A town hall meeting in Livonia (and a simulcast of the event in Grand Rapids) brought out a couple of thousand folks, most of whom have benefited from the huge increase in the volume of production work that has come to the state since the production tax incentive legislation was signed into law in April, 2008. 

There were great stories told, and passionate points made--mostly to crowds that overwhelmingly support the continuation of the tax incentive program that has sparked significant economic development to Michigan.  The program was slated for significant changes/reductions as outlined (albeit briefly) in Governor Rick Snyder's budget proposal that the executive branch introduced last week.  There are certainly questions about the program's effectiveness, but the most recent study was done by Ernst & Young, and it shows a great return on investment.

So now that the production community's support is galvanized--across the state--what is next?  If the past week is any indicator, the coming weeks will certainly see extensive debate about the governor's budget.  And while the production tax incentive is a huge issue, it is an issue that has to be taken in the context of some sweeping changes to how Michigan deals with taxation and economic development across the board.  We're looking forward to the discussion, and to finding ways to continue sparking opportunities for our entertainment industry clients working in Michigan.

We hear each other loud and clear.  Now is the time for the rest of the state to hear how a thriving production industry in Michigan can help us all.

Our artist clients are engaged in the constant search for new (and robust) revenue streams, and are working hard to live the dream of eating off of what their music generates financially.  To the vast majority of artists, it remains mostly that: a dream.  But it's a dream that is born out of passion and art, so somehow- for a while at least- it is pursued honestly and with hard work.  The same observations we have been making for years- the music business model is broken, no one knows what to do- are just boring observations now.  Statements of the obvious even?

So how do we move beyond stating the obvious and get in to working towards making music work for the people that make music?  One key way is to know how the money flows--and the FMC revenue project does that, but from the perspective of the artist rather than the balance sheet jumble of labels, publishers, etc.  It is likely to be a very helpful study.

And for the record, we were really happy to have helped out (in small, lawyerly ways) on some of the collaborations between Topspin and Air Traffic Control last year.  Forward thinking projects = fun.

Production tax incentive programs are definitely taking fire as we come to the close of 2010.  Nevertheless, the soft money that tax incentives bring to production budgets continue to help get projects that otherwise might languish in development limbo off the ground.  As many states and jurisdictions (including our home base, Michigan) debate the sustainability of production incentive programs, there are still a lot of options for producers seeking government help to get from limbo to lensing. 

One of the challenges that face producers seeking tax credit support is that the application and administrative processes for the programs vary widely.  It takes some concerted effort to evaluate not only the bottom line benefits of each jurisdiction's program, but all of the nuances of participating in those programs as well.  And then there are the true variables: the subjective criteria in each of the programs that can be impossible to predict.

In Michigan, projects have been denied tax credits because of concerns about the content of submitted scripts and because the Michigan Film Office determined that there were not sufficient economic development benefits to the state that would result from bringing the denied projects to the state.  Michigan is not alone.  This week we learned that Robert Rodriguez's most recent release, Machete, was denied incentive support in Texas because it portrayed Texas in a negative light.

There really is no escaping subjective criteria in the administration of the production incentive programs.  The key to successful utilization of incentive financing is working with professionals that have frequent interactions with the administrators of the programs in the jurisdictions that productions are considering.  While no one can predict an outcome when it comes to subjective criteria, it helps to know what has happened in the past and to have some insight into how decision makers approach each project as the applications come in. 

Set aside, for now at least, the long saga of how Peter Jackson ended up as the eventual (and logical!) helmsman for these films.  And even set aside the guilds' boycott of the project that was only recently called off.  What is really interesting to me here are the events that transpired to keep New Zealand as the location of these films.

The thumbnail of the story is that New Line and its parent, Warner Bros., threatened to move the production of the films as a result of fracas surrounding the labor issues.  Then, people rallied around the cause (check out the promotional trailer for the demonstrations), and protested in the streets when WB execs were in the country for meetings to convince the New Zealand government and the producers to keep the films in New Zealand.

