ASK & DISCUSS
INDEXThe cost of making a movie
10 years, 10 months ago - Andrew Morgan
Saw this great post by Lee Gauthier on the Blackmagic forums:
Movie Cash Flow in an oversized nutshell:
Negative Cost is the money required to go from an idea to a finished negative. This is normally what non-producers call "the budget."
Prints and Ads includes the cost of duplicating the prints, shipping them to cinemas, guarding them from being stolen, shipping them back to the distributor and storing them. It also includes all advertising and promotional costs, from TV buys and bus banners to paying for Your Movie Star's party bus to take him to the press junket. P and A normally costs 1-1.5x the Negative Cost of a film. More for big movies.
Overhead are the costs carried by the studio over time. These include the interest on the money the Studio used to pay for Negative Cost and P and A, and the cost of your production company's cool office on the studio lot. All those costs -- even the big premiere and the after party -- are charged to the movie as Overhead.
So before the first ticket is sold, your movie is down the Negative Cost + P and A + Overhead.
Now, when people start buying tickets at the cinema, the total ticket sales is reported as "The Gross." This is the number you read on the internet that says how well the movie is doing at the box office. The Gross is just that -- gross sales. The studio doesn't get to keep all that money. A few important bites get taken out first.
Exhibitors are the cinema owners. They keep around 50% of the ticket price. (It's much more complicated than that, with sliding scales, and different rates for different movies, but 50% is a good rule of thumb.)
Gross Participants are people and entities entitled to a share of the gross revenues because of an agreement negotiated prior to the movie's release. For example, stars like Tom Cruise and Will Smith will often do movies where they work for union scale payment, but taking 5-10% of the gross. Also, if you're making a movie based on a famous property like a best selling novel or a comic book, the owner of the rights may have a gross participation from 3-5%
Financiers are people and entities who loan or invest money to the studio to make movies. As a part of their deal to provide the cash, they may have the right to take 10-20% of the gross until they have been paid back the original money they put at risk.
Fringes and Residuals are the revenue participations required by some unions. While most of them are part of the Negative Cost, SAG, WGA and DGA get residual income, which comes out of the box office. This can add up to another 1-2%
This means that when you read that a movie cost $100 million to make, it actually cost closer to $200 million to put in cinemas. When you read that it grossed $300 million dollars, it actually netted around $175 million and is still $25 million in the red.
Of course, this is a simplified, back-of-the-envelope example. Mileage will vary greatly, but now you understand the dynamics at work.
Original thread here:
http://forum.blackmagicdesign.com/viewtopic.php?f=22&t=29392#p179211
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10 years, 10 months ago - John Lubran
Most human constructed paradigms, whether they be social, political, spiritual, philosophical or commercial are not at all definitive of the laws of nature and physics and only have the provenance created by the conditioned acquiescence of others; mostly consequential to the constructs of those who have managed by whatever caprice of circumstance to gain control or monopoly of a pervasive system.
We’re now well into the first phase of a new and more expansive paradigm, largely as a result of the ‘glorious enlightenment’ and the Internet in my estimation.
The rigid structures that appear to some to have been created by God for the proper management of the proletariat are rapidly losing their sheen, much like the ‘Emperor’s New Clothes’.
In terms of film making and the monetarisation of the art that’s essential for its sustainability the old established ways and means are far from definitive. Megabuck requirement such as the stupidly expensive demands of stars and the inefficient 'closed shop' of antediluvian distribution cartels are just two of the myths that are being exposed for what they are.
It was interesting and pertinent, for those who have a proverbial ear, to read the following article from the latest issue of Televisual which I've provided below. It gives some insight as to how things are moving. There ought not be any doubt that the Internet will almost completely displace all of the current broadcast platforms and distribution structures within twenty years, even if not within the next five. The universal access superduper broadband technologies and affordable advanced creative digital tools that have already been fully developed only await implementation. It's as profound as the discovery of the wheel.
I've unashamedly quoted from the following article from the 12th November edition of Televisual written by Tim Dams. Tim's article suggests that the breaking up of the big cartels is empowered by the emerging capabilities, in terms of both economic efficiency and creative ability, of small production companies. The article does not explore the inference of the new paradigms I've suggested above but by default the inference is clearly made.
here it is;
From Televisual 12th November 2014
A swathe of new TV indies has launched in recent months, with more set to come. What’s driving the start-up trend?
The big story of 2014 in indie production has been the takeover of a large part of the UK industry by US studio groups. Discovery, Liberty, 21st Century Fox, Warners, Sony and NBC are now key players in a UK indie sector that is 65% owned by foreign investors.
The spate of deal making this year sparked fears, aired by C4 boss David Abraham in his MacTaggart lecture in Edinburgh, that the creative culture of UK production would be snuffed out by foreign owners who put profits ahead of risk taking.
Abraham’s fears about the changing TV landscape seemed to be justified by comments last month from 21st Century Fox co-chief operating officer James Murdoch last month, who said the need for scale in a globalised world was a key driver behind the merger of Endemol, Shine and Core. Murdoch’s words suggested that the world of TV production had changed for good, and that only the biggest producers with true global reach could thrive and survive.
Yet, in the past few months, there’s been a curious counter trend to all the indie super consolidation. A raft of execs, producers and directors have chosen to go independent, starting up their own fledgling production companies.
New companies to have launched include Little Gem, founded by former Maverick exec Ben Gale and ex-Princess exec Natasha Bondy; Hungry Bear (ex-Talkback producer Dan Baldwin); Curve Media (ex-Cineflix execs Rob Carey and Camilla Lewis); 7 Wonder (ex-Maverick CEO Alex Fraser, see box opposite). Producers alliance Pact says 77 new members have joined so far this year, up from 59 for the whole of 2013.
