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THE MOVIE FUND BLOG

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THE BASICS OF THE BUSINESS MODEL FOR FILM

Think of the film industry and you can’t help but think of the fantasy, the glamour, the red carpet, and more, but the making of an independent film is structured like a business, complete with comprehensive business plan to raise finance, if necessary.  You wouldn’t invest in any other business without a detailed business plan, including financial predictions and analysis, and an exit strategy that stands up to review by your financial adviser, so, why should investing in a film, movie or other production be any different?  It isn’t…

There are core elements to a film business model but principally it is about the wholesale distribution and multiple licensing of film or movie – the production company’s intellectual property – that are developed for use by third parties and the public in order to generate revenue; the higher the level of distribution and licensing, due to a film’s popularity, the greater the profit.

 

There are several stages to the development of a film which basically follows this format:

  1. The rights to a script or story is obtained by the Producer, with ‘pre-sales’ included if possible.
  2. Funded development is then initiated including the hire of crew and cast, budgeting and editing.
  3. The required finance and investment is sought by the Executive Producer, enabling the film to become what is known as ‘greenlit’.
  4. Pre-production is started including the hire of locations, equipment, building of sets and rehearsals are carried out.
  5. The principal photography, or production, is finished.
  6. Post-production takes place including colour-grading, editing and CGI compositing, if needed.
  7. Potential buyers, i.e. the distributors, and sales agents (or partners), preview the film at film festivals.
  8. Time ‘windows’ are set for the Rights to distribute copies of the film.
  9. Once initially released, the film is put into a ‘back-catalogue’ so that it can be exploited at a later date.

The success of the film…

A film’s sales agents usually evaluate the film for its commercial viability, i.e. its potential for success, based on a series of criteria:

  •    Is the plot/story a proven concept, i.e. is it a sequel, based on a true event, or a book adaptation?
  • Is the film being released at its optimum time and will it appeal to the public?
  • Does the cast include A1 listed stars?
  • Is the script, and its associated development, of a high enough quality?
  • The credibility, track record and ability of the crew, i.e. the Producer, Director, etc.
  • How much marketing and publicity of the film will there be, and the benefit to the film?
  • How much interest is there in the film from potential distributors?

980x (23)Often, it is the success of the pre-release marketing and publicity that can determine whether the film or project will be successful.

IP Rights and Revenue

A film, when it is released, comes as a ‘package of intellectual property’ which is protected via copyright law, including character names, scripts, title trademarks, motion photography, soundtracks, and more.  A film’s intellectual property has an inherent value which is sold by the Producer, i.e. he has the Rights to copy, exhibit, adapt or display the film, to third parties in order to generate profitable revenue for shareholders and investors. The Producer’s key customers are the distributors and sales agents who purchase the Rights so that they can exploit them for a pre-agreed period of time.  To meet business plan objectives, there are four critical partners required:

 

  • An international sales agent.
  • A domestic distributor.
  • An international distributor to focus on markets worldwide.
  • A merchandising specialist.

The film/movie industry has changed little over the years, based principally on the above film business model; the completed film is distributed on 35mm film which is either loaded onto projectors for viewing in cinemas, or onto DVDs, Blu-Rays, etc. for the high street retailers.  The film is promoted using the standard platforms, such as the press, posters and advertising, resulting in a big outlay before there is any sign of a return on investment in the film.

However, over the past few years, the age of digital is taking over the process of film production, i.e. fibre-optic hard disk, post-production via computer, 3D and high definition photography.  It is this technology that has opened up new opportunities for Producers to generate revenue, and for third parties to reach more consumers directly than they could previously.

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Should you decide to invest in a film, moving or other production, the Producer will be able to provide more information on:

  1. The workflow of digital production including time and money savings.
  2. Digital business models.
  3. Online opportunities to enable the Producer to distribute and sell directly to consumers.
  4. The opening up of new platforms, such as mobile phones, smartphones, tablets, social networks and IPTV, where new revenue streams can be developed.
  5. The use of digital technology to enable better creativity and more innovation within the process of producing the film, i.e. VoD and 3D.
  6. Beware of Internet piracy – it can have a negative and/or positive impact on film revenue.

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