Film Producer’s Guide to Film Finance Part 3

Notes

This is PART THREE of a 3-part series about creating a business plan for film producer’s looking to land an investor to finance their movie. You can find PART ONE and PART TWO here.

What you will learn:

  • Understanding all the different markets for film distribution
  • How to market your movie
  • The types of distribution deals
  • Assessing the potential risks
  • The financial projections of your movies potential success
  • Researching an estimated financial plan

The Markets and Marketing

This area is very important and can be the hardest area filmmakers have to compromise or compare their unique movie with others in the marketplace.

It is very common to hear writers and directors say, “My picture is unique and can’t be compared to other films.” I know I had this personal problem. I always felt the movies I wrote were acceptable for everyone in all age groups. However, it was only until after I educated myself about how marketing works that I realized how flawed my perception was.

Again, the whole purpose of this film business plan is to get your movie financed, and you have to do that by educating your investor thoroughly on all the different angles you believe your movie has the greatest chance of success. That means you will have to compare your movie with other successful ones that are closely related to yours and limiting your movie to specific genres. Every genre has their own unique market and audience. Moreover, every genre requires different marketing strategies.

If you were writing a zombie movie, you know your target audience involves people who love action, gore, violence, zombies, horror and post-apocalyptic dystopian movies. There is no way you can convince an investor that your zombie movie is suitable for everyone including children.

So, try your best to narrow down your movie marketing to that specific group of moviegoers. This will not only help you get a much clearer idea of who you are targeting, but your investor and distributor will have a greater understanding of the type of movie you want to make.

Go into as much detail as you can. In fact, some great examples you can find online is to go on google and search for, “media kit”. A media kit is a breakdown of a specific company or website’s audience base. It goes into incredible detail such as, age, location, gender, education, employment, interests, etc. These companies and websites have these media kits available to educate advertisers to advertise with their business.

This is no different with what you are trying to do with film investors. Investors want to know these details. This is a good place to mention that you want to attract investors who already have experience in the market you want to enter. If you are writing a zombie movie, you will have a better chance of getting film funding by speaking with an investor who already invested in other successful zombie movies or similar movies like the one you want to produce. They understand film marketing and will be impressed how much you understand the market. In addition, if your script is incredible, you have a significantly greater chance of securing funding for your project.

Distribution

Similar to the Industry section, you want to explain how the film distribution system works. Never assume your investor already understands how the system works. Always communicate on the same level.

The “rights” of a movie establishes the owner of the copyright, which enables the legal use of the movie to the copyright holder. Having these “rights” allows a producer to create contracts, licenses, or rentals of the film for distribution. The copyright holder has complete control over how they wish to strike up a deal. You may strike a deal, where you license a specific length of time to a distributor, or a specific region, domestic, foreign, DVD, television, mobile, internet, etc. In return, the distributor shares the rental/license fee to the copyright holder.

Studio Distribution

Major studios have their own film distribution divisions for their own films. However, they sometimes acquire films outside of their studio as well.

Looking at the Industry section, you will notice the Studio ends up taking anywhere between 30% to upwards 55% of the shared revenue depending on your project.

Studio Advantages

Studios have the ability of projecting your film on over 4,000+ screens on opening weekend. They have a large established distribution channel to utilize. They also have incredible resources and influence that allow them to do film marketing consistently on TV, print and the web.

The typical deal

There is no such thing as a typical deal. No two deals are ever the same. Everyone has the same goal. Distributors will take as much as they can get, producers will want to give as little as possible.

Never go into an agreement without the advice of an entertainment attorney experienced in film. Some distributors may persuade you to sign an agreement before any specific fees or details have been spelled out. They are trained to be persuasive business savvy people. The attorney protects you from these types of people by knowing what needs to be in the agreement before signing. Attorneys are equally as persuasive.

The attorney’s film experience is critical. It is important to get an attorney who specializes in film. Some filmmakers ends up getting any attorney, or someone who has experience in the music industry. This is a no-no. The film industry is a specialty and you want to strike the best deal you can possibly get when negotiating with distributors and investors.

A distributor’s fee can also vary depending on the territory or even the medium. The fees can range from 15% up to 50%. However, the overall average is around 35%. If a distributor is asking for more, you may not want to sign.

LEARN 7 KEY PRINCIPLES USED BY SUCCESSFUL SCREENWRITERS TO WRITE BETTER SCRIPTS THAT SELL!

Prints

The initial step in distributing your film is making copies. Prints are copies of the master. The master is typically stored away for safekeeping and does not circulate. A typical print may cost anywhere from $1,200 to $1,500 depending on the length of your project. A wide distribution may cost well over $3 million for prints alone. Nevertheless, for independent distributors with smaller budgets may only start with a few or even one.

