Find an Expert Witness

Forensic, General & Medical
Expert Witnesses

In the Trenches…The Producers Part 2 – The Shifting Landscape

Expert Witness: Kathryn Arnold
Continuing the dialogue with producers Jonathan Dana and Cindy Cowan, let’s take a look at the shifting landscape of film financing and distribution.

KA: Given the variable nature of the Domestic deal, what are your thoughts on the Domestic side of the business in general?

CC: The overall Domestic side of the business is changing vis a vis 5-10 years ago…even within the last 2 years. Movies with big star appeal don’t necessarily work anymore. Like the foreign buyers, film goers are getting pickier. Now we have twitter, FB and the Web letting peers know if a film does not work.

KA: So essentially, if word of mouth is bad, it can drastically affect a film’s box office. Social media has changed publicity, release patterns and ultimately is a determining
factor if a film can last beyond its first weekend.

CC: Saying that, gone are the days of the mid-range films that might be a chancy investment. It is easier now to risk the very big pictures that are based on comics, (TWILIGHT, HARRY POTTER) or books or anything with mass appeal. Or the smaller gems...films which really touch the heart and that actors are willing to hop on for a price. (LIKE CRAZY, SIDEWAYS, THE GOOD GIRL.) The ones in between…just have not been performing the way they used to…especially if it does not play well from the start and/or has the critics behind it. Also, children’s fare is bigger than ever…everywhere (RIO)

JD: As mentioned above, the international side of the business basically drives most of the financing of independent commercial pictures. The ‘artistic’ driven pictures often focus more on the domestic value, as the international value of American art pictures is often very limited. The international market is quite strong right now on high profile “movie star” pictures.

KA: Once a film is financed and in the can, are there any interesting shifts occurring in the Domestic acquisitions of a finished film?

JD: The newer domestic companies that are focused on wide-distribution often try and make acquisitions using major marketing commitments, in lieu of cash advances or guarantees, to entice producers by inducing them with the vision of larger foreign pre-sale numbers driven by the guarantee of American wide-release.

KA: Are the large developing nations such as China and India a factor?
JD: Not currently to us, as the prices are low, and piracy is high in these territories. There are, however, large media companies in each of these countries, India in particular, who have made significant investments in US content providers. The jury is out on how those deals will work out.

CC: Most of Hollywood is still looking to do major deals in both countries and a lot of production companies are tailoring their films to fit these territories.

KA: Are you considering making local language films?

JD: No.

CC: Not yet, but it could/would be interesting.

KA: How has the international economy been affecting sales – both pre-sales and completed film sales?

JD: For the last 3 or 4 years it has been very difficult in general and has created a market of haves and have not’s. Prices can still be excellent for the bigger, star-driven films. The small films, i.e. under $10 million have been hurt the most, and utmost caution is required. More care and vetting is now required than ever.

CC: The world market always affects pre-sales as well as completed film sales. If the economy in a certain country is obviously affects the film going audiences, so that market will most certainly go down in its over-all worth. Additionally we keep losing states and countries that at one time had nice tax credits etc.

KA: It is well known that a good script, director and talent have significant meaning when it comes to financing. Have buyer’s tastes or instincts shifted?

JD: Cast and director are the major elements for pre-selling, in association with a genre that lends itself to international distribution. The choice of director has become more important than ever over the past several years, as buyers have begun to pay more attention to the execution of a film, after having been burned by too many films with major stars and perhaps riskier directors, who did not deliver the goods. (Woody Allen, Alexander Payne, Quentin as examples.) Audiences world-wide have become very smart, and ‘just a pretty face’, as it were, no longer is enough to get consumers to buy tickets. Even with action pictures, which have been the best refuge for star-driven pre-sales, a good director and production team become essential to make a good product.

KA: Are movies profitable in the current market?

JD: Some are, many aren’t. One must be more vigilant than ever at the moment, as the audiences and the buyers have become more sophisticated and cautious with their limited resources. It is always difficult to count on ‘overages’ or future payments based on the performance of a film.

CC: They can be…it depends on how they are financed. How much soft money can you get? What are the estimates worth in conjunction with the budget? How many presales can you get in advance? And what does your waterfall look like? If you can answer these correctly…you can easily see a profit

KA: So if filmmaking is somewhat of a dicey proposition with respect to making a profit, the question I must ask is….Why do we keep on doing it?!

CC: We do it because we love it...and it is in our blood. That being said...I don't think we approach filmmaking as something we can't make money on.
You just have to choose your projects carefully, and build a model so that you know that at the very least you can break even, even if the film does not come out very good. If you have the right talent that will attract a home video or TV deal, so that you will make your money back, if you do it right.

JD: Obviously, the intent is to make a profit on most movies. That is easier said than done, especially give the challenges of today's business model. Those of us who have been making movies for a long time do it because that is what we do, and in hopes of beating the odds, or of searching for new ways to work within the current and future business models.

That also is where the 'portfolio theory' comes into play. With the studios, and with equity funds, the task is to make money across the slate, even if any given movie does not.

While making a profit is the goal, the actual imperative is more like 'live to fight another day' by at least making your money back. Without the various state incentives and other forms of soft money, it is difficult to see how any realistic model for the independents would work. At least as a business. We are all dependent on these forms of support.

And we are all addicted and living off that “life support.” There have been periods where it was less of a challenge to make profits, but that is certainly not the current environment. When and if it will change again is a function of how well the new digital markets develop into revenue streams, how strong the international markets remain for American product, and how effectively the marketing costs can be kept contained and efficient.

At the end of the day, there is an unending drive to tell stories and to create. The psychological rewards from the process can be great, but making movies is not for the faint of heart, and has never really been. The art is hard, the money is harder.

Next up, we'll look at how the Film Festival and Film Markets are working as both financing venues and distribution launch pads....until then...

ABOUT THE AUTHOR: Kathryn Arnold
Professional Experience
Kathryn Arnold has over 15 years of hands on experience in the film production and distribution arenas. Having produced and/or directed over 6 feature films, dozens of commercials, corporate videos 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.

Find an Expert Witness