Financing Strategies for Distribution
The highest ROIs have come from the micro budget world that delivers quality to a quantifiable audience, particularly when they have a somewhat recognizable cast.
—Ted Hope
When you are trying to finance your independent film, it pays to raise the extra money to be able to hire a professional cast, shoot on film or high-definition (HD) video instead of standard video, and in general make a better movie. I know many filmmakers who follow the “down and dirty” philosophy and pull together whatever funds they have, slap something together on a miniDV camera using their relatives as actors, and then expect their movie to get distribution. As a general rule, this approach doesn’t work.
We’re in an interesting predicament in today’s marketplace in that you really need to step things up and make a film of a certain quality while at the same time keep the budget as low as possible because potential revenue streams are still very low.
I want to spend some time going over which sources of financing are most prevalent right now—both traditional and nontraditional forms.
Private Equity
Love it or hate it, private equity is still the most common financing source for independent films in the United States. In essence, what private equity boils down to is raising money from friends, family, high-net-worth individuals, and/or investors. The biggest advantage to private equity is that for the most part it leaves you most in control of your film. By contrast, the biggest disadvantage to private equity is that it can be very difficult to find, especially in the tough economic climate of the past few years. Another advantage of private equity is that money tends to beget other money—meaning if you can raise some initial private equity for your film, typically it is then easier to raise additional money elsewhere because the first money in is always the riskiest (and it’s hard to get people to take a big risk on the unknown!).
Presales
Presales are literally distributor financing because they mean a distributor is willing to “prebuy” the rights to your film for a particular territory and advance you the money for production. When distributors prebuy rights, the presale is advantageous to them because if they know in advance that you have a hot property, they can secure the distribution rights up front instead of waiting until the film is completed and then having to compete with all the other distributors in their territory for the distribution rights. For this reason, distributors also tend to get a good deal when they prebuy their territory because they are taking a risk that, once executed, the film will be the hot property they thought it was and will be able to recoup their advance through ticket sales.
Presales have become more difficult since the late 90s because distributors, particularly foreign distributors, have been badly burned by pre-buying into films and those films turning out to be total flops. In many instances, distributors have lost their entire investment. As a result, foreign distributors have tacked on more and more technical requirements for presales over the years. In other words, instead of just having A-list cast attached, as was once the case, you now have to have an experienced director and producer attached with proven track records. These extra requirements further ensure that the film not only will have the stars to attract an audience but also will be executed well and will actually be seen to completion, make it into the theaters, and garner ticket sales.
For obvious reasons, presales are advantageous to filmmakers. For one thing, preselling is a way to raise money for your film while securing distributors at the same time. Another advantage is that a presale gives your film cachet in that if people believed in your movie enough to pre-buy for their territory, it is very likely that other distributors from other territories also will be attracted to a presale. Pretty soon, by preselling a few territories, you can raise all the money for your film with the assurance that your film will be seen in those countries.
Presales are generally made with the help of foreign sales agents because they are the ones who have the relationships with foreign distributors. However, you may be able to secure your own presale by submitting to the distributors directly. Be warned, though, that this form of financing has become extremely rare these days and isn’t even worth considering unless you have an A-list cast and are a producer or director with a proven track record,
The one exception that I’ve seen happening over the past few years is if a film is packaged with proven B-list straight-to-video stars, U.S. DVD distributors have stepped up to the plate to prebuy their rights. So if you’re not in a position to get any A-list stars attached to your project and you want to explore presale financing, your best bet is to find three to four straight-to-video stars and attach them to your movie.
International Coproductions
An international coproduction is a form of a presale in which the distributor takes a much larger stake in the film and, in fact, becomes a coproducer on the movie. International coproductions grew out of pre-sales. When distributors started getting badly burned, they decided that if they took a greater involvement in the films, their involvement could act as insurance that the films were executed properly. With this further insurance, at least distributors could somewhat rely on making back their investment.
International coproductions, like presales, are very rare these days and pretty much carry the same requirements as presales in terms of a sellable project and A-list cast potential. However, with the increase in demand for nonfiction programming by cable and satellite networks, I have actually seen an increase in international coproductions for documentaries and special-interest films that fit a programming mandate. For example, when a new travel network began broadcasting in Germany, network programmers were so hungry for travel documentaries that they entered into several international coproduction deals to fill their programming pipeline and ensure they would have enough shows in the coming year to air to their burgeoning audience.
Sometimes you can finance a film with one international coproduction, or several at a time, and as with a presale, distributors also retain the distribution rights for their territory in a coproduction arrangement.
Also, if you’re seeking an international coproduction as a way to finance your movie, your best bet is to work with foreign sales agents because they have the relationships and know the intricacies involved in coproduction deals, including all the contractual issues.
Tax Incentives
Everyone should be using tax incentives right now because they represent “free money.” Using these incentives, you can usually get 20 to 40 percent of the budget credited back to you after the film is completed, depending on where you shoot. You can also get these same types of incentives by shooting in foreign locations—everywhere from Canada to Eastern Europe—BUT you need to partner with local production companies and keep in mind that when you’re shooting overseas, any savings in taxes can be wiped away depending on currency fluctuations and the cost of flying your cast and crew to location. Another point to keep in mind is that you still have to monetize tax incentives for production, so that means getting a private investor, bank, or other source to cash flow them for you.
