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Writing Beyond the Numbers (tip #8) »

Investing in Screenwriting

April 15, 2008 by Scott W. Smith

“Remember this rule: For every quarter you spend in Hollywood, you need to earn a dollar.”                                                                                                                                                                                  Max Adams

“And everywhere you turn
vultures and thieves at your back…”

Sarah McLachlan’s song, Angel 

It’s April 15. You know how writers love a deadline.

It’s that time of year when the local news stations and newspapers send out their camera people to cover the constant stream of people rushing to mail off their tax returns by the cut off time.

It’s a fitting time to not only look at taxes but how you are managing your creative career. The first place you should go for advice is your accountant or a trusted financial advisor or friend.

But I hope to stimulate some thoughts you may haven’t considered.

If you are even attempting a screenwriting career you’re in business. And you need to think like a business person. Think in terms of ROI (return on investment). You don’t have to be making a profit, you just have to be attempting to make a profit. (This also goes for musicians, photographers, etc.) There is a point where the IRS will start thinking it’s a scam if after x-amount of years you only show a loss.

But plenty of businesses don’t make a profit so that is not the basis of being considered a business. If you are writing scripts, sending them out, making phone calls, taking meetings, attending workshops, buying screenwriting books then in the eyes of the IRS you are a screenwriter.

So your deductions for the year should include all equipment and hard costs related  to marketing your screenplays. This may include (again check with your accountant):

Computer & software

Printers

Scanners

FAX

Desk/Chair

Lamp

Percentage of office space used if working out of home

Percentage of phone (cell and/or land line) and utilities

Printing, postage, envelopes

Writing workshops, seminars, books, magazines & CDs

Mileage and other car expenses

Travel (Air, Hotel, car rental & part of food)

Headshot

Organizations

Business cards & thank you notes

Research

Movies

Website and other marketing materials

And the list goes on…

It’s best if you can separate as much of this stuff as you can for accounting purposes. A separate credit card can help keep track of expenses.

Few artists have any security and I think it’s a step in the right direction to begin to think of yourself as business verses an employee. Perhaps form an LLC or other business entity.

Have you noticed many actors and directors have their own production companies? They are being proactive in developing their own material. In an Internet age I think you will have more and more writers developing their own material.

One of Orson Welles’ famous quotes goes something like this; It takes an army to make a film. It can. But these days it also can just take a camera and a couple creative friends. If you have a multi-talented friend like Robert Rodriguez you just need him, your script, and a couple actors.

Look what director Sydney Pollack did with a little more than a DV camera on his documentary Sketches of Frank Gehry, or Jerry Seinfeld did with a couple production friends for his stand-up comic doc Comedian. Granted we don’t all have Gehry and Seinfeld as friends but if you’re a writer on this globe the chances are good there are people nearby with a camera and editing equipment looking for someone to help them create a little magic.

Screenwriter Max Adams (Excess Baggage) has a book called The Screenwriter’s Survival Guide full of practical advice including a chapter titled “Death and Taxes.”

One of my favorite chapters her book is “What you really get paid.” There she breaks down the kind of deal you may read about in the trades of a script sold in the traditional Hollywood route. She writes:

“Let’s say someone just sold a script for $500,000. Here’s how that might look on paper.
Option $100,000.
1st Revisions: $200,000
2nd Revisions $125,000
Polish: $75,000
Sole Credit Bonus: $200,000
Shared Credit Bonus $100,000
So what you have in your pocket is actually $100,000….
(meaning the $100,000 option may be all you ever get)
Out of that you pay your agent 10 percent. You’re now at $90,000. You pay your attorney 5 percent. You’re now at $85,000. If you have a manager that’s at least 10 percent. $75,000. The Guild gets $2,500 to join, if you’re new. $72,500…Uncle Sam gets up to 55 percent. Kaching. You have $17,500 left over. That’s what you put in the bank. It’s nice but it won’t buy a Mercedes.

If you want to break it down further, count the years it took a person to perfect their craft, make contacts, and make their first sale. Say it was five years. $3,500 per year, back pay. Big bucks, huh?”

I think Max’s above numbers are a little off due to your expenses coming off the top. And your tax bracket depends on other income coming in and self-employment tax (double social security), and state tax may apply depending on where you live. Again your accountant can help you understand all of this.  But $500,000. is not $500,000. to you and even a $100,000. option is not $100,000. in your bank account.

Adams’ words are the stark reality of screenwriting. I try to encourage people to write but I think it’s dishonest to not show the whole picture like the heavy handed infomercials I’ve spoken about before. It’s fair to say that there are more people making money teaching acting, filmmaking, and writing than there are actually people making films.

If that depresses you enough to turn you away from writing that’s a good thing. Because it’s a long and difficult road even for the writers who make it. And if you don’t think the film business is full of vultures and thieves at your back, and its share of disappointments read Joe Eszterhas’s Hollywood Animal and/or The Devil’s Guide to Hollywood.

