Understanding the Global Marketplace

As I have spoken to aspiring screenwriters and filmmakers at colleges and film schools around the country, almost invariably when I talk about the realities of the global marketplace for film, it is a revelation for them. That’s because most educators teach creative theories of screenwriting or the physical practicalities of filmmaking, but are clueless as to the pragmatic reality of who or where the audience for these prospective films actually is and why certain scripts actually get made as movies, while countless others fall by the wayside.

As a victor of world wars, global superpower, and world leader, the United States of America has developed a globally naïve and ethnocentric mentality. In the film business, whether out of naiveté, arrogance, or a combination of both, most people in the U.S. tend to think of the film business as being solely American or North American and/or English speaking. This is the furthest thing from the truth. As I have illustrated in my previous film-related book, Producing for Profit: A Practical Guide to Making Independent and Studio Films, and in my DVD and download film school series, Foolproof Film School, the market for motion pictures is global, and American films are a global export product. The biggest revenues for American movies most often come from outside of the United States and Canada. In the case of almost all independent films, the general rule of thumb has always been that approximately 65% of the revenues come from international foreign territories, and approximately 35% of revenues from the U.S. and Canada and their respective territories and possessions. Aspiring screenwriters, take heed.

Whether politics, public speaking, education, filmmaking, or screen-writing, one’s mantra must be “know your audience.” Most screenwriters think about everything except who their core audience actually is when identifying subject matter, which consequently routinely results in futility, with countless unread and unproduced screenplays. Scripts that are developed and written solely according to creative paradigms are often films that have very little, if any, market appeal or value. Screenwriting is a passion, screenwriting is creative, screenwriting is a discipline, and screen-writing can be a vocation, not just a hobby or pastime, if the screenwriter is cognizant of basic fundamentals and develops material that the current marketplace has a desire for.

As I mentioned earlier, the largest market for American motion pictures and particularly independent films are all of the international territories outside of North America. Today, media is fixated on what is “trending.” Likewise, each international territory has certain criteria of the types of film trends that currently are “working,” meaning those trends that are currently desirable or salable in each individual territory. Sometimes specific salable criteria may be the same or similar in multiple territories, and sometimes a territory that may yield a very lucrative sale has a very specific element that must be incorporated into a screenplay and, in turn, the film, in order to make a sale in that territory. It is vital to understand the required salable criteria and most often a hybrid of elements, which must be identified prior to the development of the material, and incorporated into a cohesive and organically evolving story and script. The inclusion these elements will ultimately be critical to the screenplay having success and being greenlit, which is the formal commitment of financing, thereby allowing the project to move forward from the development phase to preproduction and principal photography.

Shelf Life

In both the foreign and domestic territories, trends are cyclical and change on an ongoing basis. Trends have a shelf life, but the advice I’m offering in this book has not changed over the span of my career in the entertainment business, and the vital importance of establishing a current salable trend before writing your screenplay has no shelf life.

Studio Films

There is a distinct difference between studio motion pictures and independent films. Studios are owned by global conglomerate monopolies that now have taken over almost every media outlet worldwide, as the U.S. government has turned a blind eye to anti-trust laws. Each of the big six (or seven, if you count CBS) conglomerates not only has the ability to make the movies they choose to make and force feed the public through their respective wholly owned media outlets, but they also have deep pockets of public funding to use at their discretion for the production of their film and television projects. Studio films are driven by what are known as tent pole films, which are mega-budgeted pictures with branded franchises, as we can see from the glut of superhero movies, sequels, prequels, remakes, and reboots of the same movies over and over. The majority of theatrical box office revenue for studio motion pictures is controlled by teenage to early twenties males, and every few years with a new crop of young male audiences, everything old is new again.

Distribution Costs

Films made by studio conglomerates are supported not only by public money and mega-budgets, but also by vast media spends to support the promotion, advertising, and publicity for the pictures, which at times may exceed a film’s budget. This expenditure is known as P&A, which stands for prints and advertising, and comes from the recent past when actual film prints and trailers were the way films were exhibited and there were significant multi-million-dollar costs associated with striking prints and trailers, as well as shipping and freight costs, which were factored into the costs of distribution. Today, with digital cinema packages and the advent of electronic delivery of film as digital files, there are no longer any huge print costs, but there are so many other forms of media and social media that have increased costs on the advertising side. For instance, a studio film like 2016’s Suicide Squad, with an estimated $175 million production cost and an estimated $150 million P&A and promotion costs will never recoup its money from a domestic theatrical release, even if the picture does $500 million domestic box office gross. Generally, studios split with exhibitors fifty-fifty (although there may be sliding scale formulas for revenue splits) and further have to recoup not only the cost of production but the distribution, P&A, media, publicity, and advertising costs. Exhibitors who own movie theaters use the huge promotion of these studio conglomerate films to lure people into the theaters, who pay increasingly higher ticket costs and exorbitant prices for candy, popcorn, soft drinks, and concessions. As studios generate a global awareness for a film in the U.S., this also invariably translates to box office success in the international markets, as well as significantly boosting the TV, DVD, VOD, PPV, new and emerging media, and ancillary value of any given motion picture.

