• Skip to primary navigation
  • Skip to main content
  • Skip to footer
FilmProfit

FilmProfit

The Business of Successful Films

  • About Us
    • A Little History
    • Our Clients
    • Our License Agreement
    • Our Terms of Use/Your Privacy
  • Services
    • Financial Models
    • Comparable Pictures ROIs
    • Audience Analysis
    • Indie Horror Special Packages
    • Indie Low Budget Art-House Special Packages
    • Confidence and Probability Studies
    • Greenlight Analysis
    • Strategic Business Planning and Documentation
    • Slate and Fund Strategies
    • FilmProfit Reports Shop
  • Our Thinking Lately
  • Contact Us

JNH

Theater Screen Inventory and Average Annual Take by Screen

November 30, 2020 By JNH 4 Comments

What in Holy Hell Are Indie Films Facing in 2021?

First, I’m Not A Seer

I do not style myself a future predictor, so, I want to say that I do not KNOW exactly what things will be like in 2021; but the following are not just random thoughts, they are based on detailed study.

Having spent a good bit of my life listening to, processing, and trying to understand the large and small signals of the film industry, I have learned a lot about how the gears of the industry mesh, grind, package and deliver entertainment, and how it is marketed and monetized. I use this information daily in my work, and it informs the financial models I create and the business plans I write. I try to mirror the real world, but, of course, we are reaching into the future with this work.

Too D**n Many Screens, Guys!

First, I want to say what I have been telling a lot of people for some time: The theatrical business has been over-built, with far more screen capacity than necessary, for more than 20 years (yes, 20 years!!), and the bill for all of this real estate and technology has been coming due for a long time. Now, a paroxysm of a pandemic has forced everyone’s hand; and the over-capacity of screens has caused exhibitors to hit harsh reality, and chains are being crushed under debt. This is not merely a function of Covid-19, but Covid-19 brought it to a catastrophic place.

Chart showing the Number of Screens Each Year and the Total Box Office for the Year, (inflation adjusted)

As we can see in the above chart, Inflation-adjusted box office showed the screens punched above their specific weight for half a decade, then began to track almost precisely with the number of screens, except for the abberation in 2004, based on The Passion of the Christ. Then began to track almost precisely to the number of screens again until things started to trend down in the 2010’s. .

The following chart clearly illustrates that, starting in 1987, the annual take per screen was over $450,000, with about 23,000 screens available (including drive-ins), and ending in 2019, when there were about 43,000 screens (Cripes! Nearly double!) available (including drive-ins), with less than $300,000 per screen annual income. Unless each screen is being built at less than 65% of the cost of each screen in 1987, money is certainly being lost on the overall transaction.

Theater Screen Inventory and Average Annual Take by Screen

Volume or Margin, Again!

I have talked often of the volume or margin equation. Movie theaters are items with too big a ticket on them, so why would you play them for volume? Anyway, that is what we have now, too many screens and (forget Covid-19 for a minute) not enough rise in sales to maintain a margin.

With less income per screen there is nowhere to go but further into debt. Now, with the collapse of sales due to Covid, it is causing chains to have to innovate and re-negotiate debt on facilities. Overbuilt with screens, no income, theater chains have had to become innovative, but even more importantly, start to rethink their previous extremely hard line on release windows. OMG, windows strategies are crumbling! Only months ago, one letter from an exhibitor chain explained their unmovable position:

“For 100 years, XXXXX (Exhibitor) has served as a strategically critical and highly profitable distribution platform for movie makers, and for all that time the exclusivity of the theatrical release has been fundamental.”

That sentence was kind of the introduction to the ultimatum that any abrogation of the relatively rigid theatrical window: “is categorically unacceptable.” But now, we have a lot of theater chains making deals with the studios that allow various mitigations of theatrical windows. Covid broke the theatrical window’s back.

Further, with a vaccine on the way, it is likely, as Anthony Fauci has said, that after the second quarter of 2021, theaters will be able to open much more normally, and audiences, hopefully, will begin to be confident to start going back to the movies.

But this post is not about over-building, is it? Not really, but to understand the pickle the big chains find themselves in due to Covid, and due to their exuberance, is to understand the potential opportunity for Indies who want to be out from under (at least I would think so) the thumb of the dumb entanglements of the theater chains and the studios. This is the background of the situation in which we find ourselves going into 2021.

The Perpetual Indie Conundrum — Always Following in The Wake of The Studios

Can I add another layer hinted at above? Indie films have been living with the devil-deals of the studios for years and years, from DVDs at commodity pricing, to restrictive release windows that can choke films off from reasonable market timing. Theatrical release is expensive, and indies have been hampered by these studio deals that cram the indies into a financial corner with few really good choices.

Shite, Sounds Like a Disaster!

Maybe, but indies, filmmakers and exhibitors, have been innovating the way mom and pop stores the world over have been doing forever, trying to keep their foothold on the dream of making and sharing interesting films with film fans, aficionados, and the adventuresome.

Before Covid indie theaters were already under stress, trying to update their projection equipment to digital at costs that were prohibitive for them, and even dealing with geographic blocks on distributors giving their films to local theaters because of a large chain’s prohibiting contracts.

During Covid, small indie theaters have set up their own digital channels, put mini drive-ins in small-town parking lots, while smart indie distributors like IFC, RLJE and others have booked drive-ins during social distancing, and become almost the only players on the box office charts this year. And IFC did Day and Date VOD and Drive-in releases. Innovation in thinking, and innovation in action are our path forward!

What Do I Think We Might See in 2021?

