Ted Hope on Sustaining Independent Film Production

At a recent Inside the Edit Room event at the Apple Store, Hope answered Magnet Media’s questions about the nuts and bolts of independent film production.

You’ve produced fifty films since 1990. That sounds like a lot of work.

I just need 485 days in the year, fifteen hours a day, to get it all done, and that's if I don’t take a break, particularly for lunch.

So what keeps you so busy? How much of your day is spent working with scripts, either reading submissions or working with material that you are developing?

I thought up until recently that my office covered only about 500 scripts a year. But I just asked and I got back news that I was off by about 720. There are 1124 scripts last year that we covered. And if you figure that each time you write up a letter, an email, it usually does take about ten minutes of time, so to deal with that amount of scripts, I figure one invests about 250 hours, or about 25 ten-hour days throughout the year.

Some of those scripts are solicited from agents, or are from writers you already have a relationship with. But the majority, are unsolicited, meaning that they come from writers who’ve written query letters that you’ve responded positively to. What makes for a strong pitch letter?

I get a lot of [letters] that are written very flamboyantly. I throw those letters away immediately. I don’t want to be sold to. I want to hear what the story is; I want someone to be really direct. And I want them to show some sort of understanding of whom they're writing to, so it doesn't feel like a generic letter that has gone out to 200,000 other places. So they've researched how to spell my name, the correct name of my company, they know a little something about the films that we've made. And then they're going to speak about why the film might appeal to me. If you do that really well, you'll have a one in five chance that somebody will read the whole letter and respond. If you write the perfect letter, you probably have to send that letter in a couple times, and maybe if you are really lucky, it will get the response you wanted. No one said it would be easy.

The other thing that happens, I feel that people always try to reach the wrong person. They send a letter to Harvey Weinstein. They should be sending a letter to the development person's assistant. Or if they can somehow make contact with the intern that's working the phones that day, get them. It's really what you want to be doing is building a groundswell of support, so that when you send the script out, it’s not going first to the person that's going to get the movie made, but the person that's going to respond positively. It becomes a lot harder to say “no” the more other people are saying “yes,” particularly within the same company.

How many scripts do you take into development in a year?

We only acquire about five scripts or projects a year.

Can you describe the development process?

Well, each script averages about ten drafts, on a minimum. The Door in the Floor, which we had come out this past year, was only 42 drafts. But when you recognize that it takes three hours to read each draft thoughtfully, that's 30 hours we spent reading scripts, each project. Each of those drafts, it's taken us an hour and a half to write notes. So it's another day and a half with each of those drafts. We have a meeting, and usually each meeting is two hours so that's another two days in total for those projects. So it comes out to nine days of development per project for twenty projects – that's 180 days. That's split over the two years of development. So I need 90 days of development time each year, plus the 25 days I need to find the project. That’s 115 days of development a year in order to stay in business.

So then I have to get the projects financed. I find that I spend about a third of my day chasing money. Which is usually a complete dead end. But it takes a third of my day, let's say 250 days of work in a usual work year, that's 82 days I spend chasing money. Add it on to those other things and my time is being used up fast.

How do you know where to go for money?

There are probably eight or nine people that that have private equity [for films], companies like Bull's Eye and Stratus and Bob Yari Films. This guy financed twenty-two or twenty-three films over the last year and a half. So there are those groups of similar companies, outside of the studios, that are the usual suspects.

What’s the process for negotiating with one of these firms?

What will take place is probably like a three-year dance, on the average, before the typical private equity player will actually invest in movies. You wind up having a meeting and someone says, “I want to invest in films.” If they like the idea the first time they're just trying to get information about the film business from you. The second time they maybe want to consider it, but they're not going to part with their money just yet. They want to tell their friends over cocktails that they could have invested The Door in the Floor, right? But they never were going to invest in it. They’re still getting comfortable with the whole idea of film investing.

With potential investors who sit on the fence after you’ve pitched them multiple projects, how do you know when to cut your losses?