Independent Films

Independent films are not supported by public money and mega-budgets. They rarely have large media spends to support promotion, advertising, and publicity. Independent films must rely on scripts, and in turn films, which are appealing to the bulk of the global marketplace in order to assure sales to key international territories, which are critical for the financing or recoupment for the cost of financing for every independent film. Thankfully, in the independent film world, one can identify movie trends that are currently selling in the preponderance of the international territories, as well as in the U.S. and Canada.

The majority of independent films never receive a theatrical release, meaning that they will never be seen in a movie theater in any significant way. They must rely on the ancillary markets for their revenue and the understanding of current salable and desirable trends in the most lucrative territories in order to assure the financing and or recoupment of the financing for each and every picture. (Ancillary markets are generally non-theatrical venues such as cable, satellite, terrestrial, DVD, VOD, PPV, free TV, pay TV, Internet, airlines, hotels, oil rigs, ships at sea, and any and all new and emerging media.)

Consequently, in the independent world, as discussed earlier, if the foreign revenues are double the estimated domestic revenues, the desires of the foreign audience are twice as important as those of the audience in the U.S. and Canada. Writers, know your audience!

Understanding Sales Agents

If you are like me, the stock market is somewhat of an enigma, which I have very little understanding of, and seems like high-risk gambling. However, there are trained professionals who have made lifelong lucrative careers out of giving professional advice and sharing expertise with clients prior to investing in stocks and equities based on their empirical knowledge of the market, trends, historical rises and falls, as well as the awareness of other financial bailout vehicles that may emerge should there be a precipitous drop in stock value. In the film business, and particularly in the independent film business, there are similarly trained professionals, known as sales agents, who not only may produce their own films, but who also acquire films from outside producers for international sales as commissioned salesmen.

Years ago, we used to call sales agents foreign distributors, but they do not really distribute movies, they sell film rights to international territorial distributors. In the independent film business they are as valuable as a stockbroker, as sales agents not only understand and have their finger on the pulse of the current global marketplace, but they have proprietary relationships with buyers in most international territories worldwide. They are in constant communication with international buyers and do constant due diligence on the market, updating their knowledge on what films are being sold and what makes them salable, what films are not selling, and if not, why not. They establish what the monetary value of those films may be in each territory, based on specific elements, what new media may be arising to which the proposed film may be an appropriate sale, and what the term of the sale (the number of years) to a particular international territory for specific media may be. Through communication with clients and international buyers, foreign sales agents are constantly questioning buyers to try to get them to articulate what specific creative story and screenplay components the buyers may require in order to be able to make a sale in that territory. This up-to-the-moment information about what is trending is invaluable to writers.

Sales Agents’ Responsibility to Buyers

Sales agents have a responsibility to their buyers, buyers have a responsibility to their distributors, and distributors have a responsibility to their audiences to deliver stories, screenplays, and finished films that are true to the advertised promise of creative elements and genre. Hence, they want to be involved in the creative process, from the development of the script to the final edit, in order to insure that they collectively deliver on their promise.

Independent filmmaking is a numbers game, without the backstop of big, public, conglomerate money if the film isn’t successful. The numbers either add up or they do not, and this is usually calculated prior to the film being greenlit (given a go-ahead for finance and production) and dictates whether or not a film gets made. Critically, if a screenwriter, as the architect of the film, has the ability to understand the global marketplace, its unique criteria, and often hybrid elements that may need to be incorporated into a screenplay in order to appeal to a current desirable and salable market trend, that writer will be leagues ahead of others writers who have no concept of the business and how to integrate creative screenwriting into a script that will sell and deliver those specific criteria to buyers.

How Films Are Bought and Sold

Studio conglomerates have their own domestic distribution for their movies and acquisitions. They have either their own distribution outlets or strategic alliances for distribution in almost all key international territories. If there are any remaining unsold or available territories, they may be sold at film markets. In the independent film world, unless a sales agent has a standing output deal with a particular territorial distributor, the bulk of all international rights are sold at film markets.

Film Markets

Film markets are trade shows where business is done, and the purpose of the event is to bring the industry together to buy and sell films. There are four major film markets around the world. The first film market is the American Film Market in November in Santa Monica, California. The next film market is in Berlin, called the European Film Market and held concurrently in February with the Berlin Film Festival. The third film market is in March in Hong Kong, called the Hong Kong FILMART, and the fourth is the Cannes Film Market, which is held concurrently with Cannes Film Festival. Over the years, certain film festivals have evolved into concurrent, smaller film markets, such as the Sundance Festival in January, the Toronto International Film Festival in September, and the Venice Film Festival, also in September.