Because of the stress on the chains, I see the windows erosion unstoppable. Large chains, instead of throttling the windpipes of distributors, will be much more amenable (while grumbling) to windows that are not so restrictive, and I, for one, would be pushing very hard to enable and pursue hybrid release patterns that blend Box Office and Digital in recipes that are different for each film or film type. And that includes many more players pursuing Day and Date releases that enable a consumer to see a film where they want to see it. Of course, the Digital Subscription model is going to not only emerge as king, as it is now, but it will solidify its lead with many film types. That does not mean that SVOD is the be-all and end-all platform for indies. The theatrical release that puts so much pressure on the opening of a film does not understand that many indie films have long shelf-lives, not at all like the slam it at the theaters and scoop up early dollars while the value of the film decays right before your eyes.

This is what that kind of wide release decay chart looks like:

Up First Ten Weeks

You’ll notice in the Up box office chart above that by Week 5, something like 83% of box office take has come in, and by Week 10, the box office cumulative is in the upper 90% range. The film, which earned a lot, has burned out at theaters. This slam it at the wall strategy has made all of these releases immediate do or die scenarios.

Let’s look at an indie like Winter’s Bone, and see what it’s 10 week box office trend looks like:

Winter's Bone First Ten Weeks

We can see that Winter’s Bone was at only 41% of its total box office in Week 5, and at only 77% in Week 10. Winter’s Bone held on in theaters for 45 weeks (BTW, close to a year!), giving audiences a chance to learn about it and catch up with it, while not burning through all of the world’s cash in marketing. While Up was in theaters in some form for 23 weeks, it was really burned out by Week 10. Certain kinds of fast and hot releases are right for certain kinds of films, but most indie films require more detailed and attentive handling, like Winter’s Bone. I want indies to have the maximum leeway in their choices, Day and Date if necessary and wise, and long slow roll outs if that is necessary and wise, and I believe the soft market will be much more viable for this kind of hybridization, as I call it.

My Models Now

Almost all of the financial models that I have crafted for smaller indie films since about May or so of this year, plan on some kind of hybridization of Theatrical and Digital, and plan on a very attentive release pattern. This is the way of the future. There will no longer be, I believe, a “one-size-fits-all” pattern for releasing indie films, and each needs to be planned for, modeled to the real world, and should take significant advantage of the soft spots that we will see in the markets for some time to come.

Onward and Upward

Jeffrey Hardy

If you are new to us, you can get our Newsletters by signing up here: https://tinyletter.com/FilmProfit (powered by TinyLetter)

–If you would like to learn more about our services for Indies, or discuss in detail how we might help you, especially in this new complex climate, please fill out our project submission form as fully as you can.

Filed Under: Our Thinking Lately Tagged With: Box Office, Covid-19, Independent Film, SVOD, VOD

August 29, 2019 By JNH 1 Comment

Comparable Pictures (ROIs) List

This Table Lists All the Film Titles Currently in Our Database

But don’t let that stop you from asking for a film, as we are constantly adding titles.

You can download this pdf and peruse, search, take you time with checking for the films you desire, or get ideas about films to choose. They are arrayed by budget ranges.

FilmProfit List of Films Available CompListDownload

Filed Under: Our Thinking Lately Tagged With: Ancillary Income, Box Office, Foreign Ancillaries, Foreign Box Office, SVOD, VOD

August 21, 2019 By JNH 5 Comments

Indies Lose Freedom (and money) Under Studio-Set Deals

What I Have Never Understood

Why does the independent portion of the business let the studios and big theater chains set all the rules, set ticket prices, set these DVD prices, set release windows, in fact, set many of the conditions under which the indies and the indie outlets, including smaller theaters, find themselves and their work existing, nay, struggling. Indies SHOULD NOT try to mimic the studios, or be hemmed in by studio economics, or even studio deals, but should strike out and work, continually, to differentiate their product, to court their audiences and their audiences’ intelligence, and push to increase their profit margins through different types of deals. 

I want to tackle my frustration with the fundamental imbalance in the Home Video (digital and DVD) equation. Consistent pricing between studio fare and indie fare is an ongoing threat to a healthy life for the indie film business.

If you are new to us, you can get our Newsletters by signing up here: https://tinyletter.com/FilmProfit

A Bit Of History:

When VHS movies were in their heyday (the ‘80’s and ‘90’s), there were two pricing schemes: 

  1. Low priced films on VHS to buy and have at home, ET and the like, for $15 to $25 or so. Called “sell-through,” they were considered “volume” titles, priced low to move lots of units, and make more money for the studios. All films cannot be volume titles. 
  2. “Margin” titles, which were much higher priced, with smaller target audiences, or anticipated to be targeted to rent primarily, priced at $60 to $110. Called Rental pricing. 

Yes, that is accurate. Giant audience films sold for much lower prices, to boost collecting, and niche films with smaller followings had the opportunity to charge premium prices, targeting them to rental titles, and those who desired them heavily could buy them at a much higher margin. 

The DVD Pricing Mistake

Enter DVD (late 90’s) and across the board “most-favored nations” pricing. This was not determined by small distributors, and certainly not by indie filmmakers. It was in the hands of the studios. All DVDs were priced at list between about $24 and $30. Wholesale price about half the list. At that time, all movies on DVD became volume products. [Price for volume, or price for margin, like low PC prices (volume) and high Apple prices (margin)].

Indies were forced into a deal with the devil, small margins, with only incrementally higher volume. Their consumer base is just not as big as the big guys; so small suppliers are hemmed in by pricing that favors the big suppliers. 

