Tag: foreign sales

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Truly Free Film

The New Model Of Indie Film Finance, v2011.1 Domestic Value & Funding

This was once going to be a single post.  Today is part three.  There will be at least two more to come.  I started it here. And then yesterday we tried to determine the factors for accessing foreign value.  Today, let’s look stateside.

Until the double whammy of Toronto 2010 & Sundance 2011, it looked like the US acquistion market for feature content had fully collapsed.  No reasonable P&L would have shown more than a modest six figures for US acquisitions.  Hybrid & DIY models have not been developed yet to consistently deliver returns in excess of this amount (or even at these figures).  Perhaps this is now changing, but it would still be foolish for any filmmaker or investor to expect this and we can’t budget for such expectation.

How many of the 7500 films produce in the US annually return 20% of their negative cost from US licenses?  Although it puts emerging filmmakers at a great disadvantage, I think the surest determining factor for predicting US acquisition potential is

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The New Model Of Indie Film Finance, v2011.1, Foreign Value

Today continues my efforts to try to define the takeaway from the two most recent and robust US acquisition markets of Sundance & Toronto.  I (and hopefully we) will try to extrapolate from them where we are today.  How can we use our most recent experiences to determine the reality of our filmed dreams today?  How can we move to a more realistic model of indie film finance?

Foreign estimates still set the initial value for films, and it is CAST that is the predominate determinator for this value.  Before a film is shot, there are three types of actors that mean something to foreign buyers:

  • 1) stars that have been in big hits in the relevant territories;
  • 2) stars that have been in popular television shows in those territories;
  • 3) stars that can be expected to generate a great deal of publicity everywhere.

Other than stars, there are a few other aspects of a film that create foreign value.  Stars are another entity altogether from cast or actors — and it is really the stars that determine foreign value.

Are there any other factors that help shape what your project is determined to be worth overseas? Fortunately, yes!  

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Truly Free Film

The New Model Of Indie Film Finance, v2011.1

I recently had one of the top sales agents explain to me that the only indie film that gets made or sold these days are those projects that make absolute sense.  Okay, granted what he was referring to was only within the mainstream indie business — the type of films that he and his cohorts commission — but it is worthy of our time to delve a bit deeper into this.  What indie film project makes absolute sense?

The agent said there was no room for guess work in today’s mainstream indie business.  If you want to get your film made, you have to have to make it for a price that all concerned feel it will certainly recoup at.  “Absolute sense” is this regard is a film that will inevitably make back what it cost.  “Absolute sense” can also mean a project that a company feels it has to have, usually due to the people involved or the timeliness of the concept, but those “packages”  are frankly even harder to come by than those that seem to be inevitably recoupable.  You are looking for  the needle in the haystack with either, and need to build it yourself if you want to hope to come close.

My last few projects all were designed to remove any guess work for financiers.  Between foreign sales estimates, tax credit rebates, and the undisputed value or attraction of the stars, if you want to be sure your film will get made, your project needs to read that the value of the work will exceed the cost of creating it.  Value in this regard, is strictly business related, and not cultural (sorry art-for-art’s-sake fans, this isn’t going to be one of those posts).  As much we can understand or even accept, those words though, what is the math that adds up to this formula? And where do the numbers even get their value anyway?

Even with 39 or 40 (and still rising)  films selling at Sundance this year, the first take away from it is

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Sales Agents: Are they Distributors or like Real Estate Brokers?

Guest post by Orly Ravid of TheFilmCollaborative.org

Our friend and beloved social network marketing guru Sheri Candler posed a question to me today. She noted that filmmakers are often confused by this issue of “what is the difference between a sales agent or distributor selling a license to your film or selling your film outright for 15 – 20 years?”. She posited a real estate metaphor. So here I go: Sales agents are not like Re-Max brokers only having the right to sell your house for you, if you approve. They usually take your land and then resell it and its territorial clones all over the world, or as much as they can. Meaning, they first take the rights and take delivery (at least usually that is the way they do it) and then they license those rights territory by territory for a term, a minimum guarantee, and usually a royalty split. Sometimes all rights deals are done and sometimes rights are split.

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Determining Foreign Sales Fees

The question came up over one of last weeks posts, why foreign buyers base license fees on budget percentages.  I have accepted this for so long, I had stopped questioning it — but it is one of those things worth questioning, so I am glad it was raised.  Thanks.

It made me feel we should have an ongoing “ASK THE EXPERTS” section over here at Truly Free.  For this one I went to the legend of Glen Basner, a graduate of the Good Machine School of Everything, and the man behind the founding of the new sales powerhouse FILM NATION.  The Baz explains:
There are many factors in determining what a territorial license fee should be – a percentage of the budget is only one. These are standard amounts that are “typical” for an individual territory based on what distributors have paid historically (Yes, the world has changed quite a bit recently!). I don’t believe that they apply in singular fashion unless you are contemplating some form of output deal. 
On a single picture license, a distributor will want to know what the budget level is so that: a) they understand what the production value will be; and b) they can feel comfortable that they are not paying an excessive amount in relation to the cost of the film. These are valid points but what people forget is that ultimately the budget of the film does not necessarily have a correlation with its success at the box office (Blair Witch etc). 
Our approach is to think like a distributor and run estimates – both revenue and expense – for a film in all media to determine a low, base and high value a film is likely to have in any given territory. With these estimates we can back into a license fee figure that would allow for a distributor to make money should the film turn out well. The budget comes into play if the sum total of our international estimates do not raise enough money to finance a film.
Curiously enough, the WSJ has chimed in today on the issue of value of foreign licenses, albeit the lack thereof.  Check it out here.