Interview with Director Adam Paolo Cultraro on Financing His Film with Presales
Q: Last AFM, in one of the worst economic downturns in recent history, you managed to presell $1 million of your $4 million budgeted film. How did you do it?
A: It was actually pretty easy. And not just because I’m some sort of presales superstar (I’m not), but because I followed the rules. AFM is an event that distributors, studios, and sales agents around the world congregate at every year. Like other film markets, they come for TWO reasons only: to buy or to sell. Most everyone present is there to either buy a movie that is either a script, in production, or complete … or … to sell a movie that is either a script, in production, or complete. That’s it! I was a seller. I knew from studying the markets that I would need certain things in order to have my film be of maximum attractiveness to buyers. This is the elusive package. The package is comprised of the who, what, and when of the film. Who is in it? What genre is it and what is it about? When will you shoot it? Once I had these three things, I made up one sheets, which are a poster on the front with a synopsis on the back. I then obtained the buyers’ database for AFM (which you get access to when you pay to get in). I then proceeded to send a series of targeted emails to buyers pitching my film and requesting a meeting at AFM…. I received over 50 responses and appointments. When AFM finally came around, I took meetings, pitched the project, and obtained commitments to prepurchase the film. It was easy as that. There was nothing particularly hard about it … because I followed the rules. My one sheets looked like everyone else’s one sheets. My film was a genre movie with name cast. I was speaking the language buyers were speaking, not some pie in the sky “great-movie-win-awards” type rant. All buyers care about is the cast, the genre, and that you have the ability to actually make the movie you are trying to sell them.
Q: How important do you think cast and genre were in the success of your presales? Or were there other important factors at play as well?
A: Wait—you mean there’s something other than cast and genre that buyers are looking for? Seriously, those two things ARE the package. Even my ability to make the film (i.e., what director is attached) is a distant third place consideration. Buyers have a degree of comfort in your ability to make the movie if you have significant name talent attached. They are relying on the actor’s agents vetting you before they have to. Having a name actor attached is instant credibility. Second in importance is a marketable genre. Oh, there’s no doubt in my mind that you could get a film market and sell a Tom Hanks period piece costume drama, but this will require an inordinate amount of work on your part even though there is a name attached. If you have a marketable genre and name actors, buyers will come to you, plain and simple.
Q: So where did you go from there? How did you end up pulling together the rest of your $4 million budget, and what important lessons did you learn?
A: The one problem with a presales-driven model is that you will never sell enough of the film to not require an equity investment. Not only is it difficult (close to impossible) to finance 100 percent of a film’s budget using presales, it’s not a good business strategy either. So you’re left with a portion of the film’s budget accounted for in presales, then another portion in film tax credits—which is easy, and every filmmaker should avail themselves of—then you can usually get gap financing on the unsold territories through most entertainment banks. All that stuff is relatively easy compared to the final thing you need: EQUITY. This is what stops most filmmakers, novice and veteran alike, cold in their tracks. You need to convince someone to give you money. This is always difficult and separates the men from the boys. Of course, if you bring a $4 million movie with tax credits, presales, gap financing, etc., and you only need $500,000 to get it off the ground, suddenly your package is pretty solid, and you’ll be in a better position to get the equity and get the movie made. The most neophyte mistake I find out there is when a filmmaker is trying to raise too much equity. They’ll have a $4 million picture and be looking for $3 million of it in cash. Even if you could do it, it’s not the way it’s done, and just marks you as being new when you go bang on the doors, hat in hand. In my case, after we had all those pieces, we started looking for the equity. This was a tough road, and frankly, the producer I originally had on board could not do it after six months of trying. Finally, I found a new producer, and we approached another, more seasoned producer with the package, his company then funded the remainder of the film, and we shot it. The lesson I learned here is to begin tracking the producers that regularly make the type of film you are trying to sell, and take your package to them early on. In many cases, theses filmmakers produce so many films that they can take your script, cast, and presales, and quickly roll that whole ball into a movie that will get made. These producers have large revolving lines of credit and can bank your presales cheaper than you can, so they can just look at your package and say “yes” right on the spot. It’s what they do!
Q: As a young director, you’ve taken a different approach than most other directors who are making low-budget films and self-distributing them. What are your thoughts on this, and why did you decide to take the route you chose?
A: Well, I find myself in a unique and precarious situation. I’m a writer–director who only wants to shoot my own material. Call me strange, but like Tarantino, I only do my own stuff. So that presents a huge challenge to getting the films made. My goals are very different than most other directors. I’m not trying to win a festival so I can get noticed and land a bigger gig. I’m not making calling cards of my work in the hopes of getting hired. So my process necessarily has to be different than other directors. Since no one will hire me to shoot my own script (would be nice, but alas …), I have to actually get the movie made, meaning self-distribution strategies don’t cut it. I need a budget, and I need it now, and the easiest way of accomplishing that goal has been to attach cast and presell the movie. So you see that my way of getting films made is out of necessity. It was either this method or scrape $20,000 together and shoot a crappy feature and try and get it in a festival or otherwise noticed. The path I’ve chosen is a calculated business decision, since if I felt like I could win major film festivals with $20,000 features, I’d probably be doing that. The young filmmaker doesn’t actually realize that the odds of accomplishing that goal are far, far more remote than actually piecing together a film with presales or name cast. And this is where so many filmmakers fail before they’ve even started…. They make not one, not two, but several of these low-budget, noncommercial movies with no name cast in them, and then they wonder why they’re still begging, borrowing, and stealing to make yet another forgettable and tiny picture—all the while not getting paid to make movies. I’ve unashamedly chosen the path of commercialism because that’s what works in Hollywood. It’s a business first and an art form second.