Indie Films Should Be Priced Like Artisan Products

Go to your local chain supermarket, and go to the regular cereal aisle. You will see a volume product, each box identical, each brand completely controlled, some commonality in pricing, so everyone knows exactly what they are going to get. The same is generally true in the cheese aisle, and in the wine aisle. 

But if you go to your artisan bakery, and they make granola there, you know their granola will have its own personality, and will not be like the cereal from the shelves of the big national chain. Their granola will be priced quite differently; not like a volume product because they cannot achieve volume in sales. It is an artisan’s offering. You as a consumer care about the granola the same way they care about it when they make it, so you are willing to go a little further to get it, pay more to eat it and enjoy the special product it is. Same with the farmer’s market cheese-maker, and the artisan winemaker. When a wine wins awards, they don’t mark it down, they mark it up! I think artisan films should pursue similar pricing strategies. You cannot achieve volume, so go for margin. 

Illustrations:

What Pricing Differentials Can Mean In Download Sales

How A Pricing Differential Can Mean Money For You

For an independent film costing $1million or less, your film can achieve essentially double its sales in a single market with a properly targeted price. This is just to illustrate the opportunity in thoughtful pricing. Of course you could spend a bit more on marketing to support your title, but at a higher price point you can afford it, and it can quite possibly have a multiplier effect on your sales. 

If your Download to Own (Electronic Sell-Through, EST) price point is $18.99 instead of $14.99, you have the opportunity to increase your sales margin on each download in a meaningful fashion. 

Seize The Day

Again, indies should not mimic the deals the studios set for larger market films. Filmmakers can rightly say they have little control over the life of their film after they hand it to a distributor, and small distributors may express feeling powerless to change the world of retail. I have worked with distributors who felt helpless against Walmart with their aggressive tactics to lower prices. Hey! Walmart’s purpose is not your purpose. Walmart uses DVDs as “loss-leaders” to get people in, not to honor your product.

Everything around us today says that we are only powerless if we accept it and act that way. Strike off in a direction away from big market practices for small market products. At worst, when negotiating with a distributor, focus on the future prices of your product in different markets and enable this discussion. At best, do not do a deal in which a distributor will allow your product to be devalued in the marketplace by the studio deals. If your product is special, everyone has to agree to treat it as special, and make specific moves to protect that.

Everyone benefits from Film Independent, Sundance, Festivals, IFTA and the hard work they all do to get independent films up and made and get noticed. Art House Theaters have an organization that helps them understand their audience and best practices. I think that Independent Film, Specialty Film needs to have a core organization that pushes film consumption, information sharing and marketing expertise just like the MPAA does, and that will help with best practices, including positioning and lobbying for better pricing for these films, which, frankly, are part of the heart and a large part of the soul of film itself.

We face an existential question. Indie films, their producers, their financiers and their distributors must try to seize control over their futures, and stop letting the larger outfits set all the terms. Unique films must be treated like the artisan products that they are. 

The New Yorker Magazine Found Success

The New Yorker delivers a quality product to a specific clientele at a higher than usual 3-digit annual price, and they are targeting subscriber growth. Sound crazy? “The lesson of the past five years has been not to undervalue ourselves.” Says the New Yorker deputy editor.

I think the independent film business undervalues itself and should change its approach.

Filmmakers, their champions, their business partners, and their fans need to determine that they want this special product to exist, to thrive. Higher margins will go a long way to helping ensure this. If you pay more for your cheese, wine and granola, I am sure you and your own clientele would be down to pay more for films that satisfy that special psycho-social itch you and they have, the one that Iron Man won’t scratch. 

More To Come On This Topic:

I intend to pursue this topic further in the coming months, and illustrate the value of this strategy for making films more profitable for all.

Let Me Know Your Thinking, And Earn A Significant Discount

Tell me (in a comment to this article) why you believe “artisan” films should be higher-priced (like small-batch to box wine) and you instantly qualify for a 20% discount on our: Greenlight Analysis, Financial Models, Confidence and Probability Analysis or Audience Analysis. And the same to those of you who want to justify why I might be full of it. 

Independent Films Comments (not spam or the like) that come in ihe first two weeks of this post are eligible for this discount (two product limit per client), which must be used in the 60 days following the comment upload.

If you are new to us, you can get our Newsletters by signing up here: https://tinyletter.com/FilmProfit (powered by TinyLetter)

Filed Under: Our Thinking Lately Tagged With: Digital Downloads, Digital Income, Independent Films, Indie, Profit, Profitability

June 14, 2019 By JNH Leave a Comment

Booksmart Release – Is This the New Way We Distribute Indie Films?

Having read quite a few mentions of the Booksmart film not performing up to snuff, or to expectations, and even discussion as to whether this augurs weakness for women-themed films, or women-helmed films, I wanted to look.

The Booksmart Duo

A Wide Release

Then I started to look at the release that was playing out for the comedy, and quickly came to my own conclusion that there seemed to be a disconnect between the movie’s most likely audience and the way it was booked and marketed. Why was a film that requires a core audience with educated and generally open-minded sensibilities, funny and even at times raunchy though it may be, released more like it was a teen horror movie? 2500+ opening screens? If it can’t perform under these conditions, then doom can only be skirted by prayer.

I have also seen some discussion that there are tendencies to move in this direction, away from indie platforming. This doesn’t yet appear to be an overall tendency, but, even if others are jumping off the bridge (as our mom’s always used to say) doesn’t mean it’s smart. Are we heading toward only wide or all-digital indie strategy? Can’t a theater audience have a chance to catch up with a picture anymore?

