FilmProfit

The Business of Successful Films

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Announcing A New Product, Statistical Confidence Modeling in Film Projections

Bootstrapping Our Way to Confidence and Probability

Over our 25 years of financial modeling for films and slates and funds, we have developed sophisticated methods for modeling a film or films in distribution. Because of our hard-won proprietary data and years of deep diving into markets arcana, leveraging our baleen whale tendencies toward information, we have modeled hundreds of films, from the quietly beautiful “Sweet Land,” to the challenging comedy of “Sleeping Dogs Lie” and the blockbuster-sized upcoming “The Meg.” All of these films were modeled using all of our skills, but we are continually seeking to enhance the quality of our work, and now we have again.

We here at FilmProfit have devoted significant time and effort into formulating a statistically meaningful approach to estimating Confidence and Probability (two different things in statistics) in our modeling for a single film (Illustrated below at different potential budget targets) and for slates of films. We have performed these analyses and refined the output tools to where we can now confidently share them with our clients.

Above is an illustration of a projections model we have developed for illustrating Confidence Levels when studying the potential performance of your film across a range of markets.

Our models take bootstrapped datasets and estimate these confidence levels based on target fee and costs structures. This can be done for a single film, for a slate of films, or for a fund strategy. We can divine market performances for a range of budgets determined by the data, so as to target maximum potential ROI and effective budget, or targeted to a single budget, based on bootstrapping thousands of iterations from our dataset.

The bootstrap method is a re-sampling technique used to estimate statistics on a population by sampling a data set with replacement.
It can be used to estimate summary statistics such as the mean or standard deviation.

https://machinelearningmastery.com/a-gentle-introduction-to-the-bootstrap-method/

In our continual striving to provide clients with quality information and effective guidance, we have begun driving our Monte Carlo Bootstrap Analyses to higher standards of predictability.

In this pursuit we have developed algorithms which take key data through thousands of bootstrapped iterations that can be used to derive two levels of analysis.

Confidence Intervals.

In performing a Confidence Study, we are trying to ascertain within a high degree of confidence, the possibilities that a film will perform within a certain range of market parameters, for example, box office, foreign box office, various aftermarkets, and so on.

A study will typically consist of collecting a pool of Comparable Pictures Data, and then subjecting the market characteristics of that pool to a bootstrapping (Monte Carlo) that randomly generates thousands of iterations of each studied parameter. The resultant data will give us clear indications on each parameter as to the outside edges of Confidence, and at each Confidence Interval, what the different market parameters would be: for example, at 99% Confidence Interval, we might see that the highest box office could be $100 million, and the lowest box office could be $25 million in one study. In another, those same parameters at 99% Confidence could be $10 million and $2.5 million. The Confidence Intervals, say at 90% would give us a narrower range of possibilities, but could be sufficient for purposes of the target study. What it would also tell us is what performances have a very low Confidence of happening, those outside the 99% Confidence Fence as illustrated just below. These are not outside the realm of possibility, but they are very improbable. We calculate that improbability and give you a number for it.

Discrete Event Probability

If I was using typical statistician speak, you would begin to hate me and hate what I am saying, and with reason, because much of statistical talk becomes gibberish among those who are not statisticians. It does not reduce the value of their work, but it makes it not understandable to people who also need to understand it. A Discrete Event Probability is a higher level of Confidence that an event will transpire (domestic box office +plus foreign box office + domestic and foreign aftermarkets + cost to achieve those, both in production and marketing, could be called a discrete event in this parlance for us). Probability is typically a lower percentage, because it has an even higher potential for happening than confidence. It pulls the fences in, and in the illustration above, we have achieved a 99% Confidence Level, and with the same data achieved a 90% Probability (for a Discrete Event).

Discrete event simulation (DES) is a method of simulating the behaviour and performance of a real-life process, facility or system.

https://www.ncbi.nlm.nih.gov/books/NBK293948/

If you think the business plan for your film or slate could benefit from this kind of robust analysis, then check out our Statistical Confidence Models page at www.filmprofit.com/confidence and probability_studies.

Or fill out our Project Intake Form

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Big Changes Coming to Landscape of Film Marketing

Television, The Big Elephant in the Room, May Be Shrinking

The number one single cost in releasing a film to theaters has been the buying of television ads. For many studio films, this can run from $4 million a week to $15 million a week in the month to six weeks running up to the film’s release. Of course small indie films (outside of those horror films which were given significant wide releases no matter their production budget) have never had the deep pockets for this kind of release, but their budgets might still get stretched in buying Spot TV ads, going after the random minutes available in weird time-slots or leftover network ad slots. Television is still expensive in those situations.

As you can see in the chart above, Television ads have for a long time been the dominant place for gaining first information, and being primed to see a film, with trailers in the theater coming in second. With television being the only medium which marketers felt they could target effectively, it was the mainstay of and the holy grail for film marketers.

Look at this statistic, though, in the heat of 2018 summer box office:

“This year, for the two-and-a-half months — April 1 though June 15 — national movie TV spending from the movie studios (not including consumer marketing partnerships) totaled $363.1 million… A year ago it was $505.6 million.”

Okay, let’s make a chart of that, just for emphasis:

A 30% drop! And arguably the first significant signal that the world may be changing in this focus on television as the primary ad medium. This also came in the face of slightly rising box office, after last year’s roller coaster plunge. Which means that the box office is not necessarily totally tied to TV.

There can be many elements at play here, including the fact that larger and larger numbers of consumers, mostly younger ones, are cutting the television cord, and opting for SVOD for TV content, along with more and more skinny bundle options. These make the consumer harder to target through TV-attached marketing, and would rightfully drive marketers to seek more direct relationships and channels, much more targeted digital, for example.

So, on top of losing television customers, the networks are also now losing this portion of the ad income that drove their businesses. I think as we go forward, we will be adjusting the cost structure of prints and ads, particularly for the really big films we work on, but likely more so for the smaller films, which we would anticipate having little reason to be spilling money at all over into the world of conventional television.

We are already studying how this will play out in our projections and reports.

Onward and Upward

I also wanted to let you know that we are having kind of a half-yearly set of special offers on some of our reports:

  • FILMMAKERS FINANCIALS, easily the most popular of our services, includes a set of custom Projections of Potential Income in a set of three scenarios, with 5 Comparable Pictures Reports.

Here is the report store link: Filmmakers Financials COPY AND ENTER THIS CODE: FINANCIALS18 AT CHECKOUT (there are a very limited number of these available, and a short time-frame in which this discount is active, so don’t miss it!)

