Producing a Story, Step 5: The Pre-Production Budget

In my previous post, Producing a Story, Step 4: Your Contract, I told you the executive producer has a staff dedicated to the deal and money-making processes, including lawyers and negotiators who know the industry standards of contract writing front and back. Assuming you followed my advice to hire an entertainment lawyer to manage your contract negotiations, you likely saw firsthand just how extensive and detailed the EP’s staff can be. Now, you have a contract, your story is protected, and the executive producer has your permission to move forward with developing your story. 

Many steps and processes will begin to happen in tandem. The EP will hire creative staff, including (but not limited to) a director/creative director, composer, producers, and a casting agent. The EP will work with the casting agent to attract appropriate headlining names for the production. As mentioned, the EP is all about finding investors, producing a great product, and milking that production for every cent possible. Before any of that can happen, there needs to be a pre-production budget.

Who writes that budget? It’s a sum of many contributing accountants and finance experts who analyze metrics from similar projects’ performance, executives adding their thoughts on new strategies and contract negotiations, and creatives offering their opinion of what parts of the project need the most attention. While all those contributors are essential, only a few people know the budget process inside and out. They’re the crafters who know how to forecast and model a budget for that specific industry and weave all the pieces together into one document. That document predicts a project’s likely financial success or failure. That person is someone like Denise Perry.

Denise is the former Director of Finance and SVP of Real Estate and Business Development for Clear Channel Entertainment before their merger with Live Nation in 2005. During the merger, she directed and prepared market and model analysis, constructed a business plan, and presented it to various private equity companies to raise the capital required to acquire the Clear Channel theatrical assets from Live Nation. Upon success in this endeavor, Denise joined a small group of executives and founded BASE Entertainment with the acquired assets. She managed deal structures and modeling for all contracts, including concession, merchandise, license, royalty, lease agreements, and other production contracts. If there’s anyone who knows about production budgeting, it’s Denise Perry. 

Denise also happens to be my former boss and taught me a ton about producing shows, contracts, and budgeting, so I asked her for input as I was writing this specific blog. (For fun — Denise is from Boston, so apply an accent to all her quotes.)

“The pre-production budget is different from a production budget.” Denise said, “[The pre-production budget] determines how much money the executive producer should dedicate to developing the story concept with the hope of successfully attracting the right investors.”

Denise explained that the number of investors the EP finds and the amount of money each investor is willing to contribute determines the production budget, which comes next. In simpler words, the pre-production budget is about spending money to RAISE money, whereas the production budget is about spending money to MAKE money. A smart EP will ask that the pre-production budget be considered an expense in the to-come production budget to recoup their investment in the process, but it’s not mandatory.

Establishing a pre-production budget starts with the EP and the creative team analyzing the story and asking themselves: What is the strongest portion of this story to workshop? Who do we want to direct it? Who do we want to portray the roles? How much will this cost?

We’ll get back to my conversation with Denise and the production budget in a few weeks, but first: What’s a workshop?

A workshop is a small production of a portion of the story, selected to flesh out as a demonstration as proof of creative feel and concept, all to attract investors. It’s a “show and tell” for entertainment. A well-produced workshop is key to obtaining the funding for a well-produced story. 

After the licensing, creative, legal, administrative, and talent fees have been added together, the pre-production budget will be ready to go. But some of these questions you can’t answer without a creative vision, and that comes from a creative director/director/record producer. That is the person who makes the project come to life through their creative vision. Can you guess what we’ll be focusing on next week?