There are several reasons for the spate of start-ups. Many are director-driven production outfits set up to make their own projects and hold on to rights. Others are companies focused on branded content and AFP, taking advantage of the growing demand for video content and falling technology prices.
There’s also a swathe of start-ups launched by well-known TV execs who have worked for some of the biggest production companies and broadcasters.
“What we are seeing this year is a disproportionate number of new indies emerging,” says RDF founder and former Zodiak boss David Frank – who set up his own new company, Dial Square 86, earlier this year.
He argues that recent consolidation is a key factor in the new launches, and predicts that – based on conversations he has had – we will see some surprisingly big names soon choosing to go independent. “It is amazing how hard the tree is being shaken by what is happening.”
Many of them, one suspects, do not enjoy being part of large conglomerates where the emphasis is primarily on hitting financial targets and where the pressure will be to make shows for the broadcasters’ parent companies. Others believe they can earn more money outside the superindies.
Many indie founders who sold their companies to superindie groups are choosing to leave after the deals have expired – following the example of execs like Nick Curwin and Magnus Temple who sold their indie Dragonfly to Shine in 2007 and left in 2009. They then launched new indie The Garden in 2010 and sold it to ITV last year.
The sudden appearance of new start ups is “the flip side of uber-consolidation”, says Claire Evans, a former BBC exec who set up new indie Babygrand Productions last year. “The unspoken thing about our industry is the sustainability of some of the bigger companies and whether they actually have an implicit lifespan – because it is very, very hard to retain talent.”
It is not just the big inhouse departments at the BBC and ITV that struggle to retain talent, it is also the bigger indies. Evans points out that once an indie or superindie has been sold, it is no longer able to offer equity stakes to execs. “So if you are an emerging creative and want to develop great formats, why wouldn’t you go and start up on your own.”
Those who have set up on their own say that broadcasters are keen to work with them – if you have a good track record in the industry.
Natalka Znak (Hell’s Kitchen, I’m A Celebrity) and Simon Jones (American Idol) set up their Znak&Jones indie earlier this year. “The doors are completely open. We are pitching every day,” says Jones. “A good idea is a good idea. If they know you can produce it, I actually think a lot of broadcasters prefer working with boutique outfits. We’re not going to spend six months doing the deal, we aim to please and we want to get good shows on air quickly.”
Babygrand’s Evans confirms this: “Commissioners are hungry for new ideas. The competition between channels is so ferocious for hot new formats. Frankly, as long as you are someone they know, they will take a meeting.” Simon Jones adds that broadcasters can only benefit by encouraging new start-ups. “If I was a buyer I wouldn’t want to be only able to buy from Endemol/Shine, All3Media and Fremantle. Do I want to hear three ideas or 30 ideas?”
Indeed, C4 is encouraging relationships with new and smaller indies in a bid to work with a wider number of producers, launching initiatives like the £20m Growth Fund to back smaller indies.
Many new indies also say that it is a good time to start-up because of the sheer number of options open to them. There are far more commissioning broadcasters now in the UK, beyond the traditional terrestrials. The market is more global too with international broadcasters like Discovery and Nat Geo commissioning heavily out of the UK. British indies have also had great success pitching directly into the US market.
Indies are also producing for digital platforms like Netflix and Amazon right through to low cost shows for YouTube. Funding for content is available from brands too, with the likes of GroupM active in the market. There’s also a surge in drama and animation production thanks to new tax breaks. And distributors who are not aligned to the superindie groups are eager to work with credible new producers to secure a pipeline of new content to sell.
Carl Hall set up Warehouse 51 Productions to house and fund production talent in the UK after selling his indie Parthenon Entertainment to Sky in 2012. He says it’s a “sellers market” for producers who have the skills to negotiate the new international marketplace and put deals together.
“If you have a good idea that people want, there are lots of places to go to…You are not as exposed as you were even a year ago.” And that’s because the range of options open to people who want to build a business in ‘content’ is much, much greater than it ever has been.
10 years, 10 months ago - Peter Harris
Thanks for posting this and to the OP for sharing the thread from BM's forum, really interesting reading.
I don't think we'll see a shift from TV to VOD viewing as quickly as 5 years but 20 years, sure why not. Keeping an eye on VR and augmented, wondering if there'll get the traction that 3D finally got after years of false starts.
10 years, 10 months ago - Paddy Robinson-Griffin
There's no expectation of residuals from theatrical for most films - this is why the distributors advance is so important, it's the last money you'll see from theatrical most likely!
10 years, 10 months ago - Andrew Morgan
Haha! Not trying to scare anyone Dan - just sharing what I thought was a pretty good summary of a very complicated subject.
However it does illustrate how a good, modestly budgeted film could struggle to make a profit if a studio picked it up for theatrical distribution.
10 years, 10 months ago - Dan Selakovich
@Paddy Robinson-Griffin No truer words were ever spoken, Paddy!
10 years, 10 months ago - Dan Selakovich
Andrew: it is a good summary, but damn, sometimes ignorance is bliss. ;=)
10 years, 10 months ago - Dan Selakovich
Absolutely true (except Stars on a studio deal taking scale, then a cut of the gross. That used to be true, but actually kind of rare nowadays. Yes, Will Smith might get a cut of the gross, but no way he's working for scale).
BUT, stop trying to scare the shit out of indie filmmakers! Small indie films may share some of that mess, but to a much lesser degree than an all union, all star, big budget studio picture. Indie deals with distributors are as varied as the pictures themselves, it seems.
10 years, 10 months ago - Andrew Morgan
Ain't that the truth? :D