  • COMPARABLE PICTURES WITH VOD REPORTS, another cornerstone of our work with independent filmmakers. 

Here is the report store link: Comparable Pictures ROIs  COPY AND ENTER THIS CODE: ROISVOD18 AT CHECKOUT (there are a limited number of these available, and this offer will expire in a short time, so don’t miss it!)

  • STATE OF THE MARKETS REPORT, part of a complete business plan package, saving them an incredible amount of time explaining to potential financial partners how the business actually works.  

Here is the reports store link: State of the Film Markets COPY AND ENTER THIS CODE: MARKETS18 AT CHECKOUT (there are a limited number of these available, and this offer will expire in a short time, so if it will help you in building your package more efficiently, don’t miss the chance to save money!)

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

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

Jeffrey Hardy

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Comparable Pictures: How to Choose ‘Em and Use ‘Em

I get a lot of clients who find it difficult to choose comparable films right off the bat. I wrote this article to help them, and help others, even if they do not become clients. Bona Fortuna to all!

How I Go About Choosing Comparable Pictures

In a given year I might prepare projections and financials packages in which I have to help producers choose hundreds, even thousands of titles for comparison to their prospective film. Every producer comes to this a little differently, but I thought it might help some of you if I talked about my own point of view when approaching this task. Whether I am involved in your process or not, I hope this helps in the way you approach it. First, the comparable films chosen should be seen as “models” for your film. They can be creative models, but they are also business models, and we are seeking insight from the information those models bring to us. In my case, mostly business insight for strategies and value. So, what are some key questions I think you should be asking and answering to discern comparable titles.

1. I like to start with films of Similar Themes.

Many producers think they need to use films with similar stories. This is often, in my book, a real stumbling block. A film uses its plot elements to explore themes, rather than themic elements to explore the plot. So, focus on the theme. If your film is a kidnap, then choosing only kidnapping films, for example, could actually miss the mark of your film, and make your choices far narrower than they really might be, than if the positioning of your film was as a drama of how an individual can get caught up in events that snowball unintentionally into great tragedy.

2. Of course we want to start in the Budget Range of your film.

There is a little bit more I will have to say about this later. But the lower the budget of your film, in some ways, the narrower the range of budgets we might have to work in. So, a $5 million film, we might look at titles from $3 or $4 million, to $10 million. If your film is $100 million, then we can reasonably look at films in the $70 to $200 million range, for example. Of course, with lower budget films, there could be reasons why we might broaden the range of budgets, some of them might include a sharper comparison in target market, for example. Sometimes, we may be dealing with a film that has few thematic, story, target market, and so on films that are in the same budget range of our film. In that case, we may need to choose higher budget films, or some at our target budget, and one or more at a completely different budget level.

3. If possible, we would like to work with films Released More Recently.

Various elements of the release and markets in these changing times may be much more indicative of how your film might perform as we go forward, than a film released ten years ago.

a). Still, however, your film might be so unique that similar films come along relatively seldom, so that we have to take them from the time periods in which they have appeared. That might lead us to choose films from fifteen or even twenty years ago, if they also fit in other ways.

b). As well, if we understand the range of the domestic box office, at least that can give us a starting point for understanding the possibilities of our prospective film’s value.

4. Understanding Your Film’s Target Market.

This is an important element in helping us determine good comparable films. Just today I was working on a middle ages Action Adventure with a relatively low budget, but when studying the target audience of two higher budget Action Adventures, and analysis of Action Adventure audiences from an exhibitor overseas, it was remarkable the similarities in audience breakdown. Understanding your film’s target market is crucial in many other ways that will serve you through the whole process, including the range of target distributors and the distribution method.

5. Style of Release or Distribution Method.

The viable selection of distributors, the possible number of screens in release, the size of the target market, all are encompassed in the understanding of the style of release of your film, and its comparables. At certain budget levels, a Producer Controlled Release is viable, even if it is not your preferred method and you go a different way. At others, unless you can mount a studio-style release, you must find and work with a studio partner to achieve the market dispersion your film and budget needs, and your target market(s) can support.

6. What is the Look and Feel of Your film?

The style of your film can tell us a lot about where it belongs in the continuum. That continuum encompasses Budget and Target Market. A comedy that is quirky, or a film that will be cut with a fast pace will likely have a younger-skewing audience, and may be less suitable for an older audience, unless there are thematic elements that are more suitable for older audiences. I suppose, then, what you see from my answer to this question, is that these things are all inter-related.

7. What is the Target Cast or the Negotiated Casting of your film?

Of course, given that you can achieve and afford your target cast, what does this say about target market, and, commensurately, what does that say about the style of release. Now, sometimes, a producer will think it might be easier for me than for them to make choices of comparable films. In many cases, it can be much harder for me. And, then you might understand why I charge for this service, and why it is better for you to start with your own choices, and then I might be able to help you refine that list.

Let me tell you some of the reasons why:

1. You probably know your film better than I do.
2. You likely know what about your film inspired you, better than I do.
3. You know your own influences and desires for your film better than I do.

The influences for your film, whether you are the writer, the producer or the director, or some combination of the three of them, are likely the most insightful place to start. So, I always like to start by asking you to help me see the film the way you see it. No matter how smart I might be, my goal and job is to help you achieve your film, and comparable films that I deliver are a suit of clothes you will wear, not one I will wear. The following is a set of questions we ask our clients to think about in choosing comparable titles. This comes from our Project Intake Form for packages where we are doing Comparables and Projections, Business Plans and the like: Comparables – in look and feel, market, budget, cast, distribution strategy, story, or a combination thereof. These should be films you think are the best matches for comparables, but be assured we look them over fully, and make sure we don’t think others might be better (Our criteria for choosing comps are:

1. Does it share target audience
2. Is it story style comparable, not story comparable (many get hung on this)
3. Is it distribution comparable (studio, methods, etc.)
4. Is it budget comparable
5. Does it evidence broad or deep interest in the subject matter
6. Did it come about the same way (outsider production, or insider production)
7. Is it casting level comparable
8. Certain other items may include production methods, etc.
9. Does your team feel comfortable with it, can they represent it)
Onward and Upward! Jeff

Comparable Pictures Available ListDownload

If you would like to learn more or buy Comparable Pictures Reports, go here: Comparable Pictures ROI Reports

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FilmProfit Glossary of Film Terms

This is a Glossary of Key Terms

Above The Line

Budgets for films usually begin with a section that covers creative talent such as: actors, directors, producers, and writers. This section is followed by the rest of the budget, or Below the line. This term also refers to the part of the budget which includes costs and fees associated with this division of talent.