“I get no more respect now than I did when I started.”
Jeffrey Boam (Indiana Jones & the Last Crusade)

Watch Barton Fink.  Read Frank Darabont’s account of getting jilted on the new Indiana Jones movie; “It was a tremendous disappointment and a waste of a year.”

Then there are all those people that don’t make it. Word is at the UCLA extension alone 3,500 students are taking screenwriting classes. The WGA registers around 40,000 scripts a year and there are only around 200 studio films a year and 500-800 independents. The odds are better than winning the lottery – but only slightly.

To paraphrase John Steinbeck talking about bookwriting — The profession of screenwriting makes horse racing seem like a solid, stable business.

The good news is films are still pretty bad so everyone is looking for a script/film that will knock our socks off. And every year films like Juno and Once pop up to everyone’s delight.

So have fun. And write because you enjoy it or because you are compelled to keep doing it.

And keep all your receipts.

Scott W. Smith

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Posted in Screenwriting Biz | Tagged (Indiana Jones & the Last Crusade, Baton Fink, Comedian, entertainment, Excess Baggage, Frank Darabont, Frank Gehry, Hollywood Animal, IRS, Jeffrey Boam, Jerry Seinfeld, Joe Eszterhas’s Survival Guide, Max Adams, movie business, Orson Welles, Robert Rodrigue, Sarah McLachlan, Scott W. Smith, screenwriting, Sketches of Frank Gehry, taxes, The Devil's Guide to Hollywood, The Screenwriter, UCLA | 4 Comments

4 Responses

  1. on November 15, 2009 at 12:25 am How Much Do Screenwriters Make? « Screenwriting from Iowa

    […] Post: Investing in Screenwriting. (I have a quote in there by Max Adams who explains how a $500,000. feature script sold can really […]


  2. on July 25, 2012 at 9:41 pm Anonymous

    Sorry but your maths doesn’t add up (or subtract down).

    (1)

    “Option $100,000.
    1st Revisions: $200,000
    2nd Revisions $125,000
    Polish: $75,000
    Sole Credit Bonus: $200,000
    Shared Credit Bonus $100,000
    So what you have in your pocket is actually $100,000″

    —> Can you explain how it ends up as $100,000? That suggests all the payments listed bar one $100,000 amount are somehow spent or lost?
    There is no explanation for this.

    And even if this were true (thought it seems incorrect):

    ” $72,500…Uncle Sam gets up to 55 percent. Kaching. You have $17,500 left over.”

    —> 45% (your remainder) of $72,500 = $32,625

    So not idea where you get $17,500?

    This article is mathematically misleading and I’m sure I’m not the only screenwriter looking at going ‘Huh?’.

    The overall effect of this bad maths is doom and gloom where there probably isn’t nearly as much.


  3. on July 26, 2012 at 3:07 pm Scott W. Smith

    @Anonymous

    Sorry for any confusion. Let me unpack it again and see if it makes sense.
    If you read the article carefully, you’ll see the quote you pulled is from a book by Max Adams called “The Screenwriter’s Survival Gulde.”

    While you might option a script for $500,000. That doesn’t mean necessarily mean someone sent you a $500,000 check. In the illustration Max referenced you get $100,000. for the option. That is all you are getting paid at the moment. All that other money is off the table. (If they use you for additional re-writes and the film gets made you’ll get more money. But if they use other writers and the film dies in development all still you get is that first $100,000.)

    No revisions, no bonuses. Just the $100,000 option.

    So of that $100,000. you pay 10% to you agent ($10,000), 5% to your attorney ($5,000), and if you also have a manager that’s another 10% ($10,000). That’s a total of $25,000, correct? Take $25,000 out of $100,000 and you have $75,000.

    If you join the Writer’s Guild that’s another $2,500 to join, leaving you with $72,000. And Uncle Sam (i.e. taxes) takes another chunk depending on your tax bracket. Marginal tax rates are somewhat convoluted, but in Max’s illustration she has the writer paying 55% taxes on the $100,000= $55,000. So after everyone has been paid that leaves you with $17,500.

    Your agent, manager, writer’s guild, and the government take more 70% ($72,500) of your $100,000.

    Depending on what state you live in, other income you may have from your day job, and if you can stash money in a 401K, it could be more or less than that. But it’s a fair estimate.

    If that still doesn’t make sense talk to a accountant.

    As far as doom and gloom. The real numbers according to Scott Myers @ Go Into The Story, “only about 100 spec scripts sell annually.” So if you’re one of the 100 writers who has a script optioned you’ve hit a home run. But it’s just might not be quite the payoff you think it will be. But you’d be off to a great start.

    All of that is one of the reasons I encourage writers to find ways to make their own films. Especially if you live outside LA.


  4. on March 11, 2013 at 1:26 am Anonymous

    These are the exact kinds of articles that make me feel good in a neurotic way… if you’re paying $55,000 in taxes on $72,500 net income you’re probably not the sharpest knife in the drawer…



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