The Production Budget The Complete Guide to Film & Digital Production: The People & The Process Lorene M. Wales, Ph.D. © 2017 Taylor & Francis

Budgeting Sometimes you have to go with a set amount and budget to that amount. Sometimes you need to see how much a production will cost. Each budget is completely different, depending on the needs of your script and the level of production. © 2017 Taylor & Francis

Steps to Budgeting Complete your Script Breakdown Determine scope of film Research prices Enter prices into software © 2017 Taylor & Francis

Good Budgeting Think ahead and anticipate all costs. Anticipate problems, like equipment failure. Every time someone makes a move or does something, there is a cost. Be resourceful with money. Be generous when you can with people, it’s an ethical question. © 2017 Taylor & Francis

Bad Budgeting Budgeting for a shoot that is unrealistic, for instance, reducing shooting days to save money. Spending the contingency before production starts. Changing the budget, once it is locked. Paying people poorly, just because you can. © 2017 Taylor & Francis

Pay Scales By the hour – rarely done. A day – sometimes 8 hours with overtime after, or sometimes 10. Sometimes no overtime at all, depending on the production or position. Sometimes 14 hours, non-union, but no one complains. A week – used for people working 5 days or more, at a time. Flat – for non-union, really low budget, or for positions that are creative and run-of-show, I.e. production designer, director, producer. Talk about 19 hour day on cemetery club People think it’s glamorous, and it is sometimes, but it can also be boring, long days. Some people work on call, production designer, dp, art director, set decorator, accountant, costume designer, upm, locations, poc, apoc, this also means no overtime. © 2017 Taylor & Francis

Budget Considerations Union vs. non-union Overtime Consistency across pay lines. Consider who will get kit rentals. Travel Days – could be 50%, full rate, or not at all. Production pays for airport pickup, hotel, per diem. Determine who gets per diem. Consistency – people will talk © 2017 Taylor & Francis

Budget Considerations Taxes – you take out all taxes, FICA, FUI, SUI, WC, Medicare. You also pay some union crew benefits, such as DGA and IATSE. Independent contractors, do not take out taxes, they will get a 1099 at end of the year and pay then. Always check with unions for the latest rates. If in doubt, get an accountant. Padding is good! Some people become incorporated, it’s better for them tax wise. They get taxed only 15% on their business and pay themselves out of their business, rather than being taxed 30+% on personal income. © 2017 Taylor & Francis

Budget Considerations Unions – if you use them you become… Signatory – this means you agree to hire and abide by union rules and wages. You use their contracts. Your company must provide bond info and be incorporated. Check each union for application to become signatory. DGA, SAG, IATSE, NABET, WGA Pittsburgh union story © 2017 Taylor & Francis

Budget Considerations Equipment rental – determine where you will get your equipment, call around, negotiate. Post-production – determine how your film will post. Music – determine what kind of music will be used, source, production, score. Think about contingencies. Consider getting an entertainment lawyer. Consider what clearances you need, title registration, script clearance, product clearance, music clearance. © 2017 Taylor & Francis

Budget Structure Above-the-line – producer, director, actors, screenwriter, the creative people Below-the-line (production) – crew, stock, equipment Post-Production – editing, sound post, titles, previews, music Contractuals/Other Charges – production insurance, publicity, general expense © 2017 Taylor & Francis

Production Insurance Hire an insurance broker that specializes in entertainment insurance. Usually costs around 3% of the total budget. Errors & Omissions – protects you against lawsuits. Production Package – usually consists of: Cast – if injured or killed Negative – if lost or damaged © 2017 Taylor & Francis

Production Insurance Faulty stock – stock lost or damaged Third Party – items rented or borrowed from a third party. Auto – covers picture cars and production vehicles. Extra Expense – could be specific to your production or sets, wardrobe, etc. Worker’s Compensation – part of fringe benefits, pays for medical, disability, death and lost wage benefits (also dependents) © 2017 Taylor & Francis

Contingency Standard contingency percentage – 10% (required by completion bond company) Only used for unforeseen problems or costs. If budget is – 10,000,000 Contingency is – 1,000,000 © 2017 Taylor & Francis

Other Contractuals Legal: Approximately 1.5% of overall budget. Helps with contracts, possibly clearance issues, copyright, licenses and more. © 2017 Taylor & Francis

Completion Bond Investors will require one. It’s a guarantee that people will get paid and investors won’t lose their money. Bond companies can step in if you’re over budget. Cost, 3-6% of the budget. Bond companies monitor the production. Firebirds story, completion bond people show up. © 2017 Taylor & Francis