Accrual Accounting

Whenever an ad or expense for a film is incurred, the account is charged, and if interest is being charged, all of the expenses collect interest charges as of the day they are incurred, even though cash payment for the expenses is made at a later date.

Acquisition(s)/(Acquisitions Execs)

Distributors buy or acquire films with cash, or deal parameters that portend cash. The act of buying the film is the acquisition, and the distribution executives that commit the buy are known as Acquisition execs. They often travel to film festivals (such as Sundance, Cannes and Toronto) to find films to buy.

Advances

  1. a) Production Advances
    Distribution companies will often advance money for, or guarantee loans for the production of a film by an independent producer. In most cases, the independent producer does not have any general liability for such an advance or loan. The loan is usually only repayable from the revenues from the film. The motion picture company bears substantially all the risks of ownership, though the producer may sometimes retain the copyright.
  2. b) P&A Advances
    Distribution companies also generally expend funds to release a film, including P&A costs, and other costs associated with distribution. These costs are treated by the distributor as an advance, or a loan to the film. The loan is usually only repayable from the revenues from the film, while the distributor bears substantially all of the risks of loss.
  3. c) Distribution Advances
    Distribution companies may provide the independent producer with a cash payment as an “advance” against revenues from the film. These advances can be treated by the distributor as a loan. These loans are usually only repayable from the revenues from the film.

Against(In Step Deals)

When a script is referred to going for a “low six-figure offer against mix-six figures.” Meaning the screenplay’s actual purchase price was a low six-figure offer (ex. $200,000), but the writer will receive additional funds (let’s say another $450,000), bringing the total to $650,000 or mid-six figures if the movie is produced.

Agent

A handler who represents above- or below-the-line talent. Their primary function is to secure work for their clients.

Ancillary Markets

(see Domestic All Other Rights under Distributor Revenue)

Arc

The movement of a story line from beginning to end.

Assistant Director

The crew member responsible for delegating the director’s instructions and making sure the cast and crew are in their required positions at the right time.

Associate Producer

Associate Producers carry out significant functions which might otherwise be performed by the Producer, Executive Producer or Co-Producer. These responsibilities may range from helping to raise production finance at the beginning of the production process, to supervising the final stages of post-production. At times Associate Producer titles are agreed upon before filming, and at others are bestowed upon those who have performed above the call of their conventional task.

Attach

Often a producer seeks to make a “package” (to package) their film, to pack or to illustrate the value and validity of the film they want to make. In this “package” are more than the script, it may contain one or all of the following list of “elements”: name stars, director, writer or producer, along with other items, including budget and schedule, and so on. This packaging may include compensation for some of the elements, and may or may not include legal commitments of any of the elements.

Availability/Artist’s Availability

If an artist is free to work. In Letters of Intent (LOIs) there may be references to an agreement being according to an Artist’s Availability.

Back End (Backend Rights)

Also Participations. Usually expressed as some percentage of a film’s profit. The Back End is the share of profits (usually expressed as a percentage) that a person (or even an entity) holds the rights to. This may be expressed as gross participations or net participations (and both must be defined). In FilmProfit, producer’s gross profit is considered before any deductions for backend rights of the net participants, but after backend rights of gross participants. There is a Paul Simon song which says that one man’s ceiling is another man’s floor, and in that respect, too, one man’s gross may be another man’s net. Backend is also a term used on its own, or in conjunction with other terms to describe any postponed action, such as speculative income from profits, delayed payments, delayed rights sales, etc. (see also Net Profit Participants)

Barter (or Trade)

A method whereby a syndicated television program supplier retains a portion of the advertising time, say in the case of a movie, 10 or 12 minutes across the movie’s air time, and then sells that advertising time as the way in which they make money off the movie. In these barter/syndication deals, the film may be provided to the station for free (all barter), or for some barter and some cash, or barter in the first window, and then all cash in a second, or “backend” window.

Below the line

Those below the line are all the workers on a film crew that are not part of the theoretically “bankable” creative talent of actors, writers, producers and director, for example. This includes all the technical categories and ancillary activities (legal, marketing, etc.) Also includes the part of the budget that includes costs and fees associated with all of this work and these workers, such as cars and drivers, hotels, care and feeding, and so on.

Blu-Ray

The industry-adopted High Definition DVD (optical disk) format. It beat out the DVD-HD format to become the standard. It was developed by the Blu-ray Disc Association (BDA), a group of the world’s top consumer electronics, personal computer and media manufacturers. The Blu-Ray format offers more than five times the storage capacity of traditional DVDs and can hold up to 25GB on a single-layer disc and 50GB on a dual-layer disc, offering consumers an unprecedented HD experience.

Box Office, Box Office Gross

Box office gross represents the total revenues taken in at movie theater box offices (ticket sales). (also see Domestic Box Office Gross)

Budget

The actual money spent to produce a film. It does not include prints and advertising. (also see Negative Cost)

Cable

Vernacular for Cable Television, or television delivered to homes via a direct wired connection. Cable TV has been a staple of revenue for motion pictures, including those made for theaters, made directly for television consumption, or even Direct to Video. Cable revenue includes all “Pay Cable” services and “Pay-per-View” services that deliver over this wired system. It is often determined contractually as a percentage of Theatrical Box Office revenue.

Cable Distribution Fee

The fee a distributor charges to distribute a producer’s motion picture to any or all of the cable carriers in the Domestic Territory. The fee could range from 15% to 30%, but is often about 25% of the revenue generated from Cable sales.

Cash Accounting

The case when an exhibitor sends a check from the box office for a film’s receipts, the distributor waits until the end of the quarter to credit the account for the revenue, and no interest is paid on the revenue balance for the period it was actually in the account. Not all distributors use cash accounting for a film’s revenues. Some credit when actually received.

  • In FilmProfit all expenses paid are charged and all revenues are credited as of the mid-point of each quarter.

Co-op Advertising

A distributor and exhibitor may share the cost of an advertising campaign that also features the exhibitor’s theater or theaters. In this way they are co-operating. These co-ops are arrived at through individual negotiations, and are usually short-term, on a week-by-week basis.

  • In FilmProfit, co-op advertising costs incurred by the distributor are included in the amount input for P&A.

