Reality Check! Your $2 million budgeted film with first or second time Director and Producer isn’t going to make a profit!
Well let me back up a second actually….
These past few weeks I’ve been in Australia where I gave a 2 day workshop and spent a day consulting one-on-one with Producers and I’ll tell you this – non-U.S filmmakers can actually make $2 million films without having to worry. That is because most of their film financing is public money (via government agencies) and their primary objective is not profitability. Lucky them!
However as U.S producers should we be concerned about profitability? Yes, we should! There are two reasons for this:
#1 – at the low budget level don’t you want to at least recoup or make a profit for your investors so they’ll open up their wallets for your next film? There’s no faster way to lose investors than to lose their money.
#2 – even at the Studio level, if your films generate profits when you’re first starting out, you’ll keep working. If not, you won’t. Simple as that.
Here’s the reality of today’s marketplace:
• Acquisition prices in worldwide territories aren’t as robust as they were several years ago, so you shouldn’t be using sales estimates from anywhere but the most recent film festivals and markets.
• Box office numbers don’t matter! Just because you see a particular film made millions at the box office, doesn’t mean the filmmakers recouped any of that money. In fact, most of that revenue went to the exhibitors and distributor and until you develop a serious track record for yourself, don’t plan on a slice of any box office earnings.
• New revenue models are emerging and revenue is shifting. Ah, the good news! Yes thankfully new revenue streams (like VOD) are emerging to replace old revenue streams (like DVD) – just not as quickly as everyone would like. So hold your horses with this – the revenue will catch up eventually, but as of now it still doesn’t justify making a film for more than a couple hundred grand.
So this is what I mean about establishing realistic goals for your project. And now I want to turn this over to you – have you given yourself a reality check in terms of your projects in the marketplace? If so, what have you discovered? And how are you envisioning profitability for your films?
Looking forward to your comments below!
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Great subject, Stacey.
I think filmmakers need to establish realistic goals and realistic expectations. The only way to do that is to understand the business from the creative and financial sides. it’s one he’ll of a learning curve especially on the international side; from pre-sales, equity, incentives, gap, the health of the advertising industry on the global entertainment industry, marketing, demographics – it’s an ongoing learning experience.
I don’t expect to make any income from any overages anytime soon.
We have 5 projects in development right now for different markets and media and the biggest issue for me is development money and the only way I can raise it if I want to continue producing films is to charge a small percentage of each fim’s budget to overhead.
Hi Stacey! Great points you raise here.
I produce films in Vancouver, BC, and let me tell you, government money is not as easy to come by as some may think. And when you finally do get it, it comes with a plethora of creative conditions that hurt your film’s market potential, never mind the filmmakers’ hearts.
So I’ve decided to stop betting so much on the public agencies’ money and I’ve started looking for private funding networks – ie. offshore equity investment funds, etc.
But isn’t that exactly what commercial filmmaking is about? A product that needs to sell tickets at the box office in order to create a sustainable industry? A creative commodity for export?
Yet that’s exactly what government subsidies unwillingly deny to their own local economies – sustainability. They’re the masters of the excusable flop and the purveyors of the one-hit-wonders. And IMHO, one of the main reasons most commercial movies outside of the U.S are just embarrassing – Canadian films included.
I’m not talking about the odd art film festival success – I’m talking about the films that have a decent ROI while also being entertaining and intelligent. And ideally, films that also help build a sustainable, independent, domestic film economy that creates above and below-the-line jobs and contributes to the GDP.
Thanks for your lucid analysis of the international indie film business, Stacy. I’m a big fan of your work and I hope to meet you in person one day.
All my best,
@javier_badillo
@Javier – thanks for weighing in as a non-U.S filmmaker and giving your two cents on the Govt. funding systems. There’s two sides to every story, eh?
Thanks for following – hope to meet you in Canada some day!
