FilmProfit

The Business of Successful Films

By Leave a Comment

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/

By 2 Comments

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

By Leave a Comment

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

By Leave a Comment

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

By

Box Office Panic! Part II

In my previous installment of this probing into the health of the movies in theaters business, we looked at two rudimentary charts that showed that, though the industry touts the fact that box office goes up each year (kind of like a public company report that wants to say all is rosy), we found that, in fact, in equal dollars, years bounce up and down all over the place, even as some have said in the past, somewhat counter-cyclical to the overall economy (SEE 2009). This was always touted as folks want to be entertained in bad times, so the movie business is good, or something along those lines, almost no matter what.

Along with that, though, we saw that there are two generally downward trends

Box Office rises and falls, but in real dollars, 2016, and the teetering/dancing 2017 box office look like we might be in a trend, a slow one, but a trend. Per capita spending of Americans on going to the movies is a decided downward trend. 

More People, But They Are Each Spending Less By The Year

I also assembled a chart that looks at the trend of ticket buying illustrated alongside the Dollars per citizen. Now, I did not “adjust” the ticket buying numbers, but they show a real movement, a sharper decline in the consumer activity regarding box office attendance. There is no masking the fact of this set of numbers shown below. Fewer transactions each year, with a higher average ticket price can mask the general downward trend of movie ticket sales.

Continuing in another vein, and wanting to understand this phenomenon even further, as movie theater attendance is definitely seasonal, and tied to things like kids being out of school, holidays (somewhat the same, but for the whole populace, generally). Since the discussion of the third quarter of 2017 being kind of what set off this “freak-out” discussion in the trades and elsewhere, I decided to look quarter by quarter over the last fourteen years (again, 2003 through 2016). What would we find in that? I assembled all four quarters for each year, but that creates a very, very busy chart, which I may share later, but I think a more salient and rapidly understood initial chart is the one below. I charted here just the average quarterly box office for each of the years, to see if that would better help us understand how things are going.

You can see that the peaks and valleys still remain, relatively identical to the up and down of the box office total (as this can be gained by dividing each year by four) but what bears understanding is the beginning average quarter for the year of 2003 of $3.034 billion dollars, and the average quarter box office of 2016, which is $2.928 billion, a difference of $106 million per quarter, or a difference, in constant dollars of $424 million annual take by 2016. This is not a rise. It is not a plummet, either, but it is definitely no rise.

But, what about 2017, as well as we now know? What is going on there as far as the average quarterly box office take?

This bears up under looking at more granular data.

In the chart above, we see from 2010 through the first three quarters of 2017. 2017 would have skewed the other charts, but here we can see that, though there have been more than a handful of lower first quarter box office performances (in constant dollars) than that of 2017, the second quarter was middling bad, quite a bit below most others, besides Q2 2016, but middling bad. But here is where the train went off the rails, in Q3 (orange arrow), well below any other Q3 in the last seven years.

Now we know why some folks feel like their hair is on fire. Kind of big time. But exactly whose hair is on fire? And whose hair is on fire the most? I want to talk about that the next time, along with some ruminations about why I think that is.
END OF PART II

If you find it interesting what we are posting here, 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 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

By Leave a Comment

Box Office Panic! Part I

Some in Variety, in the Hollywood Reporter and other outlets have been panicking that this down movie ticket year is the death knell of movies in theaters. I am no Pollyanna, but I heard this story in 2005 as well, of course coming off of the sterling year which brought us The Passion of the Christ. The rise of digital delivery systems, and the changing of the generations made me want to dig into this discussion.

Are people going to the movies less? Are they just waiting to huddle around their televisions, or laptops or phones!! to see the latest and greatest Hollywood has to offer? Are they shifting to binge watching, instead of even getting out of their Barcalounger? Will we soon look like the characters riding wheelchairs in WALL-E?

What Is The Result Of Some Of This Digging I Was Drawn To Do?

I gathered and arrayed a host of numbers, starting back in the early nineties, but decided it would be easier to see the effects by focusing on the last fourteen years, as 2017 is still in progress.