Delay in Payments by Distributor

Playing the “float” is common in the Film industry. Although distributors can put pressure on exhibitors to make payments on a timely basis, producers generally do not have much leverage to force a distributor to make timely payments. A typical cycle for a distributor is to make payments to a producer initially on a quarterly basis but thereafter on a semiannual basis.

  • A distributor usually accounts for revenues and P&A expenses on a quarterly basis. After the end of the quarter, the distributor summarizes the revenue and expense data. The Distributor then submits the processed numbers to his accounts payable department for payment. The accounts payable department issues checks one to two months thereafter.
  • Accordingly, the producer’s portion of revenues (Producer’s Net Rentals) collected at the box office in July may not be summarized until near the end of the next quarter (November/December) with payment by the accounts payable department to the producer in the subsequent quarter (January/February). When the cycle moves to a semiannual basis, this delay can be even longer.
  • In FilmProfit, this payment delay process is referred to as the Delay In Payments by Distributor. (see also Float and Float Penalty – For a more full discussion see the chapter of the FilmProfit Guide to Distribution Deals chapter, INTEREST-BEARING ADVANCES/LOANS)

Direct-to-Video

A film which is released into the video market before being made available to consumers through any other medium. It may be because the film was created precisely for the video market, or because it was unable to find distribution in other markets first.

Distribution, Distributor

The entity or person who takes on the responsibility of selling, licensing or renting a film to its various markets, including but not limited to theatrical, home video, pay/cable and other television markets domestically and overseas. Some distributors specialize in individual markets, while others distribute in all of the available markets.

  • The independent producer may contract with one distributor for all markets, or several distributors in the individual markets.

Distribution Expenses (see P&A)

Distribution Fees

Distributors charge fees which are usually based on a fixed percentage of their revenue from exhibitors and others.

Distributor Payment to Producer

Final payment of net rentals to the producer after deductions by the distributor for Interest-Bearing Advances/Loans and for interest. (see also Delay in Payment by Distributor)

Distributor Revenue

FilmProfit specifically uses this term to describe the proceeds of the film paid to the distributor before any deductions by the distributor.

Domestic includes the United States and Canada (North America), and represents proceeds from:

  • Theatrical: distribution proceeds paid by exhibitors to the distributor for the box office

The term Rentals as defined by Variety and others is often used to describe this income, particularly from domestic box office.

  • Domestic Video: proceeds paid by video retailers to the distributor for videocassettes and videodiscs
  • Domestic Pay TV: proceeds paid by cable and other pay TV companies to the distributor for the rights to broadcast
  • Domestic Public TV: proceeds paid by the Public Broadcasting Service, by public television stations, or by producing entities such as American Playhouse, to the distributor or producer for the rights to broadcast. (In FilmProfit this does not include outright grants from other agencies)
  • Domestic Network TV: proceeds paid by network and independent television companies to the distributor for the rights to broadcast on nonpublic free TV These proceeds are derived from the first runs of the films in free television. Subsequent reissue or reuse is referred to as syndication

Domestic All Other: proceeds paid for TV syndication and all other ancillary markets, include:

  • Syndication represents the license of rights by the distributor, usually in packaged collections of films, to independent television stations for broadcast on free TV
  • Ancillary Rights includes sales to libraries, schools, airlines, ships at sea, hotels, clubs, prisons, military, and includes such market spin-offs as music rights, toys, posters, T-shirts, clothing, etc.
  • Foreign includes all regions outside the United States and Canada, and represents proceeds paid to the distributor by subdistributors and exhibitors for all theatrical, video, pay TV, public TV, network TV, TV syndication and ancillary market rights and income

Because FilmProfit is structured to relate to the producer who will own his or her own film, as opposed to the system that favors studio or distributor ownership, we have designated the producer’s revenues as Net Rentals, and the return to the distributor from the exhibitor as Distributor Revenue.

Domestic

Includes the United States and Canada (North America). All other areas are defined by industry practice as foreign, though not in any nationalistic sense.

The domestic markets are:

  • Theatrical
    • Distribution of films in movie theaters
  • Home Video
    • Distribution of a film via videocassette or disc that may be purchased or rented for viewing through VCR’s
  • Pay/Cable
    • A programming service for which consumers pay a separate fee, and which is primarily delivered in the United States over cables wired into the consumer’s home
  • Public TV
    • Free television which operates without “advertising revenue.” Financial support for public television is primarily through government funding, contributions and corporate and private grants
  • Network TV
    • Also called broadcast TV and free TV. Supported by advertising, it is distributed over the free airwaves by networks and independent stations

Domestic Box Office Gross

Domestic usually refers to the combined US and Canadian markets (North America). Box office gross represents the total revenues taken in at movie theater box offices (ticket sales)

Exhibitor

An owner or operator of a theater that shows films

Exhibitor Share of Domestic Box Office Gross

In FilmProfit, the amount of box office gross receipts retained by the exhibitor to cover the exhibition expenses and profit margin.

Financial Interest and Syndication Rule

US networks have not been allowed to have a financial interest in their own programming, or been allowed to participate in the after-market syndication of their programming, in order to prevent the networks from favoring one of their program offerings (specifically those which they own) over others in time-slot placement, in promotion or in other means. The Federal Communications Commission created the financial interest and syndication rule in 1970. In 1993 this rule was eased again.

Float

The amount of money that a distributor holds for the period between the time the distributor receives the money and when it is paid to the producer. (see also Float Penalty and Delay in Payments by Distributor).

Float Penalty

(see also Delay in Payments by Distributor –For a more full discussion see the chapter, INTEREST-BEARING ADVANCES/LOANS in the FilmProfit(r) Guide)

Foreign

All areas other than the United States and Canada.

Foreign Revenue

The total of funds paid to distributors for exhibition and other rights outside of the United States and Canada.

  • FilmProfit assumes that all foreign distributors have deducted for their P&A and other direct and indirect foreign distribution expenses, as well as their foreign distribution fees before remitting to the primary distributor, if any, or before remitting to the producer.

Free TV

(see Network TV)

Grants

Any funds given outright to the producer, which carry no interest charges, and are not expected to be paid back. Some grants, however, do carry stipulations as to certain market windows, etc. For example, a National Endowment for the Humanities grant could stipulate that the film would receive one airing on Public Television, or some other like stipulation. (see also Presales and Noninterest-Bearing Presales/Grants)

NOTE: It is important that the producer who is receiving, or anticipating receiving grant funds, particularly those with public television stipulations attached, NOT enter those funds on the Public television data entry line and also enter them on the Noninterest-Bearing Presales/Grants data entry line. This will result in DOUBLE ENTERING, and will accordingly affect the accuracy of your FilmProfit results.