If these people are still around the next time I'm looking for money, I'll give them a situation where, once the deal is set and there are already some other investors involved they can get involved if they can meet the terms in really quick time. We find that often they have to really feel that they missed out before they will actually commit. I will invite them to a premiere or something after, and if they really liked it then they'll finally get serious. So this time they usually won't recant in the four weeks or something [we’ve given them] to come up with money. But it's a long process. And I go back and forth. There are times I've sworn I'll never take any private equity into my movies again.

What makes working with private investors so difficult?

Because you, as the producer, end up having to educate them. It's not their business, it's their money, and they're thinking all the time what else they could have done with their money. And it would have brought them a hell of a lot more pleasure than having met Cameron Diaz as their reward. So it's a pain in the ass, no one’s time/reward balance is where they want it. But at the end of the day, I think the key to the growing independent movie sector is that the industry now is more receptive to private equity than ever before. And an experienced producer can crack a deal with a distributor that is much more lucrative for the money than it ever has been. And the distributor is benefiting too, as they are increasing their output, their money is going further. We are in one of those rare times when it can be a real win/win situation for all parties.

Obviously something like The Blair Witch Project made a lot of money for its investors. But not all movies have that ratio of investment to profit. What’s the downside?

Certainly, every year you've had these great success stories come out of Sundance, people get excited. Filmmakers and investors alike always forget, for every Napoleon Dynamite and Garden State there were, I think, 75 other films in the Festival. And for every one of those films that got in, there were a thousand applicants that applied to Sundance to get to that 75. Those films, those other 925, plus the 65 films that went to Sundance, didn't get distribution. And the other thing you really realize, it takes five years for me to make a movie. It usually takes investors three years to get paid. So that's still a big problem for private equity – an eight-year process from investment to return.

How do you figure out profit participation with investors? Is there a formula?

Of the fifty films we've done, the financing has come together in different ways every time. Generally, though, for private equity, people usually put a premium on it, so that when the recoupment comes in they get their money back, plus a premium. And that usually ranges somewhere between ten and 30 percent. I want to encourage private equity to invest in movies so I usually subscribe to something like 25%. But it's higher than what you really need to do. If someone's going to be crazy enough to invest in a film they should get paid well. So that's the first, most common way.

Now there's another model with films that are budgeted, say, under half a million dollars, that if they're not family friends, frequently people now do structures where if they have a star cast, or they want to attract a higher level, where they give a percentage of what's known as producer's gross – the first revenues that come in on the film. Not the money that someone pays to the box office. You make a film independently, you bring it to market, say the Sundance Film Festival, and then Fox Searchlight or Focus Features or Miramax says, oh I want to give you $10,000,000 for it. The film's sales agent will take a cut off that, or your producer's rep, somewhere between five and ten percent. Say you're stuck with another $9,000,000 you don't know what to do with. If you made it under, say, the Pieces of April model, I believe that your creative team will receive 40% of that right off the bat. So they work in that 30 to 40 percent producer's gross. Frequently they split that up between the director and the producer, the cast and the crew in some percentage arrangement.

How do you find working with foreign sales agents?

It will depend on their appetite for the movie and what their overall situation is. Each market, before I even go out to a sales agent, I try to do a little bit of research of what films I know they're already handling. You try to get an idea of what all they're working on. You don’t want to compete with other films on their slate. So, it’s not just their appetite to work with you, it’s also what they had to eat the day before. Once you make the deal, you want to incentivize them to keep selling the movie. Sometimes on an over-negotiated deal you'll see that it only makes sense to them to sell the eight or nine major territories, because that's where they earn all their money. They won't do the clean up that's necessary for small ones. I like to structure deals where they get a higher percentage on smaller territories so they can go out and get it. You can drive some lower percentages for the major territories because they'll make more money in those.

