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How to Make Indie Filmmaking Profitable in the Age of Tentpole Franchises

Expert Witness: Kathryn Arnold
To some, indie filmmaking is an art form, to others a dream of of seeing their story come to life on the big screen, however, it is meant to be a profitable business. Investors put money into a film, and expect to get their money back and receive a decent return on their investment. Cindy Nelson-Mullen, Co-CEO of MonteCristo International, an international sales agent/production company, and discusses with her the elements it takes to make a profitable film.

KA: Does a certain director make a difference in making the decision to finance a film?

CNM: Directors are significant, when they can attract the talent.

KA: Is it all about the talent?

CNM: Mostly because the talent is the draw for the consumer. The director is an essential part of the equation in so far as he/she can attract the talent and then deliver a quality film once the talent is in place.

KA: How involved are the distributors in the choices you make for talent and director?

CNM: Distributors are more savvy now, and they want to make sure they will receive a quality film.
Therefore, they are looking at ALL the elements involved: subject matter, talent, director, and budget. Because the risk is so high they have to kick the tires a bit, take the project out on a test drive, run their numbers and then make very calculated decisions, that at one time, they made based on a one sheet and pre-determined percentage pricing.

KA: Is the Domestic Deal an important part of financing your projects?

CNM: It’s important for the overall revenue stream of the movie, but not necessarily for the financing. US distributors do not pay much up front for independent films. In fact, Indonesia, where there is a high demand for American films, pays almost 2 ½ times more to pre-buy an indie film than US buyers.

KA: That's interesting. Why is that?

CNM: The traditional theatrical distribution market in the US is via the Cineplex, where there are 20 screens, in which 15+ are devoted to big budgeted studios movies. Every once in a while, they’ll slot in an indie, to diversify their audience marketing. The chance of an indie film without major stars getting a decent US release is slim. So we don’t hedge our bets on the US pre-sale, but rather look at it as a bonus for making a great film with strong talent.

KA: For smaller films, is there revenue to be made on a US theatrical? Or is it solely a driver for the On Demand/Pay Per View release?

CNM: There would be revenue if there was a way to “retain” the money. The theatrical release is costly. If you are going to release a movie theatrically for even 1-2 weeks, you need a marketing team working for at least 3 months to promote the film in advance, and if the movie hits, create an ongoing campaign to grow the audience both regionally and nationally. You have to keep supporting it.

One way to make a theatrical release work for smaller films is to do a “Day and Day.” Which means that you release the film in the theatres and on VOD/Pay Per View on the same day. This gives you the marketing strength of a theatrical release, combined with the ability to recoup several revenue streams simultaneously, using the same marketing dollars. The online revenue is received faster, because it’s a direct payment.

KA: Is the VOD platform, generating revenues of any real value?

CNM: If there is a strong “driver” to bring the consumer to the site that is selling the films, then yes. The fact of the matter is that the consumer is usually looking for a well-known title and will choose "Batman," or "Iron Man 3" if they can. Once in a while they may take a chance on a lesser or unknown film, because they are intrigued by the subject matter or the cast.

KA: Is that true in the international markets as well?

CNM: Well, in the UK the VOD market is taking off, but ONLY with films that have a UK theatrical release on a certain number of screens for a certain # of days. Again, it falls back to the marketing dollars that are being spent to create awareness.

KA: So where did the “Direct to DVD” market go?

CNM: The DVD market that existed for action and thrillers has gone into video games and YouTube short form. YouTube videos can get millions of views in a short time frame, and earn thousands in Ad dollars. With the social nature of Video games, they can make 3-4x’s the amount of money that a movie can make.

(The top video game titles far surpass most of the blockbuster studio films in terms of revenue: “Modern Warfare” $780 million, “Grand Theft Auto 4,” $1.35 Billion, “Call of Duty: Black Ops” $1.5 Billion and “World of WarCraft” has taken in over $10.5 Billion to date. The cost of top rated video games are much less than a blockbuster film, with budgets ranging from $1 million on the low end to a maximum of $20 Million on the high end. Whereas tent pole studio films can have budgets in excess of $160 Million.)

KA: So back to movies, how do you determine what films to make?

CNM: We listen very closely to the marketplace, then develop a variety of projects that meet the criteria of what is needed. We have established strong relationships with our buyers, and there is a magical moment when everything comes together - when our product is developed and ready to go and the buyers are ready to buy that type of product. They know we can deliver. When we have a project that fits their market need, we sell them the film.

KA: How many projects do you develop a year?

CNM: What we put into development, we make. So if we’re going to make 1-2 films a year, we’ll develop 3-4 films, based on our buyers input, and we’ll greenlight the film that has the right budget, the right cast and buyers already in place. We’re driven by what the marketplace tells us they need.

KA: Do you work with outside producers to develop material?

CNM: As a small sales company, we only develop material that we own 100%. It isn't a good business model for us to buy 3rd party projects that have many people needing a share of the pie.

KA: Is producing films a profitable venture?

CNM: Films are profitable when they are financed properly. It’s important to pre-sell the film before you even make it. That way you KNOW you have a market for your film…In essence marketing is the essential precursor to financing the film to create profitability

The important element to understand here is to budget your project according to what the market will bear. As a producer, do your homework. Understand what genre, with which talent, made for an appropriate budget, will make financial sense to the sales agent and distributors. Because, as the end of the day, they are the arbiter of what gets made, and more importantly, what gets seen.

ABOUT THE AUTHOR: Kathryn Arnold, Cindy Nelson Mullen
Ms. Arnold has over 15 years of hands on experience in the film production and distribution arenas. Having produced, directed and overseen the production of over 6 feature films, dozens of corporate videos, commercials and events, as well as working in both the studio and independent film environment, Ms. Arnold understands the inner workings of the entertainment industry, its hiring practices, business development and the economic complexities and nuances involved in a world that very few understand. Working closely with each client, she brings the full benefit of this valuable experience to bear on the client's unique case.

Copyright Kathryn Arnold

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.

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