Gross

Gross is a reduced form of the term Gross Box Office.

Also a term used generically to denote any revenue before being reduced by expenses. (see also Domestic Gross Box Office)

Gross Deal

A type of deal between the producer and the distributor in which advances (if any), with interest charges, are deducted by the distributor. Then the producer’s portion of the revenue is remitted before the distributor recoups his expenses and calculates his profit.

Gross Profit Participants

Those individuals (often actors, though male actors more than female actors) and companies which are entitled to a percentage of the gross distributor revenue, unreduced, or only marginally reduced by expenses or fees. Usually a deal made with the distributor taking part.

Guarantees

The sum a distributor agrees to pay a producer for his film, no matter what the market performance may be. Sometimes these guarantee payments are made in lump sums in the production phase, or in a lump sum after production and upon the delivery of the negative, or they are spread out in progress payments, a portion during production, a portion during distribution. In FilmProfit, such guarantees received before release are treated as Noninterest-Bearing Presales/Grants if they bear no interest, or if they do bear interest are treated as Interest-Bearing Advances/Loans. After production, or after release, such guarantees are treated as Negative Pick-Up Guarantees. (see also Interest-Bearing Advances/Loans, Noninterest-Bearing Presales/Grants, and Negative Pick-Up Guarantee).

House Nut

The Exhibitor’s calculation of what it takes to lease his theater, to staff and to run it. In use, this figure may really include some hidden profit for the exhibitor.

Interest

Banks and others charge borrowers a percentage rate on the money they loan as a fee for the loans.

The interest rate banks charge to high quality borrowers for low risk loans is known as the prime interest rate (prime rate). (see also Risk Factor).

Interest-Bearing Advances/Loans

A distributor may advance a lump sum to the producer, to be used for production.

  • If this advance is treated by the distributor as a loan, and accordingly bears interest, FilmProfit calls these advances Interest-Bearing Advances/Loans. These advances will usually be recovered by the distributor, usually along with interest charges on the advances, by deducting them from the distributor revenue before remitting to the producer.
  • Distributors view such advances as high risk investments, and accordingly generally charge interest rates in excess of the prime rates. FilmProfit calls the additional percentage points above prime the Risk Factor. (see also Noninterest-Bearing Presales/Grants and Negative Pick-Up Guarantees).

Library Value

One of the most significant considerations in the long-term health of a motion picture distributor is the value of the programs which they own, their “library,” so to speak. If a program is perceived to have this long-term value by a pay/cable distributor, they will most likely be more willing to invest a larger sum in the production of the film, and want to hold all or most of the rights.

License, Licensor

A contract between two parties, giving one the rights to distribute, or exhibit a program in a certain market, or in all markets. Licenses generally operate within certain time periods, with the rights reverting to the owner (licensor) at the end of the time period.

Long-Form

Describes television shows generally of 90 minutes to 2 hours or more in length, as opposed to television series segments. Applied particularly to television movies and mini-series.

Made-Fors

Movies made for television.

Negative Pick-Up Guarantee

A distributor may advance a lump sum to the producer after production and upon delivery of the film negative.

  • If this advance is treated by the distributor as a loan, FilmProfit calls these advances Negative Pick-Up Guarantees, as this sum is assurance that the producer will reap a minimum of return on their film from the markets included in the deal. These advances will usually be recovered by the distributor, usually along with interest charges on the advances, by deducting them from the distributor revenue before remitting to the producer.
  • Distributors view such advances as high risk investments, and accordingly generally charge interest rates in excess of the prime rates. FilmProfit calls the additional percentage points above prime the Risk Factor. (see also Interest-Bearing Advances/Loans)

Net Deal

A distribution deal wherein distribution fees, P&A (including overhead on the advertising portion), advances (both production and distribution), and interest on advances, are subtracted from distributor revenue before arriving at the producer’s net rentals.

Net Profit Participants

Those individuals or companies entitled to a percentage of revenue after it is fully reduced by all expenses (including production negative cost), distribution fees, overheads and interest. Since FilmProfit is primarily focused on the distribution stream, it makes no provisions for calculating net profit participations.

Network TV

The “Big Three” (ABC, NBC and CBS) have now become four with the advent of the Fox Channel, and there is now a stab at a fifth channel in the Universal TV Network, which is, like the Fox Channel, an amalgam of independent stations, primarily providing Universal with a constant TV distribution stream for their movie packages. Television program distributors who supply programming to their affiliated stations across the country in turn for advertising time on the air during the programs. These four make up the bulk of what is often also called “Free TV.”

Non-interest-Bearing Presales/Grants

A distributor or granting agency may advance a lump sum to the producer, either to be used for production, or after production.

  • If these advances do not bear interest and accordingly are not loans, FilmProfit calls these advances Noninterest-Bearing Presales/Grants.
  • In FilmProfit all funds received for production which do not have to be repaid, would be properly entered as Noninterest-Bearing Presales/Grants. (see also Presales, Product Placement and the chapter DOMESTIC TELEVISION DISTRIBUTION in this Guide).

Other Funds Needed for Production

In FilmProfit, the resulting cash needed to cover the Negative Production Cost after deducting any Interest-Bearing Advances/Loans, and after deducting any Noninterest-Bearing Presales/Grants. This figure is the amount of money the producer still needs to provide in order to produce the movie. It may be provided by private investors, by deferring fees or expenses, trading profit participations for goods or work, or any number of other methods.

  • As FilmProfit is for analyzing the distribution aspects of a film, it makes no provisions for analyzing any of these methods or any alternative methods of providing for these funds.

Output Deal(s)

A deal usually between a producer or producing entity and a distributor (in any market), in which the distributor has exclusive access to the producer’s future products. Can be restricted to time, to types of projects, etc.

Overhead

A factor, usually a percentage of costs incurred by the distributor, which is intended to cover the distributor’s indirect costs such as maintaining an office, paying regular staff, etc.

