In order to even come close to turning a profit, a movie has to earn twice it’s production budget. Plus the millions spent on marketing such as print & advertising (P&A) which can reach 50% of production budget. Don’t forget federal, state, & municipal taxes too.
In 11/10, Forbes had a report called “The Top 200 Film Turkeys of 2010”. It reports that of those Top 200 movies with the most revenue only 4 broke even. Broke even is not profitable
The 200 movies with highest revenue are less than 50% of the 560 films in the US and Canada that were theatrically released in 2010. Those 560 movies were about 20% less of the 706 that were rated by the MPAA for release.
Those 706 are in addition to the 2,640 rated films in China and India in 2010. These figure don’t include Europe and Latin America. So it’s safe bet that 10,000 films are attempting to be pitched to VC on any week. 4 broke even films out of a pool of 10,000.
Incidentally, the Spring 2013 edition of http://www.Moviemaker.com Magazine reports that 85% of indie films fail to “recoup” their investment. Recoup means break even. So does that mean film producers will need more preparation on proving to capital markets on what guarantees there are that most investors look for in making a profit?
In 2/13, Slated reported 9 films that recently out-grossed their production budget but no indication if P&A budgeting was separate or included. The 9 films out of a pool of 10,000 claimed gross returns (ROI) on a production budget upwards of 729%. (Hollywood accounting?) The report admitted that these 9 film exceptions would be “inconceivable” in being approved for funding by the mass majority of risk-adverse professional investors, lenders, and funders.
Remember the Burbank film producers call centers in 2012 who offered unrealistic ROI’s of 1,000%? Here is a recap on the fallout;
Remember, if your not in the business of making a profit for investors when making a film then it’s just a hobby.
** For the sake of clarity the typical ROI for equity capital is 25%. This is twice as expensive as compared to ABL funding or hard money.