Serious Critical Acclaim

Critics seemed to love the film, with all the upper echelons giving it a 90 to 100 rating. But the release team must have let it all go to their heads, because critics speak to a very particular audience, not the entire available movie audience. Oh, and, by the way, there is a large swath of the movie-going public that likes to stick a thumb in the eyes of the critics. They are not the typical audience for these kinds of films, by the way. So, if the critics love it, the movie will not be for them, and if the critics hate it, some want to see it even more.

Smart movies are primarily for smart people, and critics are generally (not always) themselves, smart people. I mean, the word “smart” is in the title, and they aren’t trying to be snarky using that word.

Booksmart Is a Smart Movie

The story is that, when two girls, best friends and academic superstars, Molly and Amy, who have focused single-mindedly on their studies for four years, learn on the eve of high school graduation that the kids who partied while they worked, got into the same elite schools they did. What was all that for? Now, they have decided to cram everything else they missed in those four years, all into one night. Booksmart is rated R because it looks and sounds like real life!

Market and Release Smart

This film is rated R, so it is not for teenagers, though there are some, when they hear about it, who will aspire to attend. It’s for adults, and since when, if it wasn’t schmaltzy, was a film about booksmart people for people who are not educated, primarily urban, primarily upscale. This is not a creature feature. All of these items scream that the film would very likely have a smart audience, primarily made up of women, only partially because it is about women, and that they would of necessity be older than 17. This describes what we used to call a “Specialty Film,” or an arthouse film. Well, the arthouse audience is generally two thirds female, and it trends largely mature, and this audience generally goes out to the movies, not exactly on Friday or Saturday date nights, but the days and nights they can fit it into their schedules. Oh, one more thing, they often wait to see a movie after the first weekend, even often after the second or the third weekend. They are not in a teenage hurry. They need to be wooed, and allowed to find out more, and to fit it into their schedules.

So, Was Opening on 2500+ Screens a Smart Move?

In the right hands, a film like this might have found an audience growing and growing and growing, instead of watching it dwindle. Why didn’t it open on 50 or 200 screens and build on the critical acclaim and build its word of mouth? This film, if handled correctly, could have been a great little “Art House Plus” film.

Art-house audiences are already primarily women, are already adult, trend mature, and are a stable target for smart films. Expanding on that, we have other urbanites and near suburbanites who hanker for a wide perspective, different sensibilities, LGBTQ characters, and different looks at life. These audiences respond slower, attend in following weeks, and are loyal to films that please them. In fact, women especially want their friends to also see a film they enjoyed and to love the experience, too. That can’t happen opening weekend. They embrace topics that can be taboo or racy or wistful, even raunchy, and they are agnostic about sexual content in films. They want to see some life in front of them. So, why did the bookers and marketers spend so much money releasing this film like it was Lights Out or something?

Over-amped Release Costs Can Crush a Film’s Value

The truth is, every film type has a different arc of upswing and downtrend, and well-handled Art House Plus films are in careful, nurturing hands, managing the opening theaters, targeting the audience, teasing them out and allowing them to become familiar with it across time. Comedies go up fast, like rockets, and fall to earth the same, fast. But smart films do a slow windup, and then stick with their target audience over time, allowing them to get to it, and keeping a tight rein on the marketing spend so that the tickets you sell don’t just all go to paying off marketing spend. I wish Booksmart’s team had thought through this film’s release strategy better, and then, I suspect, there would be less carping, hand-wringing and worrying about what this film augurs.

Some Numbers:

  • -$6,000,000 Budget
  • -$20,000,000 at least Prints & Ads (2500+ screens)
  • +$18,000,000 three weeks BO
  • =$17,000,000 in the hole today
  • Needing another nearly $40,000,000 million in BO to get out.

Oh well, exuberance! I wish I was saying, fantastic, discipline, and here come even more certain chances for women. Bravo on the film, I just wish the release had nudged it toward a rolling success, instead of bludgeoning it with exuberance.

Coda: When I read or hear that a new filmmaker has had their low-budget picture picked up at Sundance, or Toronto, or wherever, and they crow that the distributor promised to spend $20 million on marketing, I usually go “Uh-oh, there goes value out the window.”

Another Coda: We were down due to hacking for a bit, and happy to be back, we are offering a Thank You discount. You can use if for Filmmaker’s Financials or Producer’s Financials, limited time, limited number, so if it fits you, use it! Use it here: https://shop.filmprofit.com/

If you are new to us, you can get our Newsletters by signing up here: https://tinyletter.com/FilmProfit (powered by TinyLetter)

Onward and Upward!

Filed Under: Our Thinking Lately Tagged With: Art House, Box Office, Demographics of Moviegoers, Female Moviegoers, Release Planning, Wide Release

January 14, 2019 By JNH Leave a Comment

Retreat from 2017 Panic!

Box Office Returns to Form in 2018

In late 2017, the biggest story was whether box office was falling off of a cliff or not, after the somewhat disastrous Summer and weak Fall season we discussed in last year’s Box Office Panic! series.

We’ve Seen This Before

We witnessed this same kind of slump back in 2005, when the box office fell from 2004’s $9.22 billion to 2005’s $8.6 billion. It took two years for it to climb back above $9.25 billion ($9.4 billion in 2007); and there was a lot of hand-wringing, then, too.

There was another slump in 2014, but without as much hand-wringing, and then an anxious replay of the fears of 2005 reared its ugly head in 2017. Now, only one year later, we have re-entered growth territory, as usual. 2018 brought a return to annual box office growth, with total ticket sales of $11.86 billion. The industry, though, is still in an uncertain mood, continually worried about the fantastically successful SVOD business taking their lunch. But what does the relationship between Box Office and Home Entertainment look like?