Q: What are some of the things you wish you would have done differently along the way or will be doing differently in the future?
A: Well, I have a series of regrets that are only natural as one progresses in one’s career. I’m just smarter than I was five years ago, plain and simple. My regrets and lessons are comprised of two categories: Creative Regrets and Business Regrets. Even though I normally speak of only the business side, many directors fail to note that the two are inextricably linked to each other. Most of these are from my first feature, Corrado. I did not repeat many of these mistakes on Hangar 14. Here goes:
• Never allow a lead actor to substantially rewrite his lines. (Corrado)
• Ensure the producer of the project shares the identical, not similar vision that you do for the picture—they are putting up money, which gives them some creative rights! (Hangar 14)
• Never allow the lead actor’s management to linger on set and offer critiques. (Hangar 14)
• Fight to the death for final cut or something close to it. (Hangar 14)
• Just because a lead actor sells doesn’t mean he is right for the role or is even a good actor. (Hangar 14)
Business Regrets
• Never borrow more equity than you absolutely need to. Presell more. (Corrado)
• Deliver the picture with enough speed that your lead actor’s value stays high. Waiting too long drops the values as your actor continues to act in film after film. (Corrado)
• Don’t try to do too many jobs and wear too many hats. (Corrado)
• Talk to distributors about selling your movie, not sales agents, and be able to recognize what the difference is. (Corrado)
• Negotiate your sales agency contract even harder and have a competent attorney review it. (Corrado)
• Negotiate your profit participation up front with the rest of your contract, not “afterwards, in good faith.” (Hangar 14)
• Don’t cast “familiar faces” in your film—burned-out-but-recognizable actors who demand more money than scale and add absolutely nothing to your sales. (Corrado)
• Don’t buy your own production equipment. It’s cheaper to rent, and you’ll get better stuff. (Corrado)
• Contingency funds are to be used for the purpose intended—in case of emergency—which doesn’t help if you’ve spent them beforehand. (Corrado)
What I’m doing differently in my next film is not doing any of the above, which is a step in the right direction. I will have another, smaller list on the next film of things I learn on that journey. Most notable in my next feature is the movement away from smaller distributors to larger studios to get the film made, and almost no dependence on presales.
NONTRADITIONAL FINANCING SOURCES
Crowd Funding
Crowd funding is a new form of financing that’s taken shape and involves raising part or all of your film’s budget via fans and supporters, usually in the form of donations. Crowd-funding campaigns can take place either on your own film’s website or on dedicated crowd-funding websites such as www.kickstarter.com or www.indiegogo.com.
The deal with crowd funding is this: at this time for most filmmakers, it’s not a MAJOR source of funding yet. In other words, instead of going into crowd funding thinking you can finance your entire budget, think of this approach more in terms of supplemental financing that you can use to complement traditional financing schemes.
One of the biggest advantages to using crowd funding as part of your overall financing plan is that it can be a great source of development money that you can leverage to get other financing. For example, I’ve seen several filmmakers ignite a crowd-funding campaign; raise $10,000–$50,000 in development funds; use that money to create initial marketing collateral, a business plan, website, etc.; and then leverage those assets to approach financiers for additional financing to get into production.
On the other end of the spectrum, many filmmakers utilize crowd funding more as finishing funds rather than development funds and create a crowd-funding campaign to raise financing for postproduction, deliverables, prints and advertising (P&A for a theatrical tour), or even festival submissions.
Really, the sky’s the limit with crowd funding, but what I will tell you is this: no matter if you’re using crowd funding to finance development, production, or finishing funds, no crowd-funding campaign will be successful unless it’s promoted properly. Think about it—unless you market and promote your crowd-funding campaign, how do you expect people to find your site or your page on Kickstarter or Indiegogo if you aren’t driving traffic to it? Unfortunately, I’ve seen way too many crowd-funding campaigns completely fall flat because of lack of adequate promotion.
Lessons on marketing and promoting your crowd-funding campaign can easily take up an entire book by itself, but in general, this effort all goes back to the audience building we talked about in Chapter 2. Ideally, you want to leverage both your social network and your email database to let people know about your campaign and ask them to donate.
I think it’s a lot easier for you to see what a crowd-funding campaign actually looks like in action, so I recommend going to www.kickstarter.com and www.indiegogo.com and browsing around at some of the campaigns that are going on. Be sure to pay special attention to how the intro videos were constructed as well as the different levels of contributions and what the filmmakers offer in return for different levels of donation. This is the best way to get inspired on how to create your own successful crowd-funding campaign!