  • There are two prime instances in which the producer will incur overhead charges with the distributor:
  • Overhead on Production Advances: When a distributor directly advances money, material, production equipment or space for a film production, they will usually also charge a fee based on a percentage of that advance which is meant to cover the distributor’s indirect costs.
  • Overhead on P&A: When a distributor who distributes films to theatrical exhibitors incurs direct costs for advertisements (the A of P&A), they will usually also charge a fee based on a percentage of the direct advertising costs to cover the distributor’s indirect costs.
  • In FilmProfit, it is always assumed that the overhead account will incur interest.

P&A

The actual costs incurred by a distributor in producing the screening prints (the P) of a film, plus the actual costs incurred for advertising that film (the A), which usually also includes overhead on the advertising.

  • In FilmProfit, there is a separate entry line for overhead on P&A. As well, P&A costs would also include certain other expenses distributors charge to the producer’s account, including: Taxes, Checking (auditing of box office income, etc.), Censorship (rating seal, etc.), Transportation, Guild payments and royalties, Trade association dues (MPAA, etc.), Claims (from any litigation, etc.), Bad debts.

Pay/Cable TV

A television system in which the consumer/subscriber pays a fee for the delivery of programming. The delivery of programs can be through direct wiring to the receiver, or through use of satellite technology.

  • There are three primary types of cable channels:
    • Basic cable included in a “base-price” to the subscriber.
    • Premium cable which are channels not included in the “base-price” of the cable service.
    • Pay-per-view, in which each program has a separate price for access.

Post-Release Direct Sales

In some instances, a producer may make a direct sale (or license) to a particular market, or markets. These sales (or licenses) would not incur any distribution fees, and would be the occasion for direct payments to the producer.

Presale

The practice of licensing all or certain rights to a film project before it is produced, or while in process of being produced. Generally used in speaking of licenses (“sales”) to overseas markets. FilmProfit treats presales that bear interest as Interest-Bearing Advances/Loans. Conversely, FilmProfit treats presales that do not bear interest, and which accordingly are outright advances, as Noninterest-Bearing Presales/Grants.

Producer, Executive Producer

An individual or company that selects a film project, arranges financing for the film’s production budget, and causes the film to be made.

Producer’s Gross

In FilmProfit, the amount of funds in the producer’s account with the distributors after deduction for all gross participations, distribution fees and charges for P&A. (see also Producer’s Gross Profit)

Producer’s Gross Profit

A term used by FilmProfit to denote the actual cash paid out to the producer by the distributor, after all expenses, charges, and interest are deducted (Distributor Payment to Producer) and after addition of any Post-Release Direct Sales and deduction of Other Funds Needed for Production and Presales/Grants.

Product Placement

Quite often independent producers will get a light in their eyes when they think about product placement as a way of funding their film production costs, or even as an area for profit from their film.

  • Now, the producer is actually selling advertising space in their movie, rather than what is euphemistically called “placing product,” and product placement often brings in far less than some producers anticipate, and quite often nothing at all.
  • For an instructive look at product placement see “Products for Nothin’ & Your Drinks for Free: Corporate Support…or Sell-Out?” in The Off Hollywood Report (magazine of the Independent Feature Project), April/May, 1990.
  • If you do receive product placement money, and would like to account for it in FilmProfit place the entire sum in the Non-interest-Bearing Presales/Grants data entry line (added to any other presales or grants, if any). Otherwise, deduct the amount of product placement money from the production negative cost before entering the production negative cost in the program.

Production Negative Cost, (Budget)

A generic term referring to the cost of producing the film (producing the actual film negative, from which screening prints will be struck), and includes the development, preproduction, production and postproduction costs.

Profit Participation

Compensation based on sharing the revenues from a film’s performance in the market. Much compensation (or incentive compensation) in the motion picture industry is based on this method of sharing income. (see also Gross Profit Participants and Net Profit Participants)

Public TV

Public TV could conceivably be called the “Fifth Network” if looked at as free TV. Public TV is free to its viewers, though they are often asked to ‘donate,’ or ‘become members.’ Public TV receives its revenue neither from advertisers nor subscribers, but rather from federal funds, from ‘donations’ and from corporate, foundation and individual sponsorship. (see also Domestic)

Release

The process of advertising, promoting and physically distributing films to theaters or other media.

Risk Factor

A distributor may charge interest on advances, on P&A, and effectively, on overhead. In contrast to the lending rates of banks, a distributor typically charges interest rates above the prime rate, with the added percentage their consideration for taking the “risk.” FilmProfit calls this added interest percentage above the prime rate, the “risk factor.”

Royalty

Payments made to a producer’s account from proceeds of videocassettes. Usually calculated as a percentage of the wholesale price of each cassette.

Specialty Film

A film which will be or has been distributed to “niche” markets, as opposed to being exhibited through general or “wide” release. Some films are designed to be specialty films, and some films just turn out to be specialty films.

Syndication

Motion pictures receive income from independent television stations through the practice of selling the films station by station. This method of selling of movies is done by specialized Distribution companies, or by specialized arms of large Distribution firms. The films are often sold in packages, and each film is individually priced for each television station, according to the size of the station’s market and according to the film’s box office and other previous exposure. The films are not usually sold individually.

Third-Party Gross Participations

(see Gross Participations)

Timing, Timing Model

A term used in FilmProfit to express the relationship of market revenues to the quarter of the year (such as year 2, quarter 3) in which those revenues would be received by the distributor.

Vertical Integration

In the film industry, used to describe the situation where the producer and the distributor are one entity, but even more particularly where the distributor and the exhibitor are one entity. Particularly distressing in the business of film distribution and exhibition as it can lead to freezing-out competitive films from the marketplace. (for more information, research topic Consent Decree of 1949 – 1952).

Wholesale Share

As used in FilmProfit, the home video wholesale share is that portion of the distributor revenue which is not passed on as royalty to another distributor or to the producer.

Window

The specific time period during which a film is allowed to be exhibited by a rights buyer, such as a television network, or pay/cable exhibitor.

  • Also used to denote time periods which relate to the general sequencing of a film to its various markets.

Other glossaries may be of interest, including:
–Hastings Communications and Entertainment Law Journal Comm/Ent, published Fall of 1991, Volume 14, Number 1, published by University of California Hastings College of the Law
-Dictionary of Marketing and Related terms in the Motion Picture Industry, by Donn Delson, Bradson Press, Thousand Oaks, CA.

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Key Risks In Making A Film, & How to Manage Them

If you’re in the film business there’s a good chance you’ve read a statement like this before:

Statements like this usually go on half a page or more, listing a pile of risks, including competition and the like. But I am focused here on the specific risks a producer confronts when birthing and bringing a film to market. These key risks are confronted in each film, and are events against which you can forge a viable campaign of mitigation and defense.