Box Office Steady State, The Action is in The Home

From the above, we can readily see that there is no corresponding serious drop in Box Office, which has been (generally) rising slowly. And this, all while Home Entertainment has been rising on the back of SVOD. How do we know it’s digital entertainment? The following chart illustrates it for us.

And The Action at Home is in Digital

It is obvious from above that digital goods, including electronic sales (EST), video on demand (VOD) rentals, and subscription video on demand (SVOD), are picking up the slack lost through the retreat of packaged goods (DVD, Blu-ray, etc.). So, Digital Goods are on a strong rise, while box office is maintaining, at least, if not growing by leaps and bounds.

What is the real “problem” in this landscape? The opportunity for indie films. It has always been true that a small indie film will get far more eyeballs on television than in theaters; and the same is true for the made-for-late-night-T.V. blockbusters. Look at Bird Box as an immediate example of this. For this reason I welcome the hybrid release strategies of films like Manchester by the Sea, or Roma, very much like art films with an immediate chance at wide audience dispersion, along with financial security.

Don’t Let The Studios Set Pricing for Indies

I may be tilting at windmills here, but in my next missive I want to lay out the case for differentiated pricing of content, like in the era of VHS cassettes, I will save it for the next post, where I want to talk about the fine wine of indie film-making and release, as opposed to a market that wants to treat all the films as perfectly equal commodities. I think indie distributors and theaters should sell their unique films as handcrafted artisanal products, carrying the premium price a handcrafted beer or cheese or unique item of clothing does.

By the way, I wanted to alert you to the fact that we have rolled back the prices on our comparable pictures reports to levels not seen in nearly a decade. We want them to be indie friendly. You can check them out here.

We are also offering a 15% discount on any service or report through Sundance and January. The entirety is on sale with this discount, but you can only use it once, so get everything you need. No code necessary for you, the special discount will be added automatically.

If you are new to us, you can get our Newsletters by signing up here: https://tinyletter.com/FilmProfit (powered by TinyLetter)

Onward and Upward.

Jeffrey Hardy

Filed Under: Our Thinking Lately Tagged With: Box Office

October 8, 2018 By JNH Leave a Comment

Key Risks in Making a Film, Part III

Steps to Green-lighting Yourself

Until the day your film is funded, it is hopefully, fruitfully, in development. But what is development, and what is all this development for?

Some think development is to get people attached: Actors and others whom you can “sell” to investors and partners. 

But it is also so much more than that.

Attachments can be important but remember that attached people are not just commodities, they are also human beings with their own hopes, dreams and goals. Pick them well, for you and for your picture, and for your picture’s future. People often engage in banter about “A List” and “B List” and so on. It depends on your picture. One “A Lister” for a certain type of picture is actually “C List” for another type of picture, or a certain audience. You are trying to find a balance between your film’s story, the right talent for the play of it, and the costs and value proposition of the film. You can also be juggling talent for position and role. I wish I could say all of this was easy, but if you wanted easy you wouldn’t be in the film business anyway. Right? 

Some think development is about building a package and “look-book” that sells the sizzle. 

If the sizzle is all sizzle and no meat, you run a high risk of becoming so transparent that people can see completely through you. If you focus only on the selling, then your project can often suffer. I like to think the best goal is to develop a really good picture and plan and be focused on its success, which is then success for you and your investors. 

Some think development is to have a good script: It’s that, too.

In the second post in this series, dealing with the audacious act of creating and then perfecting your script (a post I have a sneaking suspicion people might not have loved because I was very blunt about the challenges, and the sheer competition each new script faces in the industry). In that post I discussed just how high a mountain you have to climb to get your script prepped for notice. But once you have a good script, you then need to look very carefully at how and why people invest in projects in the world. Why? Because, unless it is you and your cousin in your backyard, you are going to need help to get your project made. Whether that investment is $200,000 or $200,000,000, you will need help getting there. And the most effective pitch for help in the real world is letting people know how what you are doing is going to benefit them.

What do you think of any of these pitch elements?

  • I fell in love with this story I wrote …
  • It is a moving (or jump out of your seat frightening, or touching, or laugh-filled, or hard-hitting) story.
  • With the new cameras, I can deliver the same quality for a fraction of the cost …
  • I need to get this first movie made, so I can build a career for myself
  • These movies are like mine, and they brought in … and all of them got good foreign exposure and … Let me show you …
  • Frankly, this is a good opportunity for you, and if you don’t do it, somebody else will …
  • The structure of our deal is that anyone who invests is first in line to receive money before any of the crew or producing team. 

Of course some of those are demonstrably bad pitches (which is why they are crossed out), but it is not always evident when you are deep in the passionate drive to manifest something. So the first stage of development in the Greenlight process is to check yourself and check your ability to understand other people’s priorities, and then include the best of them in your priorities. All of the people you are partnering with, and which you try to bring on, are resources in this Greenlight check. Try to align yourself with them in ways that do no harm to, and can even enable, your picture. Become a really good listener.

Greenlight Your Film Internally First

You may have heard that hospitals began instituting checklists a few years ago. Checklists that are used in operating rooms, in patient care on the floors, and so on. These checklists have saved many patients from dangerous medical complications, and reports say that they have definitely saved lives.

So, I am going to suggest that you Greenlight Your Film Internally first, by taking it down through a checklist, and in using that checklist, set about accomplishing all of the tasks that you can. Why? Because each item you accomplish on this list imbues you, your team and your project with real value. If you perceive your script, and then all the of this work you do to properly develop it, as an investment, then the project has increased in value, and that value is what you are selling “as a package.” This is the simple truth of packaging; it is not just about shiny sales pitch baubles, it is about real value.