Interview with Crowd-Funding Expert Thomas Mai (www.thomasmai.net)
Q: Is crowd funding your film as easy as it sounds?
A: Crowd funding can take as long or as short a time as traditional funding does. It all depends on the film, cast, subject, etc. One good idea is to do a crowd-funding campaign while you are working on the traditional financing plan. You will find that the two different models complement each other very well. It is easier to convince any investors, film fund, distributor, or sales agent to get involved in your project if you can show that you are already in contact with your audience before any of the film is shot. If you have sold t-shirts, DVDs, or posters for a couple of thousand dollars, you are proving to everyone and yourself that there is an audience. It is harder for a financial entity to turn your film down when you can prove that there is an audience. If you already have some traditional financing in place, it is easier to start a crowd-funding campaign, as you can show your audience that there is a real financial commitment behind the film. The question should be rather if you can afford not to do a crowd-funding campaign.
Everything you do online is marketing for your film, including crowd funding. No film survives in the market if there is just a trailer and a poster on the day of release. You need to get your audience involved before, during, and after you have made your film. A crowd-funding campaign is part of the many strategies you can do to be successful. What few people seem to realize is that the audience you get in contact with today are the ones who can help you fund your next film tomorrow. Look at Robert Greenwald. He has millions of fans/audience members in his database, and it is so much easier for him to finance his next film because he is loyal to his fans and they are in return loyal to him because he delivers to them exactly what they want.
Another important aspect of crowd funding is that it allows you to find out if anybody even cares about your film BEFORE you have shot it. If you can’t raise any money online before the film is made, then there is a good chance that it will have an equally dismal release. Once you realize this, then it is so much easier to find out which film project you should focus on. Ask your audience and they will tell you. No more wasting five years of your life and your dentist’s money on a film nobody cares about. Use crowd funding to build and get your audience involved.
You definitely need to make a video that stands out in order to find money online. The better the video is, the bigger a chance you have of making it viral (that your audience will start to spread the video to their friends on their own).
Most crowd-funding campaigns try to get everyone and their grandmother involved. Every film is not for everyone. If I had a penny for every time a director told me that their target group for their film is for everyone between 16 and 65, I would be very rich today. No film is for everyone. Accept this and find your niche of a niche within a niche of your audience, and start building an audience from the core on the given subject, cast, mood, [or] story of your film project. I don’t care if your film is about karate or cancer; there is an audience out there who is heavily interested in the subject of your film. Contact them and get them involved, and they will become your ambassadors.
To answer your question if crowd funding is easy. No, it is not easy to create a crowd-funding campaign, but neither is making film, and that hasn’t stopped thousands of filmmakers from trying every year.
Q: When’s the best time to start a crowd-funding campaign and why?
A: The sooner, the better is the answer. Get in touch with your audience and find out what they like and don’t like about your film project. Crowd funding is great, but crowdsourcing (where you can ask for ideas or feedback on story, script, cast) is not bad either. Any way you can connect with your audience and make them feel part of your film is a good thing.
Remember that every dollar that is raised online with crowd funding you get to keep with no ownership from the funders attached, unlike traditional financing. The more you raise, the more of the film you can own/control for yourself. I believe that “independent” filmmaking is turning into “fandependent” filmmaking. The filmmakers who truly understand this will end up owning all rights to their films, including distribution on a global scale, and thereby become truly independent. I think that this is the biggest shift we are seeing right now—that the creators of a film will actually end up owning the film, which is fair and very democratic in my opinion.
Q: You speak all over the world on the virtues of crowd funding. What’s the biggest objection you hear from filmmakers when you introduce the concept of crowd funding to them?
A: I get many questions and objections to crowd funding. I think it is because deep down people in general don’t like change; change brings a lot of unknown and stress, and that is a valid concern. A few people, however, thrive on change, and they are the ones who are currently leading the field in crowd funding.
I see crowd funding as the next step in getting closer to your audience. Making films has always been about the audience, but somehow we forget that part when we are trying to raise financing, cast, shoot, and edit a film. Audience has always been something that comes later down the line. Now, thanks to social media and crowd funding, we can have a dialogue with our audience before the film is made. This is, in my opinion, a great thing.
Some of the questions and objections to crowd funding I get are
• If crowd funding is so great, why isn’t everyone doing it? It is a good question, but it assumes that if the majority is not doing it, then it is not valid. Most people look at the limitations instead of the possibilities, and there are a lot of possibilities with crowd funding. Most people who are doing crowd funding today are doing it because of necessity; they don’t have any other financing means. I don’t see why a Steven Spielberg or Michael Moore shouldn’t crowd fund their films. They would end up owning and thereby controlling more of their films. The era of gatekeepers (the expensive middleman or the fat guy with a cigar in a boardroom, as I like to label the traditional gatekeeper) [is] coming to an end. Why should you continue to allow the gatekeepers to control your film? You do have a choice today.
• Great idea, but it won’t work for my film! I hear that one a lot. Are you making a film that has no audience? If so, then please find a different career. I don’t care how auteur and arty you are, a film has to have an audience no matter how big or small. I have sold films from some of the biggest auteurs in the world (Lars von Trier and Thomas Vinterberg), but they still want an audience to see their films. I believe that every person out there who invests a dollar into a film as crowd funding represents a great silent majority that will only come forward once the film is completed. The “smaller” your film is, the more you need crowd funding, as traditional financing will most likely not apply to your film. Treat your crowd funders as ambassadors for you and your films, and they will stick with you for a long time.
