Can an indie feature film be profitable ?

[Joe999]

Can an independent filmmaker (writer+director+producer) who makes a feature film that is successful (let's say $30 million USD box office gross is 'successful' for the sake of discussion) actually make a decent profit after all the other players taker their cut? I am very concerned about this, having a goal of writing, directing, and producing a 'successful' feature film.

I keep reading in books on indie filmmaking that a producer may see $0 after the exhibitors (theaters, cable TV, etc) and distributors take their cut of the gross, and then use 'creative' accounting methods to also then deduct other expenses and 'overhead'.

If there is no profit left for the independent studio / filmmaker after the big guys take their cuts, well that is depressing to say the least, and just prima facia seems unfair . Sure, I want to make films for the sake of art, but I would also like to make money from filmmaking. So is there any truth to $0 being left for the indie studio/producer, or are there ways for the indie filmmaker to actually get some of the money out of the box office gross?

 

[Spatula]

The answer is yes. Just keep the rights to the film and have a story that will spawn loads of merchandise, like cards, action figures and themed-monopoly.
Also, figure out a way to spend as little as possible and fund it mainly through your own pocket. That way, you only have to pay yourself back!

 

[Joe999]

My screenplay is a horror/suspense-thriller, I am certain there would be no action figures or other merchandise sales. I understand about making it ultra-low budget, say $50-150k USD. But still, it seems there will be little to nothing left after theaters and distributors take their percentages and recoup film print costs; so why make a film if there are no realistic profits for the indie filmmaker studio (me)? Why be a film monkey just to make the theaters, blockbuster/netflix, and distributors rich? There must be a way for the filmmaker / indie-studio to make money out of the deal; perhaps the secret is in how you make the deal with the distributor? (i.e. get a good entertainment lawyer to structure a profitable deal?)

The answer is yes. Just keep the rights to the film and have a story that will spawn loads of merchandise, like cards, action figures and themed-monopoly.
Also, figure out a way to spend as little as possible and fund it mainly through your own pocket. That way, you only have to pay yourself back!

 

[directorik]

Of course there is truth in a movie not seeing any profit at all.
In fact, most independently produced movies never return a
profit. I think the percentage of studio produced films that
make a profit is under 40%.

Unfair? What is unfair? And where does fairness come into play
with any business? You can use quotes around creative accounting
and overhead, but those expenses are incurred by distributors
and they want their money back - just like the investors do.

Many indie filmmakers actually get some of the money out of
box office gross - you have to spend less than you earn. Using
your $30 million gross mark that mean you will need to make
the movie for under $1 million and the distributor will need to
spend around $3 million in P&A. With those numbers a $30 million
box office will show some profit for the filmmaker.

One way writers, directors and producers make money is they
don't take a cut of future profits - they charge for their services.
If you get paid for the script and as the producer and director
then even if the film looses money, you will have been paid.

 

[Spatula]

No one makes money on theatrical releases. Nobody. Except Prince or something. But a theatrical run is just a marketing tool for the DVDs and corresponding merchandise (if you can turn your story into a "franchise").

Someone explained it like: studios do a big advertising push for theaters, only hoping that 1/100 people who see the ads end up coming to see the movie... but then the hope is that the 99/100 people who didn't catch it in theaters say "I'll get it on DVD" because the 1/100 people say "I saw this movie" when asked about their wekeends at work... then people recognize when browsing in Blockbuser/on-netflix/rogers-on-demand, because it WAS in theaters, on TV, etc, etc... therefore "more important".

So that's why you would want to keep the back-end rights to the film... because the distributors spend loads of cash putting your movie into theaters to MARKET the DVD... and they need that money back... but 5 years down the line, if you STILL own the rights and your first film becomes a cult classic (because your 2nd & 3rd have been successful), you start raking in the uber-cash on residuals.