Film markets are business trade shows for buying and selling filmed entertainment product. If you’ve ever attended a trade show of any kind, a film market is no different. Sales agents are like every other seller who exhibit new prototypes and new products for sale to distributors and retailers. At film markets, sales agents set up sales booths in convention halls or hotel rooms. Buyers from all over the world attend these markets to place purchase orders for the new product, which in this case is film. Sellers pay a participation fee as well as attendance costs and market-related expenses including exhibition panels, screenings, audiovisual equipment, posters, flyers, furniture rentals, Internet, telephones, food, and entertainment to have a presence at a film market and to meet and interface with buyers in an attempt to attract buyers to purchase their new filmed entertainment product. Buyers also incur market attendance costs as well as travel and living expenses. At any given film market, you will see motion pictures ranging from the development stage to preproduction, production, post-production, and finished films ready for delivery, which are generally for sale for all rights, all media, in all territories worldwide. You will also see older films, known as reissues or library titles, whose first cycle rights have expired in certain territories and the rights for those films become available again in those expired territories. (This is why films have a perpetuity value.)

Film Festivals

Film festivals are distinctly different from film markets. Festivals attract creative talent, who want to celebrate their work on a creative level and also with the hope of being acknowledged by their peers, audiences, or juries who often select films to receive awards or acknowledgments. Festivals are generally a feel-good, ego-boosting celebration of the art of film, actors, writers, directors, producers, and filmmakers, and often are responsible for the discovery of new artists and talent. Although many film festivals now coincide with film markets, they are completely different venues.

The festival director is like a museum curator picking and choosing, being a gatekeeper, and deciding what for a period of five to eight days will be shown to the community. Festivals may have very narrow missions or very broad missions. A film festival may be a genre festival, such as horror, or it may be a very broad festival geared to bring stars to that city and to generate all of the ancillary commerce that coincides with it. There are more than 5,000 film festivals around the world. There are more than fifty in Los Angeles County alone. From a sales standpoint, film festivals more often than not don’t result in film sales, much as a “like” of a product on social media doesn’t result in a dollar.

Term

When films are sold, the right to distribute and exhibit that film in a particular territory is sold for a term, meaning a number of years for certain specific delineated rights. The common term for the sale of rights to exhibit or distribute for a territory can range from seven to twenty-five years depending on the territory and the amount of money paid by the territorial distributor for those rights.

Rights

Films may be sold for all rights or for specific delineated rights such as theatrical rights, or any number of non-theatrical rights such as cable, satellite, terrestrial, DVD, VOD, PPV, free TV, pay TV, Internet, airlines, hotels, oil rigs, ships at sea, and any and all new and emerging media in each individual territory throughout the world.

Territory

A territory may be defined as a country or a region that adheres to a common language such as, for instance, France. When you sell France, you sell French-speaking territories, including: Metropolitan France, French D.O.M., and French T.O.M. (Guadeloupe [including St. Martin and St. Barthelemy], Guyane, Martinique, Reunion, French Polynesia [including Clipperton Island], St. Pierre and Miquelon, Wallis and Futuna, Island of Crippertone, Mayotte, and New Caledonia), T.A.A.F. (Terres Australes et Antarctique, consisting of Saint Paul Island, Amsterdam Island, Crozet Islands, Kerguelen Islands, and Terre Adak), Iles Esparses (consisting of Tomelin, Glorieuses, Juan de Nova, Bassas de India, and Europa Island), French-speaking Haiti, French-speaking Andorra, French-speaking Belgium, French-speaking Luxembourg, French-speaking Monaco, French-speaking Switzerland, and French-speaking Africa (consisting of Algeria, Morocco, Tunisia, Western Sahara, Burundi, Rwanda, Zaire, Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea [including Bata and Malabo Island], Gabon, Guinea Conakry, Guinea Bissau, Angola, Botswana, Cape Verde, Eritrea, Ethiopia, Gambia, Ghana, Kenya, Liberia, Malawi, Mauritania, Mozambique, Namibia, Sao Tome, Sierra Leone, Somalia, Sudan, Swaziland, Tanzania, Uganda, Zimbabwe, Ivory Coast, Mali, Niger, Senegal, Togo, Comoros, Djibouti, Madagascar, Mauritius, and Seychelles).

Buyers

A buyer may be a middleman broker who acquires films and resells them for a higher margin in a particular territory. A buyer may be an end user distributor, who actually controls distribution and exhibition in the international territory. A buyer may purchase all rights or there may be several buyers in a territory who each buy different rights, such as home video/home entertainment (under today’s evolving definition of those rights), pay TV, free TV, satellite, Internet, or various other ancillary rights or new and emerging media.

