3 Film Financing Myths, Hacked by Data
Team Slated
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This is all well and good from a studio perspective but the reason people poke fun at film financing investments is the ROI to the investor, not overall BO gross minus budget and marketing expenses. For example if an investor puts up $10M to finance an independent film, which is then picked up by a studio for distribution in a standard 70–30 split model, see what happens when you follow the numbers; Let’s say the film grosses $30m, triple it’s budget. The theaters take $15m off the top. The distributor then takes a 30% fee on the remaining $15m, or $4.5m. Then they get their $10m (average for a smaller film) marketing investment back, leaving the producer a gross profit of $500,000. Skipping all the fees taken by sales agents, lawyers, and other middlemen, the producer, who invested $10m, is left with $500,000, meaning a loss on theatrical exploitation of $9.5m! After selling ancillary rights and whatever other crumbs they can muster perhaps they claw back another $3-4m. Overall loss to the financier/producer is $5–6m, not counting the value of time (usually at least two years from production through distribution). Sure, there is money to be made, but what’s important is WHO is getting the money. And it sure isn’t the filmmaker, independent investor or the real suckers; ‘net” profit participants, who rarely, if ever, see a dime. In this model the $10m film has to gross almost $60m to achieve break-even to the investor, leaving other sales and rights to get them to profitability. Now go back and look at how many $10m films grossed more than $50m and see how good a business this is. If that isn’t enough pain the reality is that the majority of distributors and studios lie, cheat, and do whatever they can to withhold revenues due the producer. For a good example look at the the lawsuit documents between the producers of The Blair Witch Project, a $250,000 indie film that grossed $250m(!) and the return to the producers by Lion’s Gate. They got less than $5m back, and after spending years in court, another $7m or so. Enough said.

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