I gathered from 2003 through 2016:

  • Population of the US
  • Screens in the US
  • Box Office
  • Tickets Sold
  • Average Ticket Price
  • Factor for Inflation-Adjusting Each Year to 2016

These numbers gave me several vectors to plot, in order to see what is really happening/happened over these fourteen years, to get a handle on whether an off box office year seems like a death knell, or is not so uncommon.

So, let me first show you the “non-adjusted” box office, for comparison.

This is the kind of chart you would get if you just took MPAA numbers each year and plotted them. It looks like we are almost always rising, or, if not always rising, then rolling through hills always upward trending, while experiencing very shallow valleys.

Because I know the number of citizens, and I know the box office of each of these years, I decided another important measure might be seeing how much each citizen is “spending” each year to go to the movies (inflation-adjusted to 2016) and what the box office tally was each year (also inflation-adjusted to 2016).

This is a quite different impression than the one we get from the first chart, inflation-adjusted to show what the real economic story is: one of fairly sharp rises and pretty steep falls in real value. This is likely due to the response of the citizenry of American moviegoing to the goods on display that year. But that is a speculation, and we don’t actually know that yet. What we do know is, box office is not a sweetly-rolling ride up and up, but a kind of roller-coaster experience.

Nonetheless, the high of 2003 and 2004 has never been seen again in this chart, but for 2009, the last year of the 2007 recession. What is also clear, though, is a decided trend downward, in real dollars, of the per capita spending of Americans on going to the movies. About five bucks per person downward over these 14 years we are studying. Are we on a long downward slide?

I will be back next week with more items to look at, as there are many factors involved in this story, and I want to get to the bottom of them.
END OF PART I

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 to which they brought their 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, marketing, 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

By Leave a Comment

How Do You Kick-Start Your Business Plan?

What The Heck Is The Thru-Line?

And Why Is Every Film A Marketing Challenge and An Opportunity?

***I am updating this article, particularly after a discussion with a client that tweaked my thinking on using the word “problem.” Every time I used it, I found myself explaining it, and he was right. Thanks to Anre Garrett!

Many new and even highly experienced filmmakers arrive at our door trying to think about all parts of a business plan at once, worried about the research (worried about what to research), worried about how to describe the process, planning to deliver a detailed schedule of their production activities, trying to make their own stab at projecting the value of their film, and worrying about all kinds of deal questions, their festival strategy, selling DVDs on the Internet, selling downloads to phones in China, you name it, a stew of boiling ideas and decisions. I sometimes call this state of affairs “all trains arriving on all tracks simultaneously.”

But how do we stop and schedule the trains? One of the biggest contributors to overwhelm in decision-making and clear action is simply trying to make too many decisions simultaneously.

A Good Way To Overcome This – Remember Why You Are Here

Every film has a driving force in its idea. The industry likes to call it the concept. They love to reduce things to a few pithy words that seem to mash two or three ideas together and make a film rank high on a “cool” meter. The fact of the matter is, some films take contemplation, some films encourage involvement. There are many kinds of films that are viable for many kinds of film fans. Some are even for people who are almost never fans of films, or are very wary of films. Some elements of the Christian audience fit this profile.

Remember Why You Are Here, Above All – The Thru-Line

When a film is conceived, there is an audience for it within the story’s conception. Some think it’s dirty to contemplate your consumer, but even if the perfect consumer of your story is someone just like you, maybe even is you, that’s an audience too (no matter how unique and unreachable and above it all you think you are). I once had a Thanksgiving dinner where one of the older guests, an ex-hippie mom who had raised two very nice geek sons who were into all the latest gadgets and technology, even working in technology, and she said she was unreachable, as she didn’t have a TV, and wasn’t susceptible or identifiable to marketing. Well, if she reads Mother Jones, or even her local co-op newspaper, somebody is trying to reach her with messages. I think she hated me for saying all that. She was just the right kind of person to get a What The #$*! Do We Know?! message from the granola, co-op, whole foods type marketers that worked on that film. She probably did get more than one message.

Paula Silver once told me she was hired to help galvanize the audience for My Big Fat Greek Wedding, and her first job was to go a Greek dancing convention in Seattle. As she gave out every shirt she had printed up, she told the dancers that they needed to support this film, or “it would be another 20 years until you get a film about Greeks.” That was the start of the avalanche for the film. Constituency. Films like this are built on constituencies.