• But I just want to make my film, and now you’re asking me to do all this other stuff! Yes, making films [is] getting more and more difficult. The old Sundance dream where you make a film for a hundred thousand and go to Sundance and sell it for $5 million is over. Most of the independent distributors are closing shop around the world, including in the U.S. All the major studios closed their independent arms because the traditional revenue models are drying up. Box office is still healthy, but DVD sales are way down, and TV is not paying what they used to, so less money [is] coming in. Many distribution offers today come only with a small advance or nothing at all, and they still want you to sign over all the rights to your film for the next 10, 15, 20 years. Why should we keep accepting this? Yes, we need to start wearing more hats to get our films financed, made, and distributed, but we also end up controlling and owning more of the films that we make. It takes A LOT of work to be an independent filmmaker today, as there are [fewer] people around who can sign a check to you. And that is the real challenge for our independent industry; we are trained to be creative [about] how to make a film but not how to run a business. And it is hard to survive in the long run without doing both.
Q: What are a few of the most successful crowd-funding campaigns you’ve seen, and why do you think they were successful?
A: There are some really good ones out there. One person told me that crowd funding is nothing new. The Catholic Church has been doing it for the last 1,500 years.
Some of the most famous campaigns are
• The Age of Stupid (http://www.ageofstupid.net): The girls from the film were on a mission to get their film made, so they could make a film about the environment. They more than succeeded. As an added bonus, check out how they reinvented home screenings and created indie screenings (http://www.indiescreenings.net/).
• Ironsky (http://www.ironsky.net/site/support/finance/): A film from Finland that is close to raising 1 million euros online. Not bad at all.
• I AM I (http://www.kickstarter.com/projects/2115598587/i-am-i-feature-film): For a great example on how to connect with your audience, check out the video.
• Neither the Veil Nor the Four Walls is a great example of combining grassroots organizations and filmmaking (http://www.neithertheveilnorthefourwalls.com/donate.php).
Q: What tips do you have for filmmakers who are embarking on crowd funding for their film?
A: Nothing is set in stone, and there is no right or wrong way to crowd fund. The most important thing is to connect with your audience and tell them why you absolutely must make your film. Most people do want to help, especially if you can connect with them emotionally. [Because I am] a former sales agent, it was often easier to sell a film before it was made because buyers would play their own film on their inner projector (which, unfortunately, often was way better than the final film).
Everything changes, and nothing changes faster than the Internet. Six months online is like a lifetime offline. Your website and campaign should change based upon user feedback and contribution. Oh, and most importantly, have fun connecting with your audience!
I already mentioned that in terms of production budget for your film, under $1 million is what’s realistic in today’s marketplace, and without name actors and/or director, consider $500,000 or less.
Also, in addition to your production budget, there are two things you don’t want to forget to budget for (which most people do):
• Distribution Expenses aka Deliverables: Budget at least $20,000–$30,000 for deliverables, NOT INCLUDING prints. This amount will include masters, M&E tracks, artwork, website, trailer production, maybe E&O (more on this later).
• Marketing Budget: Set aside 25 to 50 percent of your production marketing budget for distribution and more (up to 100 percent) if you’re planning a theatrical self-release. For example, a film budgeted at $100,000 would need an additional $25,000–$50,000 for a marketing budget, or up to an additional $100,000 if planning to do a theatrical release tour.
Sample Distribution Expenses List
1. Music and Effects (M&E Tracks): M&E tracks can cost anywhere from $5,000 to $10,000 and upward, depending on the sound mixer you are using and the quality of production sound you have to work with.
2. Film Print: If you plan on outputting your movie to film, transfer costs to a print (if you didn’t shoot on 35 mm to begin with) plus the cost of the print and all the lab fees can run anywhere from a few thousand dollars up to, say, $30,000–$50,000, depending on the lab you’re using, the length of your film, and many other factors.
3. Advertising: If you decide to self-distribute your film and need to purchase advertising to promote it, the price can run anywhere from a few thousand dollars to a few hundred thousand dollars, depending what markets you are advertising in (obviously Los Angeles and New York are much more expensive markets to advertise in than Chapel Hill and Portland are), and if you are utilizing print, Internet, or grassroots advertising campaigns.
4. Publicity: If you plan to hire a publicist to help with advertising, promotions, and publicity, plan on setting aside anywhere from a few thousand dollars to $10,000 and up, depending on how long you plan to keep the publicist on retainer, what you are requiring him to do, if he is freelance or belongs to a big PR firm, and so on.
5. Music Clearances: If you plan on using music in your film that is from an artist with a record deal or publishing deal, plan on setting aside anywhere from a few thousand dollars to a few hundred thousand dollars, depending on how popular the artist is, how big the hits are you wish to license, how much the record labels and publishers decide to charge you, and how well you can negotiate with them to keep licensing fees to a minimum.
