Greenlit…To Be Or Not To Be – When is Your Movie a Go?

October 26, 2016
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How many times do producers believe their movie is “greenlit,” only to be blindsided by the investor or production entity backing out? Not only can this be frustrating, but if the producer has jumped the gun and begun making deals with key cast and crew without money in the bank, he/she could end up in big trouble.

Greenlit is a term of art in the entertainment industry when the heavens have aligned, and the “powers that be” (investors, production studio, or distributor,) have given authorization for the movie to go into production. Beware, however, that you are not likely to get this “greenlighting” authorization via a legally binding documentation that will actually protect you in the case the investor backs out.

By common industry practices, in order to be greenlit, a project should meet most of the following criteria:

  • Mutually approved Script
  • Mutually approved Budget
  • Mutually approved Production Schedule
  • Lead actors attached (at minimum a letter of intent from actor or rep)
  • Director attached (at minimum a letter of intent from actor or rep)
  • Fully executed agreement with a funding source(s) that outlines the amount to be invested, and a cash flow that is in accordance with the talent and crew payments.
  • Proof of funds in the bank, or at least fully accounted for (i.e. enough cash in the bank, or the bank has approved all the essential elements and will loan against distribution contracts and tax credits)

NOTE: In studio agreements you are likely to see a “no obligation” clause, so even with a fully executed agreement, the studio may have no obligation to fund you. That being said, keep in mind that most Hollywood deals are made under these circumstances without problems.

After these criteria have been met, there will still be script revisions, budgets change, an actor or two may need to be replaced, but in order to be greenlit in the first place, these elements must in place—particularly the money  to cover the production budget.

Frequently, however, producers get themselves into a jam because they begin to spend their own money prematurely, expecting to be reimbursed out of the production funds later. They may sign deals with cast or crew that obligate the production to pay on deal memos that had no business being signed prior to money in the bank. All of a sudden, low and behold, the investor with whom you were seeing eye to eye, no longer returns calls or emails. The producer, believing he/she is on the hook for these obligations, ends up suing the investor when they get pressured by everyone else, causing lawsuits, wasted time, money and aggravation.

That being said, here are some rules for developing and packaging a script that you’d be wise to abide by if you want your project to move forward smoothly and keep you out of legal entanglement:

  1. Option the script and/or underlying material to ensure you have the right to develop and exploit the project into a movie or filmed content. (Make sure you cover all your bases and obtain all necessary usage rights.)
  2. Build the most reasonable budget that achieves your film’s goals, and make sure the actors you have access to can support that budget level (validated by sales projections etc.)
  3. Attach that talent, and make sure the deal you make is contingent upon financing. (Or at least have letters of interest from talent that states upon funding, and if their schedule permits, they will participate in your film.)
  4. Attach a director that the actors approve/are comfortable with.  Again here, make sure the deal is contingent upon production financing.*
  5. Do not sign any binding crew or location deals that you are obligated to pay, unless your funding is complete and you are confident you can write a check out of the production funds.
  6. When an investor says they can invest, do your due diligence and make sure they can deliver.
  • Make sure they can show proof of funds.
  • Have a fully executed agreement that has been written or at least vetted by an entertainment attorney to insure that all the necessary terms, warrants and conditions are included in the document to protect yourself, the production and the investor.
  • Sit face to face or by video conference with your investor and go over each an every term of the deal to make sure both parties understand what they are getting into.
  • Get signed approval on a cash flow schedule to insure money will be there when you need it.

Investing in films is a risky and speculative business. You and your investors will be better served by being honest and transparent in the deal making process. I can’t tell you how many times I have seen producers sign a shoddy deal, then believe the money is in place, only to be disappointed by a spooked investor who pulls out of the deal. Having worked long and hard to earn the commitment of actors and various other players, it is not only frustrating to have the movie fall apart, but it also puts you in an uncomfortable and comprising position.

The bottom line is that this business is hard and unpredictable enough as it is. Don’t add additional layers of complication and volatility by missing key steps in the process. When entering a complex deal such as movie financing, it is advisable to tread very carefully, and cross all your T’s. You will be handsomely rewarded for your diligence

 

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