Stacey,
There is one reason why box office numbers, and grosses are important. When you’re writing your business plan, your investors, profit participants, and deferral partners want to see the relationship between the numbers they hear and see reported, and what is coming back to the producer, and how their return is calculated. The Business Plan needs to face the reality of where all the money goes. A flow chart diagram indicating the typical cash flow model and all the splits down the chain, as well as a one that shows what is expected in your particular film, is part of the full disclosure requirement. The business plan can show the numbers you mention (high or low) and the factors and rationale for the numbers being higher or lower. But you have to start with the gross revenue. You can’t just drop in numbers, without the calculations and splits, and say “Stacey says so.” Blessings. Stan
Hi Stacey,
As always the Indepedent Film Blog update email Is always one of the first I look forward to in my email. I am consulting with various different filmmakers right now who could really benefit from learning the business side of the show that you present so well. So I keep pointing them towards Film Specific of course
I would have to agree with Javier’s comment above re the involvement of Goverment subsidies outside of the US. In fact, dare I say it, I think it is actually easier in the US right now! Most of the funding that was available in the UK came with so many conditions and was in many ways a closed shop. Plus there is an assumption that much of it was a free gift that did not have to be repaid. Not so in many cases, in fact we are working on a feature right now where a lot of the above the line costs come from money that needs to be paid to the UK Film Council. Money which was spent long before we came on the project.
Right now i would say that raising finance in the US with access to Section 181 for investors and tax credits in many states that are much higher than the grants offered by European governments is as good as anyone can expect to get it.
With access to that sort of sort money, even with lower acquisition prices, IMHO i believe that you should be able to turn a profit on a $2m picture even as a US producer if in the end you produce a feature with high production values, a genuinely great script, top notch acting ideally from recognisable cast that distributors are going to want to put in front of audiences.
Having said that, there are some incentives that make it easier to turn a profit shooting in some locales than other. Australia as you say is fantastic, We are also looking at South African copros as well which are looking promising as well as the usual East Europe contenders.
Looking forward to your next updates, always a delight to read.
All the best
Mark
@mark_j_shields
Thing is, my expectations in regards to my short movie (along with other projects that I have in mind) are pretty much nonexistent, even though I want to profit from them, gain an audience and ultimately get a reputation.
What I mean is: Making movies is both a labor of love and a way of business for me, and so I make them however I can (in a way that’s legal, that is). However, I realize that I’m pretty much a no-name in the movie world, so even if my stuff is a success and gets me buzz, that alone won’t immediately gain me the leverage to make my next project, because Investors/Producers are finicky and cautious (and rightfully so, for the market can change in an instant, especially today).
Basically, by realizing that I’m a no-name and that I’m stuck that way for now, I’ve not only grounded myself in reality, I have also taken rational steps toward getting unstuck. Having realistic goals is liberating in that one can face the hard stuff now and relax later, as opposed to deluding oneself into thinking that they will make it big, establish themselves as a “true artist” and be rich (which creates anxiety more often than it creates a great movie).
Hi Stacy
I thought for a while it would be relatively easy to get financed from the British film council who were financed with money creamed off the British lottery. How wrong I was. The first script I sent they liked, but felt it was for a mainstream audience and as they only really helped those films that wouldn’t otherwise get made the answer was no. The next I sent them had a problem with structure after a while I got the impression that unless you were making weird stuff to me at least and were not indigenous for example Uncle Boonmee then you wouldnt get a look in. They seemed to jump on films with big budgets and put some money seemingly to use as a way to showcase their valid work. They wouldn’t finance short films and most of the money appeared to go on their set up.
Anyway the point is beyond its glossy exterior a new film maker from the UK looking for funding the reality was it was non existant.
Best,
Mark
Whew! We made monkeYman for about $60,000, with post production, trailer work and marketing, print and graphics etc., bringing us up to the $100,000 level. We feel it’s competitive with any film, and I’m inspired by your podcast with Thomas on MIcro Major DIY distribution and Production is a template for making new rules, not exceptions. Thank you for continuing to shine the light of awareness on filmmaking possibilities in the age of the internet, and affordable home theater.
Billy Joseph
Director
monkeYman
Mark, we have very similar issues here in Canada with the federal and provincial film councils – they only seem to finance films nobody wants to see. And no one does either.
Contact Elliot Grove at Raindance.org in London, he’ll steer you in the right direction.
Cheers,
@javier_badillo
Thanks for the analysis, Stacy. I have to agree with Javier about public funding. As well meaning as State funding agencies are, they frequently produce movies that are uncommercial and ill suited to the marketplace. I live in Dublin, Ireland, and many moviemakers here rely on public funding too. What I have found extraordinary is that in my meetings with production executives, revenue projections have never even been discussed. The remit of The Irish Film Board is to produce movies that explore our culture and heritage, and would otherwise not be made with other funding.
Fair enough perhaps, but this often results in movies that don’t sell tickets and frequently make a loss on the investment. I find it refreshing that there *is* a discussion about realistic goals in the marketplace for movies here.
