors have a built-in equity that will get the attention of people in the industry — and distributors.

It’s also worth it right from the beginning to pay your key crew members for at least a few days of preproduction. You want them to be there and be dedicated, not trying to squeeze it in while they’re working on something else. It’s also worthwhile to pay actors to come in for a rehearsal day.

During production, don’t skimp on food. It seems like a small thing, but providing food is one of the best things you can do.

In post-production, especially on independent films, it’s those finishing touches that usually get overlooked or cut. Like color correction. Those are absolutely worth your money. Don’t skimp on them.

“People want to be seen as professionals. Paying them is a way of honoring them in that respect.”

Tip #4: Pay People for Their Best Work

I think it’s interesting — your strategy of paying people to get the best work out of them. Some people think the opposite: that the best work comes from people working for free, out of passion.

Well, there are two sides to the coin. There’s nothing better than getting a few friends together and creating a passion project. Just going out and making it happen. When I look back at the short-form stuff we’ve done — some of our most award-winning work — all of those were made with the least amount of money or no money at all. That works for a short film. But when you’re trying to make a feature — and this is the flip side of the coin — your friends probably can’t take off for a month to come help you. It’s too much work. People still have to eat. And I think people want to be seen as professionals. Paying them is a way of honoring them in that respect.

“Mastering a few basics can make the difference between your vision coming to life or continuing to live on your hard drive for the rest of your life.”

Tip #5: Use the “Most Favored Nations” Clause

Is there anything else people should know about in terms of financials?

Yes, the MFN clause or the “most favored nations” clause, which just means, hey, everyone is going to get paid the same on this production. Or at least everyone in the same category is getting paid the same: all actors, all key crew members, all PAs, and so on. That way everyone knows from the get-go that everyone is equally important. And you also don’t have to deal with one person trying to negotiate a higher rate. You can explain that your project is working under the MFN clause and everyone is getting paid the same. It’s a pact you make that everyone is on board with.

And this is an understood thing?

Yeah. Especially in the film world, we hear that a lot.

That’s handy.

Oh yeah.

Big thanks to Red Sanders for taking the time to chat with us and share some of his hard-earned wisdom. The business side of filmmaking might not be pretty, but it’s part of the craft, part of the art. Mastering a few basics can make the difference between your vision coming to life or continuing to live on your hard drive for the rest of your life. And nobody wants that.

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