6. Stock Footage: Even if you don’t think you’ll need to license stock footage for your film, I recommend setting aside anywhere from $2,000 to $10,000 in case you need to fill in any holes in your film that you didn’t anticipate. Stock footage is a great tool during post for enhancing your film and filling in gaps, but it costs money. So be prepared by having a little extra in the budget expressly for licensing stock footage.
7. Film Festivals: Don’t forget to set aside a few hundred or a few thousand dollars for film festival submission fees, depending on how many festivals you plan to submit to and which ones.
I’ve seen many instances when filmmakers don’t think about raising extra money for deliverables during preproduction and then pay for it later. For instance, one of the most common and worst examples I’ve seen is filmmakers actually getting interest in their film from a foreign distributor and having no money to go back and make the M&E tracks that were never made in the first place because they didn’t plan ahead and set aside money to make them during post. When there are no M&E tracks, the foreign buyer refuses the sale because the foreign language dub is made using the M&E tracks. Although a lot of films imported to the United States are shown with subtitles, this is not true for the rest of the world. In most countries, any film in a foreign language is dubbed. This is pretty much the case in most territories. Without the M&E tracks, the sale will be lost because buyers will have a film they cannot dub; therefore, the film is essentially useless to them. M&E tracks are expensive yet necessary, and foreign buyers are not in the habit of putting up money for these tracks to be added on. When they buy a film, they generally buy it “as is” save for the actual foreign language dub.
I’ve also seen disasters with music clearances. If you get distributors interested in your film using a screener with uncleared music, they will not take kindly to your removing those songs. They will assume you paid the clearance costs, and if you cannot offer to pay them at this stage, sadly, the sale of your film won’t go through.
How Much Will I Make?: Realistic Sales Projections for Your Film
I fully recommend figuring out revenue projections of your film BEFORE you go into production. Not only will it allow you to raise the proper amount of financing for your film, but you will also have a better chance of paying back your investors later. Figuring out revenue can sometimes be a rude awakening when the distribution deals start closing. What you thought you might make in terms of revenues at the outset of production might not be the case at all. In fact, most filmmakers are grossly unaware of what realistic sales projections are in the first place.
I often have filmmakers coming to me saying they want to make a film for $1 million or even $5 million; in fact, this is a huge mistake I see filmmakers making all the time. Why? Because if you look at the acquisitions history over the past few years, you’ll see that even at the higher end of the spectrum (for example, all-rights deals that come out of the biggest festivals like Sundance and Toronto), the acquisition prices are rarely over a $1 million. And that’s for all rights! So I have to ask, “Why would you budget your film over $1 million in this market when even in the best-case scenario IF you get into the best festival, your all-rights acquisition price is a breakeven?”
Of course, there are exceptions to this, and every year a few films will get acquired for $3 million, $5 million, and sometimes more, … BUT they are only one or two films, and if you really look closely at them, they have an A-list cast and/or an A-list director and/or A-list producers. So you can’t compare your film to theirs!
Another issue to keep in mind before you start getting depressed about the state of acquisition prices is that it won’t always be this way. Everything is cyclical, and if you play your cards right and do well with your first few films, as you develop a track record you will have leverage later in your career to negotiate better deals for yourself and therefore be able to justify making higher-budgeted films.
Because all-rights deals are so rare (and really happen only at a few top-tier festivals each year), a more realistic way to project revenue for your film is on a platform-by-platform basis because most likely this is how you will be finding distribution deals for your film.
Creating Realistic Revenue Projections for Your Film
Realistic revenue projections are a big point of contention these days. When I’m working with clients, one of the biggest mistakes I see them making is completely overestimating the amount of revenue they can generate for their films. I pride myself on being totally realistic when it comes to projecting revenue for films—and this comes from my direct experience actually selling films all over the world to every kind of platform. Additionally, I speak on a regular basis with digital aggregators, sales agents, and distributors who tell me point blank what they’re paying and what kind of revenue filmmakers are making.
Another big mistake I see filmmakers making is overbudgeting their films and not “backing into their budget” by doing realistic revenue projections first. You don’t want to set your budget at $1 million only to find out that the film you’re making can only realistically generate $100,000 revenue in the marketplace. So you must go through this exercise first!
Here’s something to note: When you see box office numbers thrown around, understand that these have absolutely no relevance to you or what revenue your film is capable making.
Why? For two reasons:
1. Box office numbers represent what the theater makes, not what the distributor or producer makes. Also, the revenue that does make it to the distributors’ hands gets spent on marketing and advertising, so rarely does the producer see a cut of box office revenue.
2. Even if it’s an indie film that is making good box office numbers most of the time, people don’t take into account the BACK STORY, whether a film has won at Sundance, and that’s why they were able to achieve those numbers.
Therefore, I find that putting box office numbers in your business plan is a gross misrepresentation of revenue that you, as the producer, and your investors will make on the movie. And that’s assuming you’re able to get a theatrical deal in the first place.