Completion Bond Process Send script, shooting schedule & budget. Meet with bond company & provide acquisition agreements. Bond company writes letter of intent to guarantee (this can be used to obtain financing). Sign completion bond agreement. © 2017 Taylor & Francis

Completion Bond What They Will NOT cover: The cost of the MPAA seal The quality of picture Any defects in copyright Over-budget costs due to currency fluctuations Costs not covered in the budget Distribution expenses Additional shots for a television version Anything after delivery of the film © 2017 Taylor & Francis

Completion Bond CONDITIONS The film must be produced in accordance with the budget and production schedule. This does not include minor changes to the production schedule. Rather this refers to major changes in the time frame of shooting the picture. The film is based on the screenplay. The film qualifies for an MPAA rating. © 2017 Taylor & Francis

Completion Bond CONDITIONS The final film has the agreed on length including titles. The final film is in the agreed on format such as 35mm color or digital video. The film must be first class quality. The film must have had the agreed on cast in certain roles, as well as the producer and director. © 2017 Taylor & Francis

Budget Line Items Some line items appear in many categories: Miscellaneous, Loss & Damage, Purchases, Rentals, Box Rentals, Car Rentals, Travel, Hotel, Per Diem Go through each line item and research the cost. Source: Producer’s Masterguide – union rates. Union websites – union rates www.dga.org www.wga.org www.sag.org www.iatse.org © 2017 Taylor & Francis

Line Item Examples Notice in the next slide of line item examples, how different types of line items are written differently under the AMT, UNIT X and RATE columns. © 2017 Taylor & Francis

© 2017 Taylor & Francis Amount Unit X 5 Weeks Days 7 8 9 Flat Allow 12 Description Amount Unit X Rate Budgeted Person on a weekly 5 Weeks   1000.00 5000.00 Person on a daily Days 400.00 2000.00 5 persons on a weekly 7 800.00 28000.00 9 persons on a daily 8 9 350.00 25200.00 Run of show Flat 250000.00 Various purchases Allow 500.00 Rentals 12 300.00 3600.00 Set amount items Per Diem for one person 42 62.00 2604.00 Per Diem for 10 people 10 26040.00 Miscellaneous/Loss & Damage Airfare for one person 1 RT 600.00 Airfare for 3 people 3 1800.00 Hotel for one person 58 100.00 5800.00 Hotel for 5 people 29000.00 Car rental for 1 person 15 95.00 1425.00 Car rental for 10 people 14250.00 Catering 50 People 10.00 21000.00 Craft Service Purchases 200.00 8400.00 © 2017 Taylor & Francis

As you soon begin to build your budgets, you need to pay close attention how you write each line item. You may want to print out the previous slide as a reference. © 2017 Taylor & Francis

Fringe Benefits Monies that you budget for, in addition to a person’s salary. Every person gets the 5 taxes taken out: FUI (Federal Unemployment Insurance) FICA/FIT (Federal Income Tax) SUI (State Unemployment Insurance) WC (Worker’s Compensation) MEDICARE In addition each person gets .5% taken out for a payroll service, if you use one. © 2017 Taylor & Francis

Fringe Benefit Rates FIT: 6.2% with $72,600 cutoff. FUI: .8% with $7,000 cutoff. SUI: check each state, with $7000 cutoff. WC: 3.98% Medicare: 1.45% Payroll Service: .5% Rates change all the time, research the latest before you put them in the budget. © 2017 Taylor & Francis

Union Benefit Rates WGA: 12.5% with $202,200 cutoff. DGA: 13% with $205,000 cutoff. 7.719 (Vacation & Holiday) SAG: 13.3% with $205,000 cutoff. IA: $2.3625 per hour worked. 1% for Trust Account 7.719% (Vacation & Holiday) OR 9% (PH & W) 7.719% (Vacation & Holiday) + 1% (Trust) © 2017 Taylor & Francis

Currency If you are dealing with multiple currencies, budgeting software will calculate the conversion for you. Here is the process: Define a global for the currency of another country. Apply that global to all applicable line items (type the name of the global in the x column). The subtotal will appear in US dollars. © 2017 Taylor & Francis

Conclusion You need to know the scope of your project before you can create its budget. Know what format you will use, what size crew you would like, how long the final product will be, and what format is required for delivery. Once the budget is written, you track your spending with disbursement forms and cost reports. Keep in mind that the goal is to come in at, or under, budget. © 2017 Taylor & Francis