I am going to give you a checklist, with all of the items meant to move your film closer to being fully developed. The more developed it is, the closer you come to funding it, and the more intrinsic and real value it has. Think of it this way. If you want to build a building and you have great blueprints, you also likely need an option on land, surveying, a budget, at least a preliminary city approval, maybe environmental studies, and then a construction partner, and maybe something like a lookbook and deal structure and plan to recoup from rents or sales to gain finance. The plans alone are just an idea. Maybe a really good idea, but merely an idea. All of the elements in a package become something of real value, could even be sold off to another developer. That is what I want for your picture, a development arc that imbues it with value, which value then could be priced and sold off, if it ever had to be. That fact, the dedication to imbuing value with each move, provides comfort to potential investors. 

Here’s The Development Checklist

  • SYNOPSIS OF PROJECT  
  • MANAGEMENT – Can be Writers/Producers/Director(s)
  • TEAM – Can be from Executive Producer, to DP TO Casting Director to Legal and Accounting
  • TALENT (if any, you might even be focusing on unknown talent, but you still need to have a reason why)
  • FUNDING REQUIREMENT           
  • CORPORATE INFORMATION       
  • BUSINESS STRUCTURE  
  • LEGAL STRUCTURE         
  • FINANCIAL AND ACCOUNTING PRACTICES
  • KEY AGREEMENTS         
  • POTENTIAL TAX INCENTIVES      
  • COMPARABLE PICTURES
  • AUDIENCE ANALYSIS
  • — WHO THEY ARE
  • — WHY THEY ARE
  • — WHERE THEY ARE
  • — TIE THEM TO YOUR PICTURE      
  • PROJECTIONS   
  • COMPARABLE PICTURES FINANCIAL STUDIES           
  • RISK FACTORS  
  • CURRENT FILM MARKETS          
    • DOMESTIC AND OVERSEAS  THEATRICAL EXHIBITION            
    • ANCILLARY MARKETS    
    • HOME VIDEO   
    • TELEVISION       
    • DIGITAL DISTRIBUTION
  • DISTRIBUTION PLAN (if any)
  • MARKETING PLAN (if any)
  • APPENDICES
    • TALENT LOI’s
    • TEAM LOI’s (UNIQUE EQUIPMENT AND SO ON)
    • LOCATION PHOTOS OR AGREEMENTS
    • BRIEF STORYBOARDS

When I do a Greenlight Analysis for a project, these are the things I go over and test for both their presence and for their validity. What do I mean by validity? Is the team of sufficient quality and experience, say, that they can effectively deliver the $1 Million picture in hand, or the $40 Million picture?Further regarding validity, I was once asked to analyze the sufficiency of a young director who had made a very successful $5 Million horror picture, and a bunch of shorts before that which got significant attention. This sufficiency was focused on a much, much bigger picture in planning. I went back through the careers of several young directors who had just come in off the street originally, like this director in question, and gone on to mega pictures very successfully. I dug into the career arcs, the focus, when and how they made their leaps, and based on what factors, and concluded that this young director would be a better bet, even, than an old tried and true one might be, and at a better price, and with more verve and good preparation and creativity, based on exactly what the director in question had done already. There is no single answer to the question of validity, there is only a thoughtful and reasoned and properly vetted set of answers.

My Greenlight Analysis looks at:

Completeness of Package

  • Production Team and Production Plan (including budget, was it derived through a breakdown and schedule?)
  • Distribution and/or Marketing Team, if any yet
  • Rebates, if any, and state of application(s), if any yet
  • Producer’s Statement
  • Director’s Statement

Script and Plan

Do they jibe, and are they compatible with the Producer’s and Director’s Statements

Comparables Analysis

Are they effectively chosen and what is the state of the data, how reliable, unless FilmProfit is doing this report. 

Target Audience

  • Can we reasonably ascertain key demographic outlines, by age, gender and other demographic signals?
  • How, why and when do they attend, and what are their demographics (age, gender, financial status, use of media and where do they get their information?
  • Does the story and treatment jibe with what is known about that audience, from exit interviews, other audience studies, social positioning, or other industry and marketing signals?
  • Does it jibe with the Comparable Pictures Analysis?
  • Can the pieces stand together with the release plan?

Pass/No Pass

  • If all of the pieces hang together, is the plan viable for proceeding? 
  • If there are elements out of sync, what are they and how can they be healed
  • Or is the project poorly put together or severely flawed, and why? 

The Development List and my Greenlight Analysis outlined above is like a brief on the necessary elements of a business plan, which business plan will put some proof to the concept of your your strategy and the moves you will make. I consider, and many of the people I work with, consider the elements of that list to be the development process road map. Each element completed is an investment in your film that makes it more valuable at each step. Far too many people think that pitching is the magic key to opening the pot of gold needed to get a movie funded. That pot of gold is very, very similar to the pot of gold at the end of the rainbow. Don’t waste too much time looking for the pot of gold. Put your picture together!

Oh, and because, well, just because, I wanted to offer a couple of discounts:

  • 10% on our Comparable Pictures Reports, for orders of 5 or 10 titles from our database, (USE CODE: Comps!)
  • $200 on our Greenlight Analysis (USE CODE: Greenlight!).
  • Both of these discounts are limited in number of uses and in time, so get ’em now. 
Greenlight Analysis

What originally caused me to begin FilmProfit® was my noticing that the studios and big players had lots of folks to help them figure out how to make their films profitable. Indie producers were in a gunfight with rubber stage knives. I wanted to give them some weapons to begin to level the playing field a little. The things I do, whether for rump indies or mid-level players, or even the studios, are meant to get down under the hood, not just numbers, although numbers tell a story, but to get at the functions, of moviegoers, exhibitors, distributors, and all the working parts of the industry, to help my clients see better what they are getting into and how to prepare for it.