 

[Joe999]

Perhaps then it might be better to either
(1) resign oneself to the writing end of it all, and sell screenplays either for a flat cost or that plus a small percent of the gross?
(2) be a filmmaker, but get paid up front as you say for services as writer, director, producer, editor, etc. (any or all) being paid out of the film's budget (perhaps procured from investors, or the distributors)-- the millions won't be rolling in, but one could pay oneself while making the film, have fun at film festivals, perhaps even see one's film at a box office.

I still think there is something fundamentally wrong about a film making $30,000,000 at the box office and the filmmaker seeing nothing back from that, if that is indeed the case. Theaters take 50% ($15M), distributors 35% of what remains, i.e. they take $4.5M of the remaining $15M). That still leaves about $10M. OK say the film prints cost $7.5M (3000 35mm prints at $2500 each [I do not really know for sure-- is $2500/print about right?). Now we are down to $2.5M. If the film was made for $500,000 there remains $2M. Not much, I suppose some of that could get eaten away as interest to investors. But if done right couldn't the filmmaker (indie studio) see perhaps $1M? The problem I see in all this is the 35% or in this case $4.5M the distributor takes-- that seems to me to be a huge cut, and I really think if that figure were negotiated down to maybe 2 or even 3 million there would actually be an almost certain $1M remaining for the indie filmmaker/studio, assuming the film was made for $500,000 or less. Thoughts?

The film prints also seem to be a huge expense beyond the distributor-- if we could get digital distribution and projection in theaters, could that change the entire equation to slide a few million more to the filmmaker?

Of course there is truth in a movie not seeing any profit at all.
In fact, most independently produced movies never return a
profit. I think the percentage of studio produced films that
make a profit is under 40%.
...
One way writers, directors and producers make money is they
don't take a cut of future profits - they charge for their services.
If you get paid for the script and as the producer and director
then even if the film looses money, you will have been paid.

 

[directorik]

Perhaps then it might be better to either
(1) resign oneself to the writing end of it all, and sell screenplays either for a flat cost or that plus a small percent of the gross?

This is why we members of the WGA are on strike right now. Many writers don't
see this as a resignation.

(2) be a filmmaker, but get paid up front as you say for services as writer, director, producer, editor, etc. (any or all) being paid out of the film's budget (perhaps procured from investors, or the distributors)-- the millions won't be rolling in, but one could pay oneself while making the film, have fun at film festivals, perhaps even see one's film at a box office.

Not a bad plan, really. You get paid to write, produce and direct movies. If the movie
doesn't turn a profit, you still have been paid. If you happen to make a film that
makes a huge profit, that looks pretty good to the investors of your next one.

I still think there is something fundamentally wrong about a film making $30,000,000 at the box office and the filmmaker seeing nothing back from that, if that is indeed the case. Theaters take 50% ($15M), distributors 35% of what remains, i.e. they take $4.5M of the remaining $15M). That still leaves about $10M. OK say the film prints cost $7.5M (3000 35mm prints at $2500 each [I do not really know for sure-- is $2500/print about right?). Now we are down to $2.5M. If the film was made for $500,000 there remains $2M. Not much, I suppose some of that could get eaten away as interest to investors. But if done right couldn't the filmmaker (indie studio) see perhaps $1M? The problem I see in all this is the 35% or in this case $4.5M the distributor takes-- that seems to me to be a huge cut, and I really think if that figure were negotiated down to maybe 2 or even 3 million there would actually be an almost certain $1M remaining for the indie filmmaker/studio, assuming the film was made for $500,000 or less. Thoughts?

If you feel it's fundamentally wrong for the theaters to take a cut, for the distributor
to have their expenses covered (and take a cut) and the financiers to see their money
(plus a cut) before the filmmaker does, then this might not be the business for you.

That's what happens. And it's not likely to change. If the ballpark 35% is what bothers you
then rest easy. That number is kind of high. Each distributor will make its own deal
with the filmmaker. If you have the clout to negotiate that down to 10% - do it. That
number isn't written in stone.