In the following chart, I break down each of the six distribution revenue streams and give you an idea of high- and low-end revenue possibilities for each one. Then I tell you how you can get these numbers to scale higher to justify a higher-budgeted film you want to make.
| Broadcast | $50,000–$5,000 |
| Traditional DVD | $50,000–$10,000 |
| Foreign | $250,000–$10,000 |
| Cable VOD | $100,000–$30,000 |
| Internet VOD | $100,000–$10,000 |
| Direct-to-Consumer DVD | $100,000–$10,000 |
| TOTAL | $550,000–$75,000 |
| Note: These numbers vary wildly and will depend on what your specific film is, which is why I recommend you hire someone to help you nail down these figures for your film OR get out there and do the research yourself. These figures are gross any sales agency or digital aggregator commissions, which can be anywhere from 20 to 35 percent and any expenses from the sales agency and distributors. | |
You may be wondering about theatrical distribution revenue because it’s not included in the preceding table. Actually, theatrical distribution is not considered a revenue stream; rather, it’s actually a marketing expense. So even if you plan on doing a theatrical self-release or tour with your film, plan on breaking even in the best-case scenario.
Say the film you’re about to make is budgeted over $500,000. What can you do? Here are a few suggestions:
1. Partner with a bigger producer. When looking for leverage, you can always try partnering with a producer who has more of a track record than you do and who has experience making films in the budget range you’re wanting to go to and the types of films you aspire to make. For example, when you do your research on IMDB, you may come across producers who produce films in your budget range, but those films are straight-to-video action flicks and that’s not the type of film you have. Consequently, those producers are not ones you would want to partner with.
2. Attach a bigger cast or director. I’ve said this before and I’ll say it again: attaching a name director and stars to your film is the best way to “insure” it for higher returns. Of course, it’s not guaranteed by any means, but all things being equal between two films, the one with name cast and/or director will justify a higher budget any day of the week.
3. Plan a theatrical tour for the film. I mentioned previously that doing a theatrical release is a marketing expense. Well, it happens to be a very effective marketing expense! If you can work out how to pull off a theatrical tour for your film at a reasonable price, it may give your film the extra bit of credibility that it needs to justify raising your budget by about 25 percent.
These three courses of action will help ensure higher acquisition prices in every territory and on every platform plus increase overall higher visibility of the film.
Interview with Producer Mark Shields on Packaging and Financing His Film
Q: Give us a little background on your project, please. You started shopping it at Cannes Film Market when it was just a script, right? How did that go, and what was the outcome of your efforts there? How did you make the most of the Cannes market with a project in the early stages?
A: That’s right. When we first took the project to Cannes, we did not have any cast attached; we had the script and the director. As you know, sales agents are much less likely to get attached at that stage, and prebuys, etc., are much tougher. What we had planned to do was try to get them hooked on a strong concept and build relationships that we could utilize to help us make better casting decisions and to potentially take on the project when it was more developed. To do that, we made sure we had a professional presentation with concept artwork, synopsis, team description, and potential cast all put together in a slick sales brochure. Additionally, prior to Cannes, we had attached a veteran [executive] producer who had been a former sales agent and a major player in sales and distribution. His personal connections with sales agents added a lot of weight to the project when presenting in Cannes. At the end of the festival, we came away with various sales agents interested in attaching to the project, and the intelligence we gained from them was very useful when it came to selecting the most commercial cast. It became apparent that the easier you make their job for them, the greater the level of interest. By that, I mean a title, pitch, and concept artwork that allows them to gauge the genre and potential audience.
One of the most important factors we found in presenting the project at a very early stage was to be clear and credible when describing how we intended to put the financing together. A clear plan, which was achievable and backed by the credibility of an exec with a solid track record in financing, certainly helped convince sales agents that the project was going to get made and encouraged them to get involved at an early stage. This was something that again would become important in the casting process.
Q: Now you’re in prepro on the same project, what’s happened since then that got you to this point now where you’ve got your lead role cast with a name actor?
A: After Cannes, it had been our intention to sign with a sales agent as we approached cast, but due to various reasons, we didn’t do so, although we did have decent offers from high-profile agents. After the presentations in Cannes and follow-up meetings, we knew that we could get a sales agent to attach with the right package, but it was vital to get the best lead cast attached so all of our efforts now shifted to casting.
We knew the key would be building relationships and credibility with the A-list talent agencies and talent management companies in order to get to the level of cast that we needed. We approached this in a number of ways. Firstly, we attached a reputable casting director who was known to the agencies and very active in dealing with them on high-profile projects. Additionally, we utilized existing relationships of our exec producer to make introductions to agents, and we built personal relationships ourselves by flying to meet with the agents in person in LA.
As the agencies are bombarded with projects, many of which do not have financing, it is much easier for them to say no or for their clients to pass on projects than to say yes. We endeavored to show them that we understood their position and did everything we could to make it easier for them to say yes. This was done in a number of ways, including presenting a realistic financing plan, which gave the agents and talent the confidence that the film would be financed even if that financing was not yet confirmed. Additionally, we rewrote elements of the script to make it more appealing to lead actors, and we shot a teaser trailer which showed the production values and vision the director would bring to the feature. All of this showed that we were prepared to work with the agencies to make it easier for them to sell the project to their clients, and in return, they have been fantastic in their support of the film and helping us approach the cast we want. As a result, we have attached our lead actress and are just about to close the remaining lead casting, all with name actors who have value to sales and are recognized by audiences. Finally, the agencies and management companies offered a lot of support in releasing publicity pertaining to the lead cast attachment, all of which helped both the visibility of the project and also their clients.
