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MAGAZINE
STUDIO
SCHOOL

Find the Bottom Line

Lesson 1
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Lesson 2
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Lesson 3
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Lesson 4
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Lesson 5
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Lesson 6
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Lesson 7
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Lesson 8
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Lesson 9
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Lesson 10
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Contributed By Glen Berry

IMPORTANT CONCEPTS
  1. Connect Market value with Production Costs
  2. Do not use indie hits for revenue forecasts
  3. Do your homework through Market Research
  4. What's hot now will not be hot next year.
The framework of the project, what is possible and what is not possible will be determined by how much money you have at your disposal. Through creativity and ingenuity, the producer can (and must) deliver a stunning project for a ridiculously low amount of money. However, that bottom line needs to be determined.

The author is familiar with an independent feature project that was being developed in Seattle. The filmmakers had no idea where they would get the money from or how much money the project would make when completed. The initial budget started out at $250,000. Then it moved into the $400,000 range and then up to $750,000. And why wouldn’t it go up to $1 million, or $10 million? If you don’t know where the money is coming from, it’s just imaginary numbers on an imaginary project. If you want to have a real project, you must connect real funding sources to a real return on investment when the picture is completed.

This is a very simple business concept but unfortunately, when many people work in film they forget that if they want to spend money they need to make money. If you find a good script, option it. But before you go any further, you need to establish the amount of money it will cost to produce vs. the amount of money it will bring in when completed. The overall strategic vision of the producer, which is described in detail in a business plan, should have this idea addressed as the centerpiece of the proposal.

So let’s look at the cost of production. For many years, the cost of professional production has been pegged at $1,000 per finished minute. Therefore, a feature film of 100 minutes would cost $100,000. Are there pictures made for less than that? Sort of. We’ll discuss the difference between actual, in-kind and deferred costs later as well as the difference between a screener and completed deliverables. The $1,000 per finished minute comes with a wide range of caveats. It’s not really an accurate way to forecast costs because it doesn’t take into account the higher production value you will need to sell your project. However, it does set a minimum bar for the cost of production. A detailed examination of the script by an experienced producer will send that number up but first, you must establish the upper limit of your budget.

Setting the upper limit of your budget is done by determining how much money the project will return, minus any profit you hope to make. If you plan on selling your project to Blockbuster or Netflix and they will only pay $150,000, if you spend more than $150,000 you will lose money on the deal. Those are going to be hard numbers to sell to a potential investor. The author is familiar with some investment bankers in New York City who decided they wanted to become filmmakers. They made movies for about $1 million and sold them to the Sci-Fi Channel for about $1 million. They were content enough with breaking even. There’s nothing wrong with that. If you love doing this enough, being able to do it is its own reward. However, if they had applied more creativity and ingenuity to the producing and reduced the cost of their production by $200-300K, they would open up a gap between the cost of production and the value of the production in the marketplace. Then you have a profit, everyone is happy and you keep making movies.

SUMMARY

  • Make sure that the amount of money will create with the completed picture is greater than the amount of money you budget for your picture.
  • Using independent hit movies to forecast revenues is irresponsible and unrealistic.
  • Market Research is your key to putting real numbers to your revenue forecast and realistic expectations for investors about the return on investment.
  • Producers follow trends and as soon as a trend materializes, everyone hops on the bandwagon. If you follow trends you will be trying to put your project out in a glut of look-alike movies.
MEDIA
Hi-Mid-Low sales projection for micro-budget feature with no name talent.
Sales Projection for feature film with two A name actors.
LESSON
The Business Plan
Building your strategic plan into a form that makes sense to you and will guide you through the production. Taking the plan for your movie and putting it into concrete form.
Business Plan Examples
A critical review of three actual business plans.
Find the Bottom Line
Create the framework around which your project will be build based on the bottom line number for your budget. Market research and current market conditions will determine what you can and cannot do.
Getting Star Power
How to find and work with name talent.
LLC and Operating Agreement
How to create a structure to share ownership of the project with investors, establish voting rights and the authority of the producer and protect the investors from personal liability.