The film prints also seem to be a huge expense beyond the distributor-- if we could get digital distribution and projection in theaters, could that change the entire equation to slide a few million more to the filmmaker?

It does. But the prints are a very minor expense for the distributor - by comparison.
Advertising is 3 to 5 times more than the prints.

Getting a film out there isn't cheap. Most of the time the P&A costs are 2 to 5 times
more than the cost of the movie. And those costs are fixed. You can get an actor to
work for cheaper (or free), you can get crews to work for very little money, but you
cannot get TV stations to give away air time because the believe in the project, you
can't get newspapers to lower their fees and you can't expect a theater owner to
cut you some slack on their fees, either.

 

[Joe999]

...Getting a film out there isn't cheap. ...r.

An interesting article on rethinking film distribution I came across, fwiw:
http://www.iofilm.co.uk/io/mit/001/film_distribution_20051115.php

 

[Joe999]

This is why we members of the WGA are on strike right now. Many writers don't
see this as a resignation.....

I did not mean my comment as demeaning writers, I hope it did not come off that way. In fact I just finished my first draft of my first screenplay-- believe me I am appreciating the work and talent involved in the craft of screenplay writing! What I meant was that I might want to just write screenplays, a worthy endeavor of its own, and rethink if I want to do all the work involved in filmmaking, because at least the writer gets paid up front and does not have to wonder what s/he will make after the movie is produced.

I am feeling slightly less demoralized as I contemplate creative revenue streams other than at theaters. I should think a film might make money without going the theater route through direct sales to blockbuster/netflix, licensing streaming viewing through blockbuster/netflix, self production and sales of DVDs through amazon/other, perhaps stream and sell direct off the web.

 

[Beeblebrox]

I am very concerned about this, having a goal of writing, directing, and producing a 'successful' feature film.

Don't we all?

I think to a large extent you're putting the cart before the horse. It's hard enough just to get a film made. It's harder still to get a film distributed. It's hard still to get that film distributed theatrically. And it's almost unheard of for that first-time low budget film to make $30 million at the box office. You hear about the successful ones of course, but you're not getting a picture of the hundreds of films that never make it that far.

First of all, you are going to make the money back for your investors in the deal itself with the distributor. For a film that gets enough interest for a theatrical release, you're looking at an upfront deal that should cover your production budget and deferred salaries (assuming you worked for deferred payment as the writer, director, and producer), which is probably the most money you're going to see on the project unless the movie does REALLY well at the box office.

If you are one of the lucky few who do make a film that grosses $30 million, an independent producer can make decent money on the theatrical release. A friend of mine produced a $20K indie film that went on to make $100+ million at the box office. He made some pretty decent money from that (although he had to sue the distribution company to get it).

But the real point of that kind of success is to make your money on the NEXT deal. You'll likely have studios and production companies coming to you with generous offers for your services.

 

[Joe999]

Don't we all?

I think to a large extent you're putting the cart before the horse. It's hard enough just to get a film made. It's harder still to get a film distributed. It's hard still to get that film distributed theatrically. And it's almost unheard of for that first-time low budget film to make $30 million at the box office. You hear about the successful ones of course, but you're not getting a picture of the hundreds of films that never make it that far.....

I have no argument with you on that. But for the sake of discussion I am presupposing a successful indie feature film making $30M, just so we can discuss where the money goes. My concern, and what I want to try to sort out, is how and where the $30M disappears between the box office receipts (theatre gross) and the filmmaker. The fact that you mentioned your friend had to sue the distributor to get some profit tells me what I suspected and pointed out in this discussion thread--that the murky spot (fudge factor) in the whole food chain seems to be the distributor; I have no problem with a distributor taking money for their expenses, and taking a reasonable amount for their services--the problem is that creative accounting and greed can so easily come into the distributor's hand along the food chain so that nothing is left for the filmmaker when perhaps more food should have come down the pipe to the filmmaker. So, how to deal with that murky food chain factor known as the distributor? Is the answer in getting a kick ass entertainment attorney? self-distribution? electronic distribution to theaters? simply avoiding theatrical exhibition? standing firm when negotiating with distributors? I don't know, I am just asking questions.