Distributor Strategies

Because movie marketing is a skill like writing or directing, it is the film distribution company’s area of expertise. Therefore, they typically limit or outright ignore the filmmakers say in the sales strategy, poster designs or even how the film will be portrayed. Even though a filmmaker may know the movie like the back of their hand, it does not mean they know all there is to know about marketing, business and sales. Leave that to the pros, just as others leave you to write or direct your picture and trust your vision.

What does a distributor want?

A distributor looks at many of the same elements as an investor would in your Films section. Such as,

  • Uniqueness of the story
  • Genre
  • Star power
  • Money already invested
  • Special audiences
  • Experience of the cast and crew

When coming to a distributor with a completed project in hand has many advantages. The distributor’s risk level is significantly lower, they know exactly what their getting and having a finished film places you in a significantly stronger negotiating position.

Be Aware

A written agreement is what truly counts, no matter what anyone says to you verbally. For example, if you want to have a final say in the movie marketing, you will want to put this in the agreement. As always, before signing anything always have an entertainment attorney with you.

Risk Factors

Every business plan or business for that matter involves some level of risk. It is important to mention this in your plan by making it clear that nothing is guaranteed. This is simply to protect you. In an LLC or limited partnership, your attorney will enter one in whether you like it or not. It is always better to be safe than sorry. Having a risk statement included means; investors cannot later claim they did not know the investment was not guaranteed. Even though this is probably obvious to the investor and you, never assume anything. Always state the facts clearly.

Financing

As a filmmaker, especially a writer, you know that if you cannot capture the reader’s attention within the first 10 pages, you will lose them altogether. The same can be true about your film business plan. Typically, most investors will read your executive summary then skip on over to the Financing section and if they like what they see so far, will read everything else in between.

What you get

Be prepared to share at least 50% of your cut of the producer’s share of the film with your investors. It does not matter how many hours, weeks, months or years you spent writing the script. At the end of the day, the investors’ money will take your script from production to distribution. Moreover, they will want half, if not more. You can try to negotiate a better deal, but if you are new to the industry, if this is your first film, you will have a tough time getting a better deal or worse, lose the deal altogether for being too greedy as a first-timer.

Most film investors like to see their name on the screen with the credit as Executive Producer. Very few like to remain anonymous. If you are going to look for investors, have this card reserved for them.

Negative Pickup

You might make a deal with a Studio or distributor to promise to pay the cost of the film negative (production cost) upon delivery of the completed picture. This agreement can be taken to a bank, which then provides you cash to begin production. However, the bank will only agree to this if they believe the Studio or distributor is capable of paying off the loan upon delivery, typically a year from the date of the agreement.

Advantages and Disadvantages

The great advantage of negative pickups is that the film can be made without giving away a portion of your company to someone else. It also removes the fear of having to find a distributor once the movie is completed; you already have that established before you even begin production.

That being said, there are two very important things to consider when making a deal like this. First, is the agreement has a built-in escape clause that states, “You must deliver the film we were promised.” So if you decided to change up the script, even a little, may cause the distributor to back out of the contract, legally. Second, even if you shot the movie exactly as the script, page for page, the distributor can still bail on you if the film’s quality does not meet to the standards guaranteed in the agreement.

The Financial Plan

This is personally one of my favorite sections to write because it gives you real world forecasts of what you might expect from your future grosses. By researching, the historic data calculated from films similar to yours and predicting your future. In order to get an idea of how much revenue and sales you can expect there are two great resources to check out.

The-numbers.com is an amazing resource that you can spend countless hours understanding your market. Select some films related to your own, and study how they grossed all their revenue, how long it took, how many screens, where they made their money (box office, DVD, TV) and so on. There is just a wealth of knowledge you can gain from this website.

References

If you found this article helpful, I highly recommend checking out the following book that goes into more detail about how to write a business plan for filmmakers.

Filmmakers & Financing: Business Plans for Independents

Recommended Resources

Producer to Producer: A Step-by-Step Guide to Low Budget Independent Film Producing

Producing An Indie Film From The Grassroots Up

Crowdfunding Your Film

Was this article helpful? Leave your comments below or share. Thank you!

RELATED POSTS

  • filmmaking
    Filmmaking Advice and a $125,000 Crowdfunding Tip
  • film-producer-guide-to-film-finance
    Film Producer's Guide to Film Finance Part 2
  • how to make a movie
    Why Great Writers and Directors Ask Great Questions Part 2

LEARN 7 KEY PRINCIPLES USED BY SUCCESSFUL SCREENWRITERS THAT SELL IN THIS FREE E-COURSE.

What you will learn:

  • How to write a script
  • Screenplay format
  • How to write for passion and business
  • Exclusive content that I only share through email

Enter your first name and email below to get started!

We won't send you spam. Unsubscribe at any time. Powered by ConvertKit

Leave a Comment

1 × five =