As a filmmaker, you probably know that most prospective investors are business savvy and inevitability, one of their pressing questions will be: “How do you plan to sell this movie and return my investment?”
In the old model of filmmaking, traditional distribution was a lottery. So to answer that question, most filmmakers, especially first time filmmakers said something like this: “Filmmaking is risky. If we are lucky, we will get into Sundance and get a distribution deal.”
Investor: “What? That’s not a business – that’s gambling!”
THE NEW MODEL FILMMAKING (EXAMPLE)
Disclaimer: What I’m about to share is total FICTION and should NOT be used in any business plans you create because I am neither a lawyer or an accountant. And I express my right to free speech as I share this imaginary scenario.
Filmmaker: Well, in our business, we hold the rights to an outstanding screenplay that taps into a well targeted, genre specific audience. We have budgeted the movie for $100,000 dollars. And given the genre, we do not need star talent. We are keeping the budget low – most folks have agreed to work for a salary, and all have agreed to residual compensation in the back end.
At present, our crowdfunding campaign has allowed us to test the concept. And with sixty days left in the campaign, we have already sourced several hundred donations, giving us $8,000 dollars to pay for our website, marketing and PR.
Upon completion of our movie, the title will available in all the popular marketplaces, including Amazon and iTunes. And as we speak, in addition to crowfunding, we have already contacted our audience list of 20,000 people (from our last movie in a similar genre) who have expressed interest in this upcoming title. Combine this with several partner filmmakers which will roughly expand our audience footprint to well over 250,000 targeted viewers.
So at the time of release, if we project sales at 2% of 250,000 people. This means that 5000 people will download the movie at 9.99… which will be close to 50K minus a 40% marketplace fee and a 10% commission to our partners – and we should be able to immediately return $25,000.
Each subsequent quarter, we would like to continually re-invest 10% of the revenue into further list building efforts. And we would like to keep 30% for the producer and crew compensation. Which should leave you with a 60% cash dividend, to be paid quarterly. Assuming we can bring in $30,000 per year, in 7 years we will have more than $200,000 in revenue for this title. At that time, $20,000 would have been paid to marketing, $60,000 would have been paid to cast and producers and $120,000 would have been paid to investors.
As soon as we pay back the initial investment, we would like to split our revenue 60/40. In other words, the producers and crew would get 60% and you would continue to get 40%.
Prospective Investor: I see…
Filmmaker: Of course, there is always the small chance that we could get lucky – if we got a 5% return on our initial campaign, and 12,500 people immediately downloaded the movie at $9.99, our revenue will be close to $125,000 – minus expenses. But I need to remind you that this is not likely. And we would still have to pay a commission.
Prospective Investor: Oh. This makes sense.
Fimmaker: Great. Would you like to invest?
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While I have provided a FICTIONAL example of how some filmmakers may decide to navigate this new movie business, my whole point here is this:
It is important to realize that success of a movie is no longer based solely on handing off the movie to some 3rd party distribution company. If you want to make it in this new world of filmmaking, you need to stop waiting for someone else to manage the business aspects of your movie and your career. Instead you now need to take a vested interest in the success of your project.
If you’re helming your movie project, nobody cares about it more than you. But if you aren’t afraid to provide everybody on your team with a bit of ownership too – you’ll soon be surprised to learn that word of mouth spreads a lot quicker when your entire cast and crew has a vested financial interest in the project.
In this regard, when you win, everybody wins!
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DISCLAIMER (again) – I’m a filmmaker – not a lawyer or accountant. I’m expressing my freedom of speech for your entertainment. If you’re still reading this, I want to make it very clear that I made most of those figures up as a fictional EXAMPLE. You’ll have to figure out your own numbers and crunch your own data and make your own relationships with prospective investors. And always speak with a qualified professional before you do anything.