 

[Beeblebrox]

The creative accounting is generally in the marketing expense and how distributors/studios assign certain other expenses. In this case, they assigned the expenses of the film's sequel to the original film - a distinctly illegal action* that helped speed along a generous settlement with the filmmakers. But usually studios will simply spend (or say they spent) the profits from the film on more marketing to make more money - a strategy of increasingly diminishing returns.

But you also have to keep in mind the long term revenue, not just the theatrical release, which as someone pointed out above, is becoming an increasingly smaller piece of the pie compared to DVD and now online distribution. For DVD sales, you get residuals, which is a percentage of the gross sales and generally far more lucrative both in the short and long term over points from the theatrical release.

The most common strategy, however, is to use your success (and a $30 million theatrical gross will get some serious attention) for a more lucrative deal on your next project. We're talking about an advance north of a million on screenplay and directing duties, as well as a more generous back-end (which you probably still won't ever see), and residuals on home video.

And for the MOST successful filmmakers, you can negotiate first-dollar gross. That means that you'll get a percentage of the box office BEFORE expenses and marketing are deducted. But at that point, you've already been so successful that "making a living" is a moot point.

*The distributor in question is no longer in business.

 

[Joe999]

Thinking outside the box-- I wonder if it might be possible for a filmmaker to work with a distributor who ONLY distributes (at least initially, to judge a film's popularity) to digital cinema theaters-- thus substantially diminishing the huge cost of film prints needed for 35mm projection theaters?

A list of digital cinemas (search box on right at url below):
http://www.dlp.com/cinema/default.aspx
As I look at the list above, I have to wonder-- is this the future, so that in say 3 years when I have a feature film ready try to get seen in theaters, the notion of 35mm film prints might become moot.

A web article about an indie filmmaker mad as hell at the traditional distribution route and how it cheats filmmakers, and how he is going the self distribution route:
http://seattlepi.nwsource.com/movies/333342_outsource27.html

 

[spinner]

This is an interesting thread. I must admit that I really have nothing to contribute, but the question raised is a heady one indeed. So I guess I have a comment and a observation.

It is generally recognized (yes?) that the filmmakers of the Blair Witch Project, for lack of a better expression, got hosed in terms of how much return they garnered from their film.

My observation is this:
Of all the contributors in this community, from producers, directors, editors, videographers, screenwriters and all that. The one position I have yet to see is a lawyer.

Do we have any of those here? Someone well versed in entertainment law? I don't know about you, but I know that I would be interested in what a lawyer might have to say about all this money we hope to make....

-- spinner

 

[directorik]

I disagree that thinking about how your film is going to make
money is putting the cart before the horse. The money is the
horse. Without the horse your cart ain't going anywhere.

Joe - where I think you're going wrong is assuming that
distributors are going to cheat the filmmakers. They are in the
business to distribute movies, if they do that poorly then
filmmakers won't provide them with product. Of course there are
bad people in the distribution business, but they are rare.

The food chain isn't a murky as you think it is. In general the
money path is very clear and very open.

Is the answer in getting a kick ass entertainment attorney? self-distribution? electronic distribution to theaters? simply avoiding theatrical exhibition? standing firm when negotiating with distributors?

Yes. Yes. Yes. Yes. And yes. It's always best to keep on top of
any business. You are less likely to be cheated if you treat the
business as a business.

Thinking outside the box-- I wonder if it might be possible for a filmmaker to work with a distributor who ONLY distributes (at least initially, to judge a film's popularity) to digital cinema theaters-- thus substantially diminishing the huge cost of film prints needed for 35mm projection theaters?

This isn't really outside the box thinking. Many theaters and
distributors are moving away from film prints. But prints are a
minor expense compared to advertising. If you want your movie in
1,000 theaters, that's going to take a lot of advertising dollars.