Onward and Upward, Jeffrey Hardy
Key Risks In Making A Film, & How to Manage Them
Key Risks in Making a Film, & How to Manage Them, Part II

If you are new to us, you can get our Newsletters by signing up here: https://tinyletter.com/FilmProfit (powered by TinyLetter)

Filed Under: Our Thinking Lately Tagged With: Development, Six Key Risks

October 2, 2018 By JNH Leave a Comment

“Big” Data or “Smart” Data

In this era of ‘Big Data’ buzzwords flying everywhere, “We at FilmProfit prefer to focus on the accuracy and the appropriateness of data, not its height or its girth.”

FilmProfit Uses Latest Data Science Techniques to Guide Financial Modeling

Deep knowledge of the film business, an Institutional Memory of its patterns and its deal structures is crucial to understanding and managing risk. Markets in evolution fall back on tried and trusted deal structures, even when deployed in new patterns. We track these patterns. Big pools of data cannot give you this. At FilmProfit, we bring this institutional memory, and our powerful data knowledge, coupled with the latest data science techniques to rational decision-making in film business planning.

Good Assumptions Start Good Data Science Studies

In data science, one must always start with assumptions, so knowing what to assume moves one instantly ahead when seeking Confidence and/or Probability. And, not knowing what to assume or what is actually customary, then any data could be seen as telling you its secrets, when it is actually not giving up any significant secrets at all. In a complex system, we never have complete information, so to analyze a system, we have to know the system well, and then look for important links in the observational data, before making a case for a potentially valid inference. Does knowing the differences in market deals at different levels require us to think differently for different types of films? Does knowing the differences in how women and men approach movie-going at different ages, and for different film types mean anything? Does knowing the base and evolving structure of Chinese, or Japanese film distribution help us with modeling for these markets. We definitely believe it does, and we believe it can impact your business, and we believe that it works with and provides a separate set of signals that pure pools of box office data cannot. We use these signals and many more, combined with our command of practice, to help us choose and organize our data and assumptions, and to help us have a valid starting reference.

Science realizes that in evidence-based work we are often focused, like in a courtroom, on the causal elements of what is at hand. But, we must admit that all systems contain randomness, and that there are causes which exist that are very difficult to discern. Now, the human brain is a very powerful computer, but even the human brain cannot ascertain all of the random and non-random elements in a circumstance or a pool of data, and certainly not with alacrity. So, we use the latest techniques in statistical analysis to help us feather the non-random elements in our data to the surface, where they can be analyzed, while sequestering the random elements at the edges of the system and beyond.

Data Science Aids Us in Complex Systems

A complex system such as producing and releasing a film, contains randomness and uncertainty because there are so many independent operating parties along its path. In data science modeling, they call these operating parties “agents.” The individual goal-seeking of those agents can create randomness, uncertainty and complexity.

We start our work with the understanding that there is and will be randomness and uncertainty, so we are able to focus our attention on the string of non-random events, those which maintain relative stability. These we analyze to ascertain with a high level of CONFIDENCE (90% or above), so we can see a path forward. We can also push this confidence further, labeled in data science as PROBABILITY, using our proprietary tools. Within these bounds are the things of which we feel pretty confident, or which we can describe as probable. These things, then, enable us to identify the range of events where the randomness and risk are not so high, and even the areas where the randomness exists, thereby enabling us to focus on our confidence range, or on our probability range.

An Illustration of Confidence and Probability

FilmProfit has long produced proprietary models for estimating the financial performance of films in distribution, from the very low budget, like Sweet Land, to the very high budget, like this summer’s The Meg. These models have been used by producers for hundreds of films. In a standard three-column format, Low, Expected and Better, they are still a very viable alternative for modeling a film.

An Illustration of our three-column conventional projections model

Understanding the range of risk or performance, is an exceeding powerful business planning tool, and a powerful driver in targeted negotiations that impact your film’s performance for your team. Over the last year, building on our deep institutional memory of the film business and utilizing the newest aspects of data science, we have put significant time and effort into developing a system for effective and affordable Risk Analysis using our proprietary data to arrive at two new reports which provide significant advantages for our clients:

Report 1. Filmmaker’s Statistics-Driven Financials

With designated 90%, 95% or 99% Confidence Level and detailed performance ranges in the assessed output, based on individually separate market signals bootstrapped a minimum of 3,000 iterations on each signal. This robust report is targeted to single films, or slates of up to three.

Report 2. Producer’s Continuous Event-Driven Financials

A Continuous Event is an ordered (or “chained”) sequence of sub-events, such as box office and budget and opening and maximum screens and foreign box office all tied together to find central tendencies of these when chained in a bootstrapped analysis of a minimum of 3,000 iterations on each signal. We use this much more complex analysis to achieve an even greater modeling environment.  This report is ultra-powerful with both single films and slates of films.

Six Reasons Why This Analysis Is Meaningful

  1. It enables a client to gain prudent evidence-based scientific inference
  2. This data analysis effectively describes the range of performance within our Confidence Levels or Probability Range with designated levels of confidence and/or probability, further defining the client’s “less-risk” path pointed out in the analysis.
  3. It is backed by a deep institutional memory of the industry practices and structures
  4. It uses rigor and discipline to achieve a practiced analytical approach that can take the results of the data analysis and apply it to any client scenario parameters, any deal point structures and any waterfalls, even including specific target parameters for an individual offshore target market, such as China, or the UK, and so on.
  5. It supports planning for effective long-term outcome over risk.
  6. It is an affordable approach to giving a client greater confidence in business planning for a film.

