Last month, a small company called Destiny Pictures was touting itself as the first film producer to sell its shares online. This month, it is mired in securities investigations by New York and California officials. But Destiny's fate, while highlighting the difficulties of financing films online, is not stopping other independent film buffs from tapping the Net for funds.
"It's really unfortunate. They were doing something interesting and new - essentially trying to create an independent film movement," says Jonathan Sarno, an independent filmmaker and creator of the Web Cinema group. "But they didn't go according to the guidelines ... and they muddied the waters for the whole thing."
Destiny Pictures originally offered stock last month, looking to raise US$200,000 for its "erotic thriller" Intimate Stranger. The New York Times reported that nearly 200 people sent in $100 each to invest in the film. But when state officials in New York and California discovered that the company hadn't registered in those states, Destiny quickly shut down the offering and, according to its Web site, sent the investment money back.
John Cones, an entertainment attorney who's worked with numerous online filmmakers, said Destiny's problem exemplifies the problems with trying to do an offering on a global medium. Put something up on the Internet, and you're automatically advertising in every state; but according to the "blue sky" laws, if you're looking for investors in a state, you first need to register your offering there. If you don't plan to file in a certain state, then you must put an exemption notice on your Web site.
"There are a lot of filmmakers who are desperate to make films, and are jumping on opportunities on the Internet, but it's a lot more complicated than they think," says Cones. "They know a lot about filmmaking, but nothing about dealmaking."
Hollywood Stock Exchange, created by a group of former Wall Street investors and Hollywood producers, also plans to raise capital through online offering. HSX has three independently financed films in production, and plans to offer shares online for as many as 12 films, hoping to raise several million for each. Unlike Destiny, however, it plans to file each offering with the federal Securities and Exchange Commission and register in all 50 states - a process that lawyers estimate to cost around $100,000. "We're working with the SEC to get the verbiage to make this viable," explains HSX co-founder Max Keiser.
But many indie filmmakers can't afford those fees, preferring instead the more traditional capitalization method: active investors. Thirty-one filmmakers are now using the Surfview online "bulletin board" to seek investors who will not only provide money, but will take a role in the entire film production.
For around $120, a filmmaker can advertise their projects on the Surfview site, allowing interested investors to email them for their business plans and further information about investing. In order to make sure that all projects are legit, each film must include either a member of an entertainment guild, a non-guild celebrity, a film festival award, or a recommendation from a film school or organization. At least one advertised film, Cherokee Bill: Outlaw, says it has received serious offers of capitalization through the site.
"We get calls from Malaysia, Bali, Singapore. In LA, everyone's competing for the same dollars, but once you open it up on the Internet you get the rest of the world," says James Tessier, creator of the site and an independent producer in his own right. "Our next phase is to rent lists of wealthy risk-takers from investment groups and send them to my Web site."
Sarno's Web Cinema site is providing a similar (albeit nonprofit) venue for capital-seeking filmmakers; his mailing list also has more than a thousand filmmakers and industry observers discussing just these online issues. And in Sarno's eyes, online investing is particularly relevant for filmmaking.
"Filmmaking is a people-orientated business," he says. "An online investor not only invests in a business but in a potentially exciting endeavor - if done correctly it is almost most like joining a community and participating in a creative work."
Not everyone is sold on the idea. Filmmaker Didi S. DubelyeW, for example, has been advertising her film kinda wired on Surfview for six months, but so far has only heard from "scam-artists, prospective talent, prospective crew, and other filmmakers." She writes in an email: "I am pleased with the energy the page has elicited, but have no illusions that kinda wired will be totally funded via the Net.... I look at using the Net as more of a way to get the word out about the project."