How Sales Are Documented

Sales are commemorated most often first in the form of a deal memo. Most commonly, the universally accepted form is a short-form deal memo created by the International Film and Television Alliance (IFTA), which specifies the terms of the film sale in writing. After a film market, deal memos are followed up and most often replaced by long-form contracts, which stipulate more formal terms and conditions between the sales agent and the distributor or buyer.

Sales Agents’ Contracts

As mentioned earlier, sales agents, much like real estate agents, represent the film product for a commission plus market expenses and, in turn, have long-form written agreements with producers or filmmakers who control the disposition of the rights to their film and stipulate their contractual terms. They also contain exhibits that include delivery schedules of all materials and formats required by the sales agent in order to effectively deliver the film to all of the worldwide territories.

Buyers’ Reps

Sales agents interface with, and cultivate and sustain relationships with, not only buyers, but also with buyers’ reps, who are generally North American–based individuals that represent major international territorial distributors. Buyers’ reps know far in advance of each film market what the desires for the distribution slates of their clients are in their respective international territories.

Producers’ Reps

Producers’ reps are individuals who represent companies, filmmakers, or producers and their films in the global marketplace. Producers’ reps have relationships with sales agents, distributors, and buyers’ reps, and they work on behalf of producers to attract a foreign sales agent appropriate for each film and often procure certain distribution deals for a picture. As you might suspect, the producer or filmmaker incurs double commissions, a percentage of sales to the producers’ rep, and a percentage to a sales agent. However, consider this: If a filmmaker has no industry contacts, a producers’ rep can be an entrée for the filmmaker into the business, and almost always a producers’ rep will negotiate a better deal with a sales agent than a neophyte producer or filmmaker. In many instances, producers’ reps more than pay for their services by their professional expertise, relationships, and negotiating skills.

North America

Sales for North America are often made at markets but also in between markets, since most buyers these days want to see the finished film, and there is just not enough time during a market to screen and view all the product a potential buyer may be interested in. As we touched on earlier, films that have a bona fide studio theatrical release have greater worldwide value than films that have no theatrical release. Films without a theatrical release are generally being made for and sold to what is known as the ancillary market, which includes all media excluding theatrical, and if the film is a made-for-television movie with an American broadcast sale from a bona fide network, it may have an increased value in the foreign market based on the domestic network’s name brand in the international market.

Market Value Is Critical for Screenwriters to Understand

Although genre, tone, and setting can all increase or decrease the value of any given screenplay or film, there is generally a market value for films that are perceived as television movies or films made specifically for the ancillary market in the international marketplace. As we’ve covered, sales agents do constant due diligence not only on the market trends and desires internationally, but also on the market value per territory of a particular film that meets certain criteria and contains certain elements. Consequently, having a strategic alliance with a sales agent is important in predetermining what a film’s market value may be. Sales agents assess, per territory, on a best and worst case scenario what a film’s market value is based on the creative elements of the story and script. Take the lowest projected sales numbers, add them up, subtract sales agency fees, market expenses, and a margin for market fluctuation, and that will give a screenwriter, producer, or filmmaker an idea of what a film is worth and/or what a film’s market value is prior to the development of the screenplay.

The Market-Savvy Screenwriter

Why is this information valuable and necessary for screenwriters? If a screenwriter is conscious and aware of the impact of very specific elements for a film getting made, developing a story based on salable market trends is the first step for writing a successful screenplay, which, in my opinion, is a screenplay that will sell. Conversely, if screenwriters allow themselves to be open to understanding that if a storyline, genre, subject matter, or setting that they are contemplating does not meet any desirable or salable trend in the marketplace, no producer is likely to ever read past the first few pages, since the wrong script of the wrong genre, with the wrong setting, tone, and story elements, has no ability to be sold in the current global market.

Other Ways of Gathering Trending Information

Aside from sales agents being critical lifelines and a source of information for most independent filmmakers, including screenwriters, there are many online resources that writers can use such as the Business of Film online, IFTA online, and Screen International online, which will show writers what films have recently been made and are currently being sold in the global marketplace. These sites are updated regularly and reflect current trends as they change and evolve. Going to Walmart and looking in the new release section or to any Red Box kiosk, or scrolling through Netflix new releases, will also give writers an idea of what these domestic ancillary venues are buying. In today’s marketplace, everything needs to be very specific. In the past, you could get away with making the right film for the wrong price, of the wrong genre, or with the wrong cast if it resonated with certain other elements in key territories. However, today, everything has to be firing on all cylinders with the right cast and the right story, of the right genre, good production value, and made for the right price.