 

[Beeblebrox]

I disagree that thinking about how your film is going to make
money is putting the cart before the horse. The money is the
horse. Without the horse your cart ain't going anywhere.

What he's worried about, which is how and why the distributors from his $30 million grossing film are going to cheat him, IS putting the cart before the horse. Of course you have to think about making money from films you produce, but that's not really what he's asking about. The reality is that by the time you reach that point, you have, in all liklihood, already made your money back for your investors and paid off any deferred salaries including your own. The money you're haggling over AFTER such a huge theatrical success is all back-end.

 

[clive]

I'm with Beeblebrox on this one... no point in worrying about the backend deals on a $30M turnover film until you're a lot further down the road than you are right now.

Not because the business side isn't important, but because if you've just written your first feature script, your chances of having a product that is commercially viable are some where between non-existent and nil.

On top of that, there is very little point in approaching the industry as either a writer or as a director/producer unless you've got a slate behind you. At least five scripts which are ready to roll out.

The basics of this industry are that you don't make your money off one film... you make your money of your slate.

The tragedy of the Blair Witch wasn't that they got screwed on the deal for that movie... but that they couldn't turn that opportunity into other projects.

If you did have a movie that turned over $30M... where you make your money is in the investment that pours into your other projects, because you are perceived to be hot.

The film itself is irrelevant... it's only your slate that matters.

This is an industry that is feeds off someone's perceived ability to make money.

 

[Joe999]

What about distribution straight to DVD/rental, straight to Blockbuster/Netflix, and web? I understand how theatrical distribution can help later with rental and sales of DVD, but I see and have rented titles at Blockbuster that I doubt were ever shown in a theater-- and yet I rented them---primarily because of the genre, logline, and nice looking DVD box cover art. So for an indie filmmaker, with the odds of making little to nothing from theatrical distribution, maybe it would be smarter to just go straight to deals with DVD sales and rentals, worldwide, through a distributor or self-distribution that way? And maybe self-distribute to a few dozen digital independent or other theaters just for the "fun" of having one's feature film seen in theaters?

...prints are a minor expense compared to advertising. If you want your movie in 1,000 theaters, that's going to take a lot of advertising dollars.

 

[Joe999]

Just wanted to say I visited your website 1000dollarfilm.com and like it!

 

[directorik]

This is what I love about this place. Different perspectives.

I think knowing and understanding all aspects of the business end is very
important at the very early stages of your career. Worrying, considering
even obsessing over what the back-end percentages might be is a great
thing - in my opinion very important.

Every bit of information is worthy of worrying about. Of course if you change
the word worry to consider it's hard to say, "no point in considering the back-end
deals on a $30M turnover film until you're a lot further down the road than you
are right now." I don't believe thinking about and learning about these aspects
of the business is restricted to a further point down the road.

What about distribution straight to DVD/rental, straight to Blockbuster/Netflix, and web? I understand how theatrical distribution can help later with rental and sales of DVD, but I see and have rented titles at Blockbuster that I doubt were ever shown in a theater-- and yet I rented them---primarily because of the genre, logline, and nice looking DVD box cover art. So for an indie filmmaker, with the odds of making little to nothing from theatrical distribution, maybe it would be smarter to just go straight to deals with DVD sales and rentals, worldwide, through a distributor or self-distribution that way? And maybe self-distribute to a few dozen digital independent or other theaters just for the "fun" of having one's feature film seen in theaters?

There is a huge DTV (direct to video) market. Even the majors are deep into it.
But it's just as competitive (maybe more so) and still take a lot of advertising
dollars to bring the title to peoples attention.

And "four walling" is also an option. That's where a producer rents a theater to show
their movie. But this, too, needs advertising dollars to get butts in the seats. In that
case it's the producer (you) who fronts all the P&A costs. Which means that you get
every box office dollar.