I call the line from the conception of the story to the ultimate consumption, the Thru-Line (trademark, service mark, copyright, intellectual property). The Thru-Line is what will always return you to why you are even here anyhow. When you are pitching your film and its reasons for being to an investor, your Thru-Line is what you are asking them to partner with you on. When you are lining up actors and production personnel, you are asking them to get aboard and help you attain the vision that delivers your Thru-Line. When you are presenting your film to a festival, or to a distributor, you are asking them to get aboard and help you bring your film to the audience, achieve the fullest expression of the Thru-Line.

Why Does The Thru-Line Exist, Then?

The Thru-Line is your direct connection to your audience, why you’re even making the film. It can be sublime, sharing a meditation on the most metaphysical of concepts in a documentary or a filmed tone-poem, or it can be a ridiculously funny and bloody zombie romp, or it can be a quiet look into the emotional needs of a woman uprooted from her homeland and dropped into an alien farm town halfway around the world. And I’ve enjoyed working on all of the above.

Every Film Is A Sizing Problem Challenge – Then It’s A Marketing Problem Challenge and Opportunity
What do I mean by that? I don’t mean that marketing is at the heart of your endeavor, but I do mean that communicating the existence of your film to your natural audience is as important as making the dang film in the first place. So, thinking long and hard about who your audience is, how to describe them, why they even want to see your film, or they need to, is a crucial first step.

Unfortunately, this business (making a film) usually costs some kind of money. And often the story requires enough money that a couple of friends just can’t do it out of their wallets, even if their wallets are middle-class, or above middle-class.

So, unless you can do the whole thing on your own allowance, you will need financial partners. Knowing who your audience is, and being able to clearly articulate who they are, and why they want to see your film is part of bringing those financial partners on board. Knowing who your audience is can also help you size that audience in some reasonable fashion.

Celibate Goths may be a pretty small group, but you can look for them and their friends and try to find out how many there are, and how they communicate, and get a feeling for whether they can help support your ten million dollar movie or not. If not, then you need to either determine how to crossover, or how to trim your budget by five or ten bucks. This is “Sizing.” Now, when you do this a lot, sizing becomes easier, and you can get a feel for it, but there are no absolute “facts” out there, and you just might uncover the surprising and wonderful fact that Celibate Goths are all on one Twitter channel, and that there are forty five million of them, and they all use VOD extensively every day because of something they got in a tweet, so your job is easy, and a $10 million negative cost is easy to deal with. But the key thing in this paragraph is that “there are no facts.” Everybody in this risky business of filmmaking and delivery wants to feel secure, so they grab at “facts” and spout them repeatedly, to gain and retain comfort, and to provide it to others.

Here’s a fact:

In a 2009 New Yorker article on the new Julia Roberts and Clive Owen international spy dalliance romp in the hay, the author says that “Today, the film industry considers adult-oriented drama a small target, and one that is getting smaller. Middle-aged Americans don’t go to the movies; young adults and teenagers do, and they prefer action to talk…”
There are actually several facts stated in this small excerpt, a. what the movie industry considers a viable target audience (probably based on the “4 quadrant” theory – men, women, above age 25, below age 25) b. who goes to movies (and who doesn’t) c. and what they love in a film (and don’t love).

Let me show you a countervailing couple of facts:

The audience opening weekend for Gran Torino was 45%+ 50 years old and older. The audience for The Unborn the same weekend was more than 40% under 18.
Gran Torino achieved $143 million US gross, and The Unborn achieved $42 million US gross.
Gran Torino had 52% highly satisfied female attendees opening weekend and The Unborn had 56% very unsatisfied female attendees opening weekend.
1, 2 and 3 are much closer to facts than the facts (a, b, c) in the quote above.

The secret is, (whisper) the audience is aging, and, frankly, the MPAA is trying to hide that, or, at least I think they are. Up until 2005, they reported age and attendance figures by slices like this:

  • 12-15
  • 16-20
  • 21-24
  • 25-29
  • 30-39
  • 40-49
  • 50-59
  • 60+

Starting in 2006, they began reporting it like this:

  • 12-24
  • 25-29
  • 30-39
  • 40-49
  • 50-59
  • 60+

Now, read below, and you might wonder, like I do, if they are trying to plaster over a crack in reality.