An illustration that shows elements of the kind of detail in the nine scenario results

This level of inquiry and enables us to plan in much more detail, and to understand the field with a higher confidence or a higher probability.

FilmProfit’s new analysis tools:

  • Increase your speed to market
  • Result in triple the number of model scenarios
  • Give us clearly defined boundaries at the Upper and Lower Confidence Intervals
  • Give us even more sharply defined fences in the Probability Range, providing us a finer-tuned approach to our discerned outcome ranges.

A conventional histogram illustration that enables us to understand the detail in our analysis

The power of this new approach can be acquired for your film project or slate, by contacting us at https://filmprofit.com/contact/

FilmProfit is the premier business planning consultancy for filmmakers, financiers and studios, with clients in all the filmmaking centers around the world, from Los Angeles to New York, to London to China and India, and covering all the areas in between. FilmProfit has been striving for 25 years to aid independent film producers to develop and operate with good business practices, by providing them with the business planning tools that meet this mission, including, FilmProfit ROI Comparable Pictures Reports, Projections of Potential Income, and End to End consulting in the preparation of a film to deliver successfully all the way to market, including target audience analysis and much more.

FilmProfit® is a registered trademark of FilmProfit, LLC.

Contact FilmProfit

If you are new to us, you can get our Newsletters by signing up here: https://tinyletter.com/FilmProfit (powered by TinyLetter)

Filed Under: Our Thinking Lately Tagged With: Film Business Risks, Films and Risk, projections

August 28, 2018 By JNH Leave a Comment

How Do We Arrive At A Film’s Projections Model?

Are They Predictions?
I find that some folks prefer to look at Projections as some kind of prediction of performance.

Let me start off by saying clearly that Projections of Potential Income ARE NOT PREDICTIONS of any performance. Predicting is what humans have sought for millennia, and have never found, except by happenstance. Even the near-term example of Nate Silver, of numerous political polls, too many to count, show us that predicting is a near-impossible business.

What are FilmProfit Projections of Potential Income?

Our models are meant to be shaped reasonably to the real world. What does that mean? Shaped, means that when there is a domestic profile for a certain kind of film, then the potential for a foreign profile of a certain shape, as seen through study and analysis, is a reasonable assumption.

But, those shapes are different for different types of films: dramas and comedies, thrillers and science fiction. They are also different according to the release pattern taken by the film. Those with slow roll-outs theatrically fare differently than do medium-wide releases, and than do wide releases. On top of the release pattern lays the type of film, as we discussed before, but with even more nuance. A marketing campaign can aid a film in gaining its shape, or performing above its weight, and can also miss or even sink the film into the morass.

Now, I have only cited three key factors here, and one can see the complexity of maintaining a prediction. In this age of “big data,” many want to put their faith in data alone. But where does institutional memory fit into big data? Where does casting fit into it? Is Brad Pitt always a 1 (or a 10, depending on the scale)? Has that assumption proved out? Is Johnny Depp always a 1?

No, modeling a film in release is much more complex than that. Particularly when you are modeling against “consumer activity.” Because consumer sentiment, attraction and activity are always much more complex than that. Is a tweet from Kim Kardashian certain to make a film a winner? It could also make it a loser, for certain types of films and certain portions of the consuming public.

So, What Can Projections Of Potential Income Do Best?

They can identify restrictions in the pipeline, and they can raise flags regarding risk factors that must be addressed, from casting, to budget size, to target markets, to deal structures which reduce risk and increase upside potential.

They can help shape a business plan so that it hopefully has multiple paths along its arc.

  • If one market fails, is all then lost?
  • How can another market be attacked?.
  • They can also show a film that is hemmed-in by deals, or planned deals that could restrict its potential.
  • Upfront deals help reduce risk, but they almost always reduce upside potential as well.

These things can be explored in Projections models that are shaped like the real world, and follow what I call the “wave-form” of a deal.

It Kind Of Goes Like This:

  • Film’s upfront deal structure in
  • Film’s comparable data in (per-screen average, weeks of run are elements in this)
  • Film’s audience knowledge in
  • Shape of world in (domestic box office to foreign box office is one element in this)
  • Deal structures anticipated in
    • Including Investor/Partners’ share structures
    • Rebates and Incentives
  • Model these elements and adjust for outside factors and for reasonable conservatism

Out come projections models that are closer to a business plan than a prediction, and a much better tool than reading entrails, and maybe even more interesting than political polls. Ahh, probably not that last one. 

Financial Models
You can learn more about our projections by clicking on the image

If you are new to us, you can get our Newsletters by signing up here: https://tinyletter.com/FilmProfit (powered by TinyLetter)

Onward and Upward!
Jeff

Filed Under: Our Thinking Lately

  • Go to page 1
  • Go to page 2
  • Go to page 3
  • Go to Next Page »

Footer

Our Thinking Lately Blog

  • What in Holy Hell Are Indie Films Facing in 2021?
  • Comparable Pictures (ROIs) List
  • Indies Lose Freedom (and money) Under Studio-Set Deals
  • Booksmart Release – Is This the New Way We Distribute Indie Films?
  • Retreat from 2017 Panic!
  • Key Risks in Making a Film, Part III
  • “Big” Data or “Smart” Data

Subscribe to Our Newsletter

Check your inbox or spam folder to confirm your subscription.

Copyright © 2020 FilmProfit, LLC | All Rights Reserved || FilmProfit is a Registered Trademark of FilmProfit, LLC