In general, in life, to the risks go the rewards. Risk, and this potential for rewards, are both inherent in the business we have chosen to pursue. However, I am very much against running wildly into the risk storm, yelling, “Wow, this is risky, but fun!” We must understand and inspect the risks, and we must take measures to control them and to control the relationship of our projects to those risks, while not limiting the potential for reward.

These Risk Points
Are Met at Key Tasks and Their Attendant Decisions

  1. Creation of a quality script
  2. Effective development and packaging of the property to make a quality film
  3. Fully financing the film
  4. Completing the film at a level commensurate with its budget and market
  5. Gaining adequate distribution in the marketplace
  6. Achieving effective marketing for the target audience
  7. Achieving consumer uptake or sales levels, thereby achieving financial goals

Each Film Has Many Risk Points

Every risk point I list here is actually a decision point and an action point. The act of planning the business of your film is the act of learning about, understanding and gaming out your moves in advance so as to minimize risk and maximize potential. You pre-visualize the creative plan of your film to mitigate production risk, so why not pre-visualize the business plan of your film and mitigate the business risks. Mitigating the business risks protects the precious creative asset you are producing. This is to the benefit of all stakeholders in the asset, including you!

The result of this approach to answering the risks will be an effective and powerful business plan. https://filmprofit.com/what-is-a-film-business-plan/

There are, of course, very complex business moves that people might take, all meant to target and neutralize financial risks. These are good and viable, but most of the items I want to highlight in this series of articles are easily do-able by any producer, and are primarily focused on how information and preparation will enable you to be ready for the key risks in front of you, risks you can manage without being a hedge fund manager.

This Is An Ongoing Series

I will be discussing these risk points in future installments of this blog. To go on this little journey with me, you can subscribe here:

Key Risks in Making a Film, & How to Manage Them, Part II
Key Risks in Making a Film, Part III – Greenlighting Yourself

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, and help my clients see better what they are getting into and how to prepare for it.

Onward and Upward
Jeffrey Hardy

https://filmprofit.com/blog/

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Comparable Pictures: How to Choose ‘Em and Use ‘Em

I have helped producers choose and use literally thousands of titles for comparison to the films they seek to finance and make. When I am preparing projections and financials packages, whether for a single film or a slate of films, the first crucial task for me is to understand the film(s), to be able to see them both as the producer does and how the world might perceive them, so that we can look at comparable titles from several points of view, including the eyes of finance partners, distribution partners, and so on…

[Read more…] about Comparable Pictures: How to Choose ‘Em and Use ‘Em

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Box Office Panic! Part IV

What Chance Do Indie Films Have?

Over the last three weeks, I had wanted to explore whether, as some were intimating, the idea of going to see movies in theaters is a dying market. Hi Def TVs, Netflix and Amazon around the world, TV downloadable to mobile devices, couch potato-itis, sequel-itis, too damn many super-heroes and anti-super super-heroes have all been touted and examined as the culprit(s). So, I wanted to get to the bottom of this through a deeper kind of analysis, and see if there is any truth to the Chicken Little cries, or if something more, or something more nuanced, is happening.

My driving interest in this was ultimately to see if Indie filmmakers of many stripes, should be nervous, very nervous, or right out frightened of the collapse of movie-going.

Well, the last in that list isn’t happening, certainly not yet. But there is nuance to this, and we have been seeing it in the downward slope of ticket buying per capita, and the real dollar downward slope in box office. We have also seen that theaters are building more theaters, even in the face of this, but not enough to completely erode the per screen yearly income. Still, that income is not growing

But several things are happening, as we have seen, US citizens have been buying fewer and fewer tickets every year, even with more theater screens competing for the movie dollar. Nonetheless, in real dollars, the chains have effectively been losing money comparatively.

So, having seen a pretty bad 2nd Quarter in 2017, and now a really bad 3rd Quarter, with only the numbers yet to come in for the double holiday last quarter of 2017, I want to step aside and look at another element of the box office, and that is, who has been capturing the box office dollars from year to year for the last 15 years.

I have not included the Thanksgiving weekend in this analysis, but it is through Q3, and This is being finished on Thanksgiving morning, so the holiday box office is not in yet, and we’ll look at that next week, but we have enough of 2017 in, to look at this from another point of view: Who is taking what there is to take at the box office? The next chart we have to analyze is one that details what portion of the annual box office has been taken by the Top 5 Distributors?

In 2003, the Top 5 took 64% of the total box office, and though this has fluctuated over the last 15 years, with 2010 hitting 74% and 2016 hitting 76%, at least as far as we have gone in 2017, these top 5 studios have captured 75% of ticket sales. The trend is to the studios taking a bigger share of the box office each year, leaving 25% available to the other 100 to 125 or so distributors.

So much for the 80/20 rule that says that 80% of any market is taken by 20% of the players. In this case, with the top 5 being variously 3% to 5% of the theatrical market players, we are still talking in billions of dollars available for the smaller players here, so there would be, (if 2017 comes to $11 billion box office, almost $3 billion left for the other 135 to 140 box office players. Still, this is far more stunning than the 80/20 rule.

To dig further into this, I also gathered the Market Percentage of the top 20 distributors for each of the last 15 years, 2003-2017, again with the caveat that 2017 is still in play. Here is the chart that lays that out for all the top 20 studio players:

What we see in this chart is that the Top 5 studios are battling it out almost continually with the next 5 top distributors (Top 6 to 10) for share of 90% of the box office each year.

The differences shown in the fortunes of the Top 5 can almost always be attributed to movement in the studios that grab these 6th through the 10th slots each year. Now, we also have to attribute these movements to players like Lionsgate, the fortunes of Paramount, and folks like STX, Focus, Open Road, Fox Searchlight, New Line and the like. Of course these companies slip above and below the Top 10 and Top 11-20 demarcation line from year to year, to join those like Roadside Attractions, Broad Green, Sony Pictures Classics, what was The Weinstein Company, CBS Films, IFC, Rocky Mountain, what’s left of Relativity and more.

So, the box office pain of the year we are in, and the long, slow-appearing decline of theatrical income in real dollars appears to be taking the biggest chunk out of the Indie-leaning market players among the top 20, while also leaving a very small share for the other 110 to 125 movie distributors that play in the theatrical market.