–In 1990, the percent of moviegoers above the age of 30 was 37%.
–In 2000, the percent of moviegoers above the age of 30 was 42%.
–In 2006, the percent of moviegoers above the age of 30 was 51%.

The audience is aging, and has been since at least the mid 90’s. I have been covering it that long, sad to say, or happy to say. But these are facts.

–In 1990, the percent of moviegoers above the age of 40 was 17%.
–In 2000, the percent of moviegoers above the age of 40 was 24%.
–In 2006, the percent of moviegoers above the age of 40 was 33%.

When a segment of the audience nearly doubles its hold on a marketplace (those above age 40), this is significant. But even these facts are also “facts.” When you start to analyze frequent moviegoers, you get a different, but not radically different slant on the situation. As would be anticipated, you lose a few points when looking at frequent moviegoers in the upper age groups. They have a lot more discretion, a lot more money, a lot more decision freedom, and a lot more they like to do.

And don’t even get me talking about online presence and other facts areas like that. What many people think are facts are actually just crap to talk about.

The point is, facts are closer to facts, and what is often taken as “received wisdom” like the statement from the New Yorker article is nothing but water-cooler talk, in light of real facts.

That’s why what you hear in the halls of AFM might be far from a fact, and just one piece of anecdotal information handed around ten times before it got to you, all massaged into a soft little tidbit.

Facts are actually better.

Every Film Is A Marketing Challenge and Opportunity

I see every film as a marketing problem (Read: problem as task) challenge and opportunity, but that is really broken down into:

  • An audience identification task
  • An audience sizing task
  • An audience hangout identification task
  • An audience message preference identification task
  • An audience position in the flow of information
  • A scoping out of the cost of messaging the audience task
  • Identification as to whether all this will support the ostensible negative cost, or investment.
  • Go/No Go – or redesign…
  • Unless these things are at least reasonably and satisfactorily answered in some way, it is hard, I believe, to begin to think really clearly about what the model for your film’s life could be.

Oh and by the way, the Julia Roberts film opened with a 60% female audience, and almost 50% aged 50 and above. Both males and females were generally dissatisfied, and older audience members the most dissatisfied.

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)

By Leave a Comment

Why is Video on Demand so Attractive?

And Why Are So Many People Mystified About Video on Demand and Its Contribution to a Film’s Value?

It’s attractive because delivering a film is expensive, and the core purpose of filmmaking is sharing what you made, the story you have told. More ways to share it are attractive, and easier and cheaper ways to share it are attractive, and delivering it, potentially, into the hands of everyone, is attractive. Now, I believe all filmmakers are concerned with that sharing, but some filmmakers are more interested in the making of money than others. Almost all investors, however, are interested in making money, so understanding how to estimate some reasonable region of future value is attractive.

With a declining business in “shrink-wrap” (DVDs and Blu-rays), other markets are necessary to help float the content increase caused by the new production paradigm (cheap, fast and everybody doing it).

Come To the Rescue, VOD

But VOD is complex, and VOD is a mystery.

Just today a new Ooyala report came out that the Premium Over the Top business (OTT, that is: Netflix, Hulu and the like) will grow from $4 billion in 2014 (of which Netflix owns 85%) to $8 to $12 billion in 2018. Now, almost all predictions about VOD since 2011, and almost all predictions about Netflix since then as well, have been below the mark. But let’s just accept the middle, and say that in 2018, OTT will be $10 billion. The Ooyala report also says that Netflix will drop to 50% of the market by 2018 (so, $5 billion of that middle accepted number).

Ooyala Premium OTT Growth

Source: Ooyala

I hate to go off on an aside here, but this story has so many asides in it. The DEG (Digital Entertainment Group) who tracks these things, also tracks Digital Download to Own (also called EST Electronic Sell-through) and Digital Online Rentals (and also shrink-wrap) and puts all of this together into home entertainment. Why is this interesting? Because this lumping of digital and shrink wrap kind of obscures the fact that digital could eclipse former markets, and digital is half just like TV and half just like shrink-wrap, but with newer less-friction technologies for delivery.
History Rewards Content Heading Toward Ubiquity