I’m developing a feature length history documentary which I estimate will cost around €450,000 ($622,210). My initial strategy is to arrange a co-production in Europe between Ireland and Norway, and then obtain extra funding from Media Desk (based in the EU) which awards funding to some films that are made as a co-production.
Finally, I plan to generate some revenue (perhaps half the budget) with a limited cinema release, and then generate revenue with sales to TV broadcasters who have an in built audience for history documentaries. How does this sound? I would appreciate any feedback. Also, does anyone know of it’s possible to obtain box office data for feature history documentaries on Box Office Mojo? Stanley Kubrick’s argument that the most important thing in moviemaking is not to make a sucessful picture so much as not making a failure seems wise. Every time you lose money, it inhibits your chance of making another one.
Interesting to read that it’s not just the UK Film Council that has a policy of investing in films that no commercial investor would take part in, it seems this is also true of Canada and Ireland. I believe the UKFC only invest 10%-20% of a film’s budget, and the money they have to invest in films is only a small part of the money they receive from the lottery, the rest goes on training, distribution etc. But true, it’s well known most of the films they invest in, bomb, saving the King’s Speech which I was very pleased to see letting more blood than a Saw movie on the Kodak stage. (Brits rule the Oscars, ok!) It’s weird that even government organisations have such non-commercial objectives, or maybe not so weird!
Hopefully things will be different when the BFI take over the UK’s public film investment, though a couple of the people from the UKFC are going there, so we’ll see.
I’ve just been investigating potential UK/Australia co-pro and it looks like indigenous film makers do get a good deal, co-pro as always is more complex, but not as restrictive as Canada.
Ultimately, I would agree, the US is the easiest place and most attractive to do business, the state tax incentives are better than the UK though Section 181 investors are still a mystery as to where they hide, and of course it’s cheaper to make movies in the US than the UK. They just don’t have red busses and the Tower!
What the indipendent film maker needs in todays world is a list of good honest distributors. If you have found one, you are a lucky person. Most of them are crooks and should be ignored by all indipendent film makers.
If you have found a profitable distributor where you made a profit, you should send their name to stacy so she could compile a list of those to talk with and ignore the rest of those cheating bastards.
Mike
This is what I’ve been saying for a couple of years now, but not many wanted to listen… even on the Forums. Glad to see you also see the light Stacey.
Strange, all this bashing of the film councils for only funding non-commercial projects.
Isn’t that why they were set up? After all, if a film has commercial potential there is already a funding mechanism in place for that…the free market. Providing a chance for alternate voices is the whole point of government funding of most flavors.
Glad to hear that Section 181 and tax credits are working so well for filmmakers, though.
To be fair, I think all State funding agencies want to make good films and aspire to promoting a viable national film industry. One could argue that movies made with public funding could not be financed by the free market, and therefore deserve a chance. But does the audience care about them? They box office numbers suggest to me that they’re not interested.
Ultimately, the audience is the arbiter of a films success. If audiences don’t go to see the movies they’re funding, State agencies should reevaluate their decisions and the criteria by which they make them. It’s great to see “The King’s Speech”, which received 1/10th of its funding from the UKFC, make so much money and win 4 Oscars.
From my point of view, public funding is probably the only viable finance option for a history documentary set in Europe, but I’d love to be proven wrong. In Ireland, we have a tax incentive, Section 481, that allows investors to recoup €80,000 automatically from every €100,000 they invest in a film once principal photography begins. I believe they can then recoup more depending on its commercial success.
This is quite a discussion! Thanks everyone for your comments and feedback – interesting that you all are pretty much saying the same things with regards to public funding outside the U.S no matter which country you’re from….
“Ultimately, the audience is the arbiter of a films success.”
True, but timing is everything, isn’t it? Films that turn out to be true classics often don’t perform well on release, & those that do perform well financially often become nothing more than a footnote in history–most Oscar winners included.
If public funding isn’t the solution, what is? Decisions of the free market are too focused on instantaneous conditions to evaluate what will be the truly valid art. And frankly, the market doesn’t care about art, as long as a film makes money. Is that all that matters? Fortunately, sometimes even a blind pig finds an acorn, I guess.
All public functions of a democracy are designed to protect the minority view, not the majority, despite the common assumption to the contrary. “Majority rules” is just another word for mob rule, which a free market certainly is. I’m glad that “King’s Speech” was successful, but even if it hadn’t been, it’s still a story worth telling.
And worth subsidizing, IMO.