A CFO gets the cameras rolling while Hollywood is on pause

Dawn’s Light Media recently finished its first films, Fatal Frenemies and Deadly Radio Romance, since the start of the coronavirus pandemic shuttered Hollywood.

Founded in 2014, the US company produces, finances, and conceptualises movies and TV across most genres for the likes of Amazon Prime, Apple TV, and Netflix. Its specialty is action movies, featuring Hollywood actors such as Jean-Claude Van Damme, Denise Richards, and Kelsey Grammer.

“As all of this started, we basically decided to drag our feet on going back into production to see how things shaped out,” said Jason Cherubini, CPA, CGMA, the company’s CFO and COO. “I’m glad we did because we had no money invested in projects that were on hold. We didn’t have anyone on payroll for the individual projects. We were able to tighten our belt.”

Following two months of lockdown at the beginning of the pandemic, Dawn’s Light Media resumed production. On-demand streaming platforms have been scrambling for content. But shoots are smaller now and include safety measures.

“We knew we had to have all of the safety procedures in place before production started, so people would feel comfortable,” said Richard Switzer, Dawn’s Light co-owner who also directed Fatal Frenemies.

When asked what the most significant changes were, Switzer said, “We did as much prep work as we could to help limit crew size, have testing in place, and have the proper PPE [personal protective equipment] supplies. It felt a little like everyone was working in a bubble, but it’s what had to be done to keep everyone healthy.”

Socially distant film shoots

The company limited the number of people who “touched set” for the shoot to just eight. Although 35 crew members worked on the production, most stayed away from active filming. And the crew members were asked to commit to working on the full production. This went hand in hand with masks, temperature checks, and the following of state and federal physical distancing guidelines.

“We limited excess personnel,” Cherubini said. “We had people commit to not trade things off, where in the past we would have had one hair and makeup person for week one and another for week two.”

Still, with all that caution, filming was put in doubt when one actor became ill. “We had one scare,” he said. The actor had a call time of 3pm and was scheduled to shoot for a day. In the morning, before he was supposed to be on set, he phoned and said he was running a fever. He had not interacted with anyone. His auditions and meetings were all done digitally. After he called in with a fever, he was replaced by another actor and never came near the set.

“It was a case of ‘don’t show up, don’t come anywhere near,’” Cherubini said. The actor stayed away and got tested, and the test came back positive, he added. “Luckily, we would have found out because he would have been tested when he got on set. We followed all the temperature checks. We had the testing on set, and all of that, but just to have anyone that close added a little level of fear.”

Planning for missed payments

Many of the company’s shoots are small by Hollywood’s dimensions. Its 90-minute films typically take 12 to 13 days to shoot.

“We’re small enough, agile enough, and liquid enough, that we were able to adjust relatively well and put ourselves in a good position coming out of lockdown,” Cherubini said. “The only thing we really lost — and it’s more of an opportunity cost — was delivering two holiday films. We were going to be filming in May, and we held on until the last possible minute before we cancelled them.”

It was the anxious period in late February and early March, when Dawn’s Light Media started to structure scenarios for missed payments. Cherubini and his co-owners identified potential dates when customers could not pay, so they could convert trade payables into credit notes, if needed.

There was a million-dollar payable due in the second quarter. Cherubini at first worried that payment problems would cascade into the next two quarters. “If one of our purchasers couldn’t pay us, it could then affect future licensing deals and contracts. A lot of our contracts are three- to five-year licensing deals, but in a few cases, it’s a 25-year licensing deal,” he said.

The company has five full-time staff and a number of independent contractors who work on a project basis. Everybody stayed on the payroll, but Cherubini and his co-owners decided to forgo pay.

Even with the constraints of the pandemic, the company plans to shoot six of its own films this year and finance two others, bringing the total of film projects it completed to 30 by yearend.

Made-to-stream

Dawn’s Light Media produces movies for television and cinema that have production budgets of between $500,000 and $5 million. Theatrical releases are used as marketing tools to stimulate more profitable sales for the films’ key audience: viewers on streaming services, such as Amazon Prime, Apple TV, and Netflix. By releasing the films with a limited theatrical run, titles then get promoted in the “now-in cinemas” section of streaming platforms — valuable small screen real estate in a metropolis of content.

The strategy may prove worthwhile in the pandemic environment because many cinemas remain closed and Netflix added almost 16 million new paid subscribers in the first quarter of 2020 alone. That is twice Netflix’s own projections.

“We try to get basically static budgets, timelines, and schedules so we’re able to ‘cookie-cutter’ our productions,” Cherubini said. “We have our bread-and-butter productions, which are a lot of made-for-TV movies. In the US, they end up mostly on Lifetime or Lifetime Movie Network. Some of them get released digitally, but those are normally licensing deals, and those get made for short money, about a half-million dollars. That’s kind of our entry point.”

Hollywood’s conundrum

Cherubini sees the pandemic as a crossroads for the film industry, especially Hollywood.

“For the big studio blockbusters, it’s going to be a changing event for many reasons,” he said. “They need to figure out how to do a film that's filmed all over the world with thousands of people under these conditions. Think of any of your Lord of the Rings or Avengers films. That isn’t even doable right now, until some of this gets sorted out.

With many cinemas still shut across the world, Hollywood studios have a backlog of hoped-for blockbusters. Cherubini suggests films slated to come out in 2021 will be competing with movies from 2020.

“We're going to end up with kind of a crunch,” he said. “Tenet is just coming out. Wonder Woman 1984, god knows when. All of these are being pushed off. A lot of these studios don’t want to release in the winter. They want their big summer blockbuster.”

— Luke O'Neill is a freelance writer based in Australia. To comment on this article or to suggest an idea for another article, contact Sabine Vollmer, an FM magazine senior editor, at Sabine.Vollmer@aicpa-cima.com.