Now, it's pretty clear that the studio was just doing what studios do: negotiating the best deal for the production of what promise to be huge films for them.  So, what can we take away from this?  A few things:

1.  Productions of major motion pictures are major economic events, and around the world, they inspire public and political action to attract and retain them.

2.  Studios are always going to work for the best deal on physical production to maximize returns on investment.

3.  Labor issues are a critically important factor in steering production work.

4.  Currency fluctuations and government incentives/subsidies are (still) critically important factors in steering production work.

As things settling down with the planning of these films, we can now look forward to them taking shape as Jackson and his team work to dazzle the world with their movie magic.

New Orleans is a music town, and in the years since Katrina, musicians have rallied around their brothers and sisters, musician and non-musician alike, to help with the recovery.  Air Traffic Control Education Fund, a national non-profit, has collaborated with the Future of Music Coalition to facilitate directed assistance to the people of New Orleans by musicians in the years since Katrina.

Their efforts have culminated in this project, Dear New Orleans - A Benefit Album, that was released last week.  Learn more about what artists have been doing to help in New Orleans by checking it out.  And get a great record while you're at it.  The work isn't done, but after five years, it helps to slow down and enjoy the music that helps tie New Orleans to the rest of America and the world.

Read about the deal HERE and HERE.

There are shades of re-invention of the film distribution models in this story, and it's pretty clear that the process is in full swing at this point.  The movement to faster arrival of films on streaming platforms has been predicted for a while, so this is likely another step along the road towards a theatrical/non-theatrical universe where the non-theatrical world is mostly just streaming.  Slumping DVD sales supports the idea, but just like in the music industry, it's really hard to say where things will be a year from now....

Check it out HERE.

This article is really worth the read.  We get a lot of calls from clients that get visited by the performance rights organizations, and the whole "of course people should pay for music, just not us" conversation inevitably ensues. 

Is the system broken?

The basic concept of the Concord Free Press (visit them HERE) is that the books they publish are free (100% discount!).  They only ask that those who pick up their books from bookstores make a donation to a charity or person in need, record that donation, and pass the book along after the reader has read it.  The publisher's website is basically a long list of donations that readers have made that are associated with each of their four titles currently in print, and the list is impressive.

In a publishing environment where most books do not make money, this novel approach to doing good makes a lot of sense.  Authors want their work to get out there, and making that happen while creating a social return on the investment is a win-win.  It's not quite "Steal This Book," but it is an interesting and compelling model.

Check out Michigan Film Reel's piece HERE- and make sure to check out their other interviews- they get some good ones.

Our friends at WJRW had us on yesterday- you can listen to that conversation HERE.

The first Featured Venture is FRACTURED ATLAS.

Fractured Atlas is a 501(c)(3) non-profit operating out of New York City.  They provide services related to project financing and insurance for artists working in all media.  Specifically, they have a fiscal sponsorship program that allows artists to finance their projects by getting tax-deductible donations applied to budgets. 

This is a huge benefit to artists- especially filmmakers.  Our independent film production clients (almost) universally struggle with how to finance their films.  We spend a lot of time warning filmmakers about the perils of violating the securities laws in the course of raising production funds, and unfortunately, compliance can be really, really expensive.  To prepare a private placement memorandum and to issue securities that represent equity investments in a film project- and to do it right- is frequently cost-prohibitive.

It is also risky to ask for donations to fund film projects.  Asking for donations implies tax-deductibility, and the slope gets slippery in a hurry.  It is ok for people to give money to other people (up to the annual IRS limit for gifts), but the law gets involved when there is something promised in return (i.e., state and federal securities laws) or when the person who gives claims a tax deduction for the gift (i.e., state and federal tax laws).  Fractured Atlas' fiscal sponsorship program provides a way to navigate the morass without spending an out-sized chunk of the budget on compliance.

Fractured Atlas recently announced a cooperative arrangement with IndieGoGo that I think people should notice.  Read about it HERE and HERE.  There is a webinar about how the organizations are going to work together next Tuesday--check it out.

Let us know if you have any suggestions for projects that should be considered for the Featured Venture series.