Remember, these 11th through 20th slots form the portion of the box office achieved by smaller distributors who are battling over between 12% at the high and 4% at the low of total box office. We currently see something like 5% so far in 2017 for those among these top 11-20 distributors. The top 11 to 20 distributors have had their share of the market cut in half over the last 15 years, while the market has also been shrinking in real dollars.

It makes me think of the story of the blind man trying to figure out what he is touching as he walks around an elephant. He knows something big is in the room, but he can’t precisely figure out what it is. In this case, as he tries to describe the elephant in the room, the room is slowly getting smaller. If the elephant is getting smaller, it is not shrinking in the same way the room is, but is taking up more and more of the room each minute, while the blind man and anyone else in the room is trying to find a safe place to stand so they don’t get crushed. The blind man in this little tale is the Indie distributor.

With the holiday season still to play out, and with Coco, Justice League, another Star Wars, Ferdinand, Pitch Perfect 3, the Jumanji sequel and many more coming between now and the end of the year, we don’t yet know the full outcome of the year, but it will definitely be largely played out in wide and very wide releases.

We will revisit this year more after we have been through the holidays and turned into 2018.
Next, for this blog, I will likely want to start a discussion about how I think some big decisions over the last 20 years have led to a place where the Indies have lost mojo, at the box office, but also in other markets, much of it caused by accepting the trickle-down decisions made at the larger outfits, decisions based on quarter by quarter short-term planning. These decisions reduced the potential for product differentiation that had made home entertainment a crucial part of the business.

END OF PART IV

If you find what we are posting here interesting, maybe subscribe, if you haven’t already. You’ll get more:

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

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 mi d-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

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Box Office Panic! Part III

Last week, I discussed box office, primarily by quarters over the last nearly eight years. I hinted that I was going to go in a slightly different direction to see if we can discern if there are fundamental elements causing this to play out the way it does, and who is benefiting, or is not.

First, no one benefits from a plummet in box office. Far-flung outfits like Screen International, Variety, Hollywood Reporter, and major business magazines have spoken out about the dismal summer, and the dismal fall. Screen Daily said: “The summer blockbuster season is traditionally the time when critics and commentators bemoan Hollywood’s reliance on franchises, sequels and reboots, while studio bosses point to the box-office numbers that prove audiences are being served very nicely, thank you, by a series of adroitly marketed tent-poles that blend the fresh with the familiar. You can carp all you like, they say, but the numbers don’t lie.

In 2017, however, the studios have lost control of the narrative.” Screen Daily further counseled that “The millennials (born early 1980’s to 2000 or so) are coming…” as if to say that all would be alright.

Deadline.com said: “There’s been a lot of crying out there over how this summer was the worst in 11 years, logging an estimated $3.78 billion. But there is a positive takeaway from this mess: Movie-going habits aren’t broken. That’s right.”

Last week’s charts we looked at here did not tell us that the Milennials are coming in North America. It said that not a lot of people are coming. Millennials are a difficult audience to cultivate, as they have new and growing families, and so their focus is more diffuse than that of GenZ (ages 3 to 22, which includes the “dependable” opening weekend PG-13 crowd and more than 25% of the R crowd). After them, but much less opening weekend is the older filmgoers, the only really growing age demo.

Content has driven the highs in the past, and it will drive the highs in the future, even though Box Office sales are entering a long slow decline as we saw over the last two weeks. But let’s look now at what another leg of the industry, the theaters themselves, look like in more detail, and over time.

I have, literally, since the last half of the 1990’s been hearing that screens are being built too fast, and that the glut of screens means more competition among them and a thinning of profits. As well, a glut of screens has been pointed to as the culprit in over-saturated releases, on 3,500 to 5,000 screens, causing faster box office drop-off. Are the exhibitors causing a real problem here? Let’s look at some charts.

With these charts, I am able to more easily to show all 14 years without a muddy graphic. We can see above that the rise of screens in 2003 through 2006-07 was pretty rapid, but once we hit the slippery financial patch in 2008 and 2009, growth in screen counts slowed measurably, while still continuing. I plotted next to it the growth in constant dollars of ticket prices, showing that ticket prices also lost their momentum from the early 2000’s, in relation to screens. This hints that we could be seeing a redlining of both.

Now, when we look at screens across this same period of time as per 1,000,000 citizens, screens and citizens kept pace with each other, until about 2014, when the number of screens per million citizens began to fall. Now we find that the number of screens per citizen is about 5 per million less than in 2012. This is likely not evidence of the over-saturation discussed, but in light of the reduction of tickets sold, and the drop of approximately $5 per citizen per year on movie-going we saw in a previous post, just plotting the “ever-rising” box office and tickets sold may have been masking erosion underneath the theatrical business.

Looking further underneath, to see if the action at the box office has been generally dismal as well for theater owners across this 14 year period, I decided to take a look at the average sales per screen per year, to see what insight that might give us about how theaters may be faring. The following chart, showing the number of screens, and the sales per annum per screen, shows us that as the number of screens has grown (along with ticket prices and so on), there has been only a small amount of growth in the per screen take over the last 14 years, gaining about $25,000 per year per screen over that span of 14 years, or about $2,000 per year growth each year, and meanwhile, per capita screens are dropping a bit, and per capita citizen’s spending on movies has dropped.

Just to put this in tighter perspective, with a chain which had an estimated 5,426 theaters in 2016, the income difference of $25,000 per screen would mean $131,500,000 per annum for the chain in 2016, compared to 2003. If they are 12% of 2016 screen count total (of 40,000 screens), then their pro rata 12% of 2016 box office would be approximately $1.356 billion in 2016. If their screen count in 2003 was at 12%, then their share of (adjusted) box office would have been $1.425 billion. This would have been a loss of box office of roughly $5 million per year for the entire chain of screens, over each of the 14 years (in constant dollars). Balancing the relative stagnation of per screen per year income, and the reduction in screens per capita, it seems like theater chains may have the number of screens somewhat right, or not massively overblown, but the problem appears to be moviegoers are just not growing their movie-going, and really haven’t for some time.

We know that box office, important though it is, is not the raison d’etre of the theater business, concessions is, but if people don’t come and buy tickets, they can’t sell them concessions either. And per screen sales averages dropping $1,000 per year over the last 14 years is not anything to crow about. Things are stagnant, and have been for some time.

More to come…
END OF PART III

If you find what we are posting here interesting, maybe subscribe, if you haven’t already. You’ll get more:

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

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 mi d-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