Now, you want to get your money back, but you also then want to push the sales agent to keep driving the film. So I also feel that at a certain point where you've recouped, you can give a higher percentage. Because at that point, the major territories, you want people to work extra hard, because that's your cash. So why not let them go up to fifteen or twenty percent? And why not at a certain level make that whole thing retroactive? Incentivize them to keep going. You want to get as much money as you can back, but in the long run you want them to want your movies the next time, you want them to come in earlier next time, you want to incentivize them to be there for the long haul, to be a long term relationship for you. It’s always about the relationships.

So, the project is financed, and now you’re ready to shoot. What happens next?

Let’s say, for sake of example, six-ten weeks of pre-production. Pre-production's a little easier than shooting it because it's about 60% of my time – that's about 21 days on a seven week prep. Then let’s say, 35 days of shooting, on the average. That takes about 90% of my time when we're working. Twenty weeks in post. And that's usually easy on the producer, so it's about 25% of my time, I would say, on the average. Once it gets into distribution and marketing it's usually about ten days for a project of my time. So for each film, when you get down to it, it's 87 1/2 days I figure, in any year, that I need to contribute. With three films a year, that's 261 1/2 days. But you only have 250 workdays a year, so I'm already working through the weekend.

In addition, I try to go to film festivals, like Sundance. I have to travel to Los Angeles a lot too, and I try to get involved in political stuff around film and other issues. Let's just say that adds up to another 26 days. So when I added all this up – 25 days a year chasing projects and trying to acquire them, 90 days a year developing them, 82 days a year financing them, 262 days producing them, and 26 extra days – I figure I need 485 days a year working. That's based on a ten-hour days.

In other words, impossible. So how do you make it work?

The way I feel is, how the hell does this ever work? How can we get this made? Well, you've got to take a partner. I need to get a partner to cover up all these extra days, because when in production I only have 10% of my day to attend to all this other stuff, so what do I do? I figured, okay, it all works out if I get a partner. The partner and I will only have to work one third of the weekend. We'll work 15 hour days, we'll get it all made.

But then you also have to share the producing fees, which are not very high on low budget films. Can an independent producer actually make a living?

If you’re a successful independent producer, you should make at least $100,000 a year. Is that true? Can you do that? A producer usually gets paid a fee somewhere around 5% of your budget. And usually, an independent film is under $10,000,000. If the budget is around $1,000,000 a producer will make $50,000 and like $25,000 increases per every million dollars in budget. But usually that will cap out pretty quick at, like $150,000 until you've done five more films and $250,000 until you have a hit. It can keep going. It needs to keep going if you plan to survive. But there never is a guarantee. Financiers tell me they want to work with us because we make quality films at a good price and because we have great taste and are good to deal with, but then they tell me they don’t want to pay me my quote – go figure.

Producing’s a lot of work, but the compensation’s not bad.

Sounds good, right? Producing is really not bad money, right?. But let's reveal how long it takes to get your movies made. Now, I've made about 50 films, and I would say if I averaged it all out it really comes down to five years for each project. Usually it's about two years that we spent developing it, about a year that we spent financing it, a year in production and post, and about a year distributing it, marketing it to the whole film festival thing. You could be doing a film for, say, $3,000,000 – say a $75,000 fee -- you're getting paid $15,000 a year over five years. [To make] that $100,000 goal, you have that other film at $3,000,000 each year, one at $5,000,000 each year, one at $10,000,000 each year, and then you'd be earning close to that goal of $100,000. Plus, you'd be on the list the Hollywood Reporter puts out each year as the most prolific producers in the country, because that's what that will get you. If you do three films a year, you're on top. But now I have to split that hundred grand with a partner, so I'm only making half, back down to 50 – and working 15 hours a day, five days a week -- plus a 1/3 of the weekends. On an hourly basis, my babysitter makes more money.

What kind of overhead do you maintain? Do you have an office? That would also mean incurring expenses for staff, electricity, healthcare, internet, and that can really add up.