VHS tapes took about 25 years to achieve the sales that DVDs achieved in about 8 years. Digital could explode beyond that, and faster. All the markers and infrastructure are in place. But there is a further complexity, and that is the fact that digital delivery is really a bunch of markets and platforms that work differently, have different price points and have different deal structures behind them.
Here’s a Tiny Example:

A client of mine made a music documentary, The Wrecking Crew. Here are the prices of the digital movie on select services:

  • PlayStation Standard Definition (SD) Rental $6.99
  • Xbox Video SD and HD, Own $11.99 and up, Rental $3.99 and up
  • Amazon Instant Video SD and HD, Own $12.99 and up, Rental $3.99 and up
  • iTunes SD and HD, Own $12.99 and up, Rental $3.99 and up

Another client of mine made a sports documentary (and no, I don’t only work on documentaries, but I do like them and the makers), called Undefeated (Oscar Nomination btw). Here are the prices for that on select services:

  • PlayStation Not Available
  • Xbox Video SD and HD, Own $7.99 and up, Rental $2.99 and up
  • Amazon Instant Video SD and HD, Own $7.99 and up, Rental $2.99 and up
  • iTunes SD and HD, Own $7.99 and up, Rental $2.99 and up
  • This film is also now available on Netflix

Key in the difference between the two films is age, (2011 Undefeated, and 2015 The Wrecking Crew). That makes Undefeated a catalog title, and explains the general price difference. And some of the platforms are coalescing around similar pricing, but since all of these deals are revenue share, one dollar means about seventy cents per transaction to the rights owner, and about thirty cents per transaction to the platform. 10,000 downloads means $7,000 lost income. 100,000 downloads means $70,000 in lost income. For DVDs, there are not supposed to be separate deals per outlet, so, if Walmart decides to sell it for less, the distributor take is still the same on that DVD.

This is the first major complexity in modeling Video on Demand.

Video on Demand Is Really Kind Of Like 25 To 30 Markets, or Platforms

Here is how they break out, sort of:

MSO’s, or Multi-System Operators, on the order of Comcast, Direct TV, Google Fiber or Time Warner, including small regional operators.
These have subscription options, and Pay per View options (the original VoD).
OTT operators, like Sling TV, Amazon Prime Instant Video, Crackle, HBO, Hulu, Netflix and the like. These are, in general, the Subscription Video on Demand (SVOD) folks, though Crackle and Hulu have commercial-funded elements. Hulu, Amazon and Netflix buy movies, but they are really competing for television windows or rights. They used to buy the 2nd TV window, but now they buy, in some cases, the 1st TV window.

Then we have IPTV, which includes some television content, not germane here, but also some Video on Demand movies, which are delivered over Internet Protocol Television platforms.
Lastly, we have the pure Internet plays who will deliver to any device, and often through their own apps, or through a browser window, or to a set-top box, completely platform agnostic. These include Google Play, Amazon Instant, iTunes less so, Distrify and Vimeo on Demand focusing on Indies, and so on. The larger of these take more for each transaction, but have large marketing footprints, and so on, while some of the smaller ones return all but 10% of sales, with much smaller footprints.

Why did I talk about all that? To show that there is a great deal of complexity in Digital Delivery, and it is getting more so all the time. The Ooyala report that says Netflix will have a smaller share of a growing market, anticipates many small niche players. They will be like art houses, and specialty distributors, and will be boons for smaller films.

Why Is It Mystifying?

The complexity is in understanding and modeling the value these markets offer. Some films will have Netflix, some will not, some will have MSOs, and some will not. This is a very complex environment and my models for estimating the value of a film already in release, and my models for estimating the value of a film in front of us have many moving parts, including 25 to 30 markets, with rentals, DTOs (also called EST) and different market shares for each platform, if they overlap, like many do. The models are not perfect, but no one’s model can be perfect, even more so because so much of the data is hidden from everyone, purposefully.

Exiting the Desert

But we are not still lost out in the sun-baked desert anymore, and we have more points of reference to map out our path, but there are rocks and stones and mirages as we make our way to the oasis. Still, over the last five or so years of studying this, I think we are making progress, and, on that note, I am introducing our ROI Reports (Now with VOD) at the old price of these reports without VOD for the next month and a half. Check them out, but whether you buy one, a handful, a bucket full or none, I hope this discussion was helpful and informative along the way of your own path.

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)