Subsequently, the attachment of the lead cast will enable us to move forward with the financing. We had the potential of various presales as a result of prior distributor meetings which were cast dependent, and now we are able to look at the best way to utilize those to fit into the mix.
Q: Tell us about your teaser trailer. Why did you decide to do that, and where did it get you?
A: That came about as mentioned above as a result of trying to understand the challenge the agents would have in getting their talent to commit to the project, and indeed for them to see the project at a certain level. We had to remember that even with the script in front of them, there was no real way for actors, managers, agents, financers, distributors, etc., to know what the execution of the material was going to be like, and that was crucial when the project was to be helmed by a director they were not familiar with. So we decided that shooting something would be the best way to showcase the ability of the director, but also to show the production values and the quality level of the project. This was also suggested by a well-established sales agent we had been working closely with after meeting in Cannes. They agreed it was a good idea and that it would help sell the director and the style of the project to potential prebuyers.
There was some discussion over what exactly to shoot, whether it would be better to shoot one scene from the script, or just a collection of moods and atmospheres. In the end, the director custom wrote a short piece which captured key moments from the script and highlighted the aspects of tension at the film’s core. We sourced an excellent cast for the teaser which enabled the director to showcase more dialogue and gave a great insight into his ability to direct performances as well as composition.
The response to the trailer was great. Apart from anything else, it, when combined with script changes, showed the agencies that we were actively committed to doing everything we could to make it easier for them to work with us. Similarly, financers, distributors, and sales agents had a similar reaction, as it made it so much easier for them to see how they could sell the film as well as showing that the director knew where to point the camera. The nature of the script meant that you could assume the director was either going to shoot the film as a no-budget slasher flick on DV running around with handheld cameras or as something with higher production values. Without the promo, there was no real way of seeing which immediately. With the promo, we were able to elevate the project in the eyes of agents and managers, who became more keen to push the project with their higher-profile clients. It also gave them instant security in the director’s ability and showed how he would handle their talent. The actors we approached have all reacted well, and it made the conversations with the director so much easier as they had faith in his ability.
In conjunction with the other marketing elements such as business plan and brochures, the promo has played a vital role in attracting financers, distribution, talent, and other key players, and we expect it to continue to do so.
Q: What about cast? You hear all the time about the Catch-22. You can’t get cast without financing, and you can’t get financing without cast. Yet you were able to get past the gatekeepers and get the agents and managers to take you seriously enough to get cast on board your project. How did you do that?
A: We initially got past the gatekeepers by bringing people onto the project who had credibility with the agencies, such as the casting director and an experienced exec. With the introductions made, we flew out to LA to have face-to-face meetings and present the project. Once in the room, to be taken seriously, we presented a serious project and had serious, credible answers to the questions we knew they would ask. We presented a professional package with solid/realistic financing and distribution strategies and made realistic offers. We have always been very up front and honest in all the dealings and presented a strategy for producing the film that they knew was credible and achievable.
Q: Is there anything you’ll do differently on your next project from the lessons you’ve learned along the way? Any tips for filmmakers who are where you were a year ago with your project?
A: Be realistic about the level of cast that you approach. Casting can burn a lot of time up, and relationships with the casting agencies are key. Trying to attach cast with enough profile to finance a low-budget picture is tough, and a lot of time is burnt up waiting for offers to get through the system and to get a reply. You may have a timescale, but you are low priority in their system. If you start applying deadlines to offers, they will often just pass. It’s like trying to reel in a big game fish…. You need to learn when to let them run and when to start hauling, but if you haul too hard at the wrong time, the line will snap and that could be another six weeks of work lost on an offer. If you can establish a good working relationship with an agent within one of the agencies, you will be able to find out if their talent is available and provisionally open to an offer before you put an offer out. This can save a huge amount of time.
Do whatever you can to make your project more enticing to lead talent as early as possible. Make sure you have really good lead roles with enough to do for a lead actor that will be attractive for them to play.
Anything visual you can provide that supports the director’s vision is always extremely useful. From concept art to full teasers or trailers. Just make sure it is of high enough quality; otherwise, it will do more harm than good.
We have found plenty of financing opportunities and even prebuys available if you have a solid, marketable concept, backed up with a tight script and name cast that will be shot to a high standard, and you can demonstrate that you are capable of pulling the financing together in a realistic way. However, if one or more of those elements is missing, the battle is going to be a lot tougher than it needs to be. We are already applying lessons learned to our current slate of pictures and making sure they have all those elements in place right from the very start.
Case Study/Interview with Adam Paolo Cultraro on “DIY Packaging”: www.FilmSpecific.com/Adam
Case Study/Interview with Thomas Mai on “Starting a Movement”: www.FilmSpecific.com/Thomas
A Crowd-Funding Case Study “Financing Your Micro Budget Film”: www.FilmSpecific.com/Crowdfunding
“Dissecting Distribution Revenue,” Video Training: www.FilmSpecific.com/DistributionRevenue
“5 Ways to Decrease Your Budget & Find Financing in the Current Economy” Video Training: www.FilmSpecific.com/Budget