I'm still reliant on the antiquated idea that I need to have a place I go to every day. Once I figure out that overhead situation it comes to another $300,000 a year minimum. That would pay for an assistant, or two assistants, and the computers, and the Xerox and copiers. So you need a third partner to make that money, and he or she has to be able to get paid on their movies. So then we can pay off the overheads. So, I think I finally cracked the code. I've been doing this now for 18 years, I finally figured out how to run a company. If I have two partners, we don't take fees, we make seven films a year, we'll break even. That's the independent film business.

Do you make seven films a year?

Last year I think we made one. Luckily, we still have a few tricks left on how to survive.

So how do you survive?

We find that we go out with our films and finance in cycles. And one of every three films that we have fully packaged – director, cast, all that – gets financed each year. But it’s not that the other two die, it’s just that they get delayed because of actor availability or production schedules. So on top of that, you find it's usually one out of every five films that are in development move through to packaging projects in a given year. And then, on top of that, I would say we're very successful at developing scripts. Usually in this business only about one in eight get made. We usually average much closer to 75% of the films that we put in development go to production.

You’ve been successful since you started out, with breakout indie hits like The Brothers McMullen and Walking and Talking, and have nurtured directors like Hal Hartley and Ang Lee. Has it gotten easier for over the years?

It doesn't ever get easier to get your movies made, but it does get a little easier to find the good movies to make. And it really seems to me is, the first thing you have to do then, if you're planning to work as a film producer, is figure out how to survive as long as you possibly can. That's the key, endurance. And I think one of the key things I tried to figure out, how is it you can endure, is always remember you want to be able to look back and feel good about what it is you do. The film business is an industry that's overrun by narcissistic, egotistical, lying malcontent, misanthropic – all those beautiful things - individuals. You have to deal with that day in and day out.

You do hear a lot of horror stories about bad behavior in the film industry. But for you, it’s important to maintain your integrity as well as find success in the marketplace.

I think one of the things that keeps me going as a film producer that has got me through these years is just feeling like, well, I'm going to take the high moral road. Those people are going to be lying to me, trying to cheat me, I'm going to try hard as I can to not compromise my ethics. Always keeping in mind, what is the world that I want? I want a world that has more of the movies in it that I love, more films that are New York City type films, informed by the world we live in and the history that has come before us. I don’t want to change my good behavior because of someone else’s bad behavior. Sure you are going to be cheated, mistreated and lied to, but you also don’t have to do business with them ever again.

Do you think it matters that you are in New York, as opposed to Los Angeles?

I'm really thankful I live in New York. I try to walk around and try to find those little bits that made me first want to make movies -- wonder and mystery and serendipity. And luckily, on the streets of New York, you're assaulted with chaos. And no matter how well I organize my life and get my routine together I find those things that break through. Like, I can’t believe it! That window washer is an artist in the way that he – what if I made a movie about -? You know, I am just trying to keep those things going, finding those nuggets of inspiration.

You’ve been fortunate to work with so many great directors at the beginnings of their careers. What’s been one of your favorite experiences?

The story I've always loved is, I had the good fortune of getting involved with The Brothers McMullen after it had already been shot. And at times the director, Eddie Burns, had a cut that was two and a half hours long. He had submitted it to every studio, and everyone had passed on it. And at the time, that movie was a melodramatic weepy. And at two and a half hours, that's what you recognize. Everyone had a chance to look at that movie, and everyone passed on it. But you do two weeks worth of work with Eddie in the edit room, so you have to realize that what he has is a comedy. And at that point, when we took the film to Sundance, everybody wanted to buy that movie. And Eddie has hanging in his house a framed collection of his 35 rejection notices. I think that's always the lesson to remember, that a lot of people don't know how to look at work unless it's presented to them in the right format. People never see a work-in-progress for what it is. They don’t want to buy a bud and watch it bloom; they want that flower right here right now.

What advice would you give to an aspiring producer?

I think the first thing I learned is, I worked as a production assistant for three years, and someone on my first day at the job, when I asked how I do the job, said “Just look around and try to figure out how you can do this a little bit better? And I think that's still the best advice anyone gave me. I keep try to figuring out, how do I do this job as a producer a little bit better?

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