Budget Conscious – An “Entertaining” Perspective

I told myself I would write about the crazy fun weekend at the premiere of my new movie JUNCTION, written and directed by the crazy fabulous Tony Glazer. And I still hope to get to that, but I’ve fielded some interesting questions in the past 24 hours about the buyers of movies.

 

Now you may by thinking the buyers of movies are you and me, the fans and audiences buying tickets.  But, I am talking about the film distributor.  The company that buys my completed film so that it can get to you.  So that we can see it in the theatre or on Netflix.  Now I’m a student of the financial analysis of the entertainment industry, and I’ve had the privilege of having counsel of amazing entertainment attorneys.  I glean much from them.

 

We here in movie making la la land have different ideas about film budgets.   Perhaps it’s the finance guy in me, or my engineering training that likes to latch onto the controllable variables without considering that they too could use a fresh perspective.  But in business, strategy follows budget, not the other way around.  One is a formula for success, the other is a formula for bankruptcy.

 

So here is the weird market observation of film budgets right now (these are comparatively low budgets mind you).

 

Currently, film budgets from the $3-7 million dollar range are not selling.  This is information according to producers that have been doing this for longer than I.   However, a $10 million dollar budget will sell, under the right conditions, and the under $2 million dollar budget films are selling.  Discuss this phenominon with an entertainment executive and there will be no less than a half-dozen theories for why this is happening.

 

I go for simple explanations: there is an inherint need to be able to justify the uncontrollable.   Trends are trends, and it may just not have an explaination.  So, let’s get back to basics.

 

Let’s take Nike.   A formidable brand–in fact–a company that according to a recent article evaluating Warren Buffett‘s choices in companies, Nike’s intrinsic value may very well exceed it’s book value (investment terminology).  Which means, if you like to invest, it may a stock worth looking at.  Now, back to the example: let’s say they make a shoe and sell it for $100.   If it costs them $30 to make the shoe, and $50 to market it.  Nike earns a $20 profit.  If they were able to make the same shoe for $25 dollars, and it is of the same quality or greater, this is an increase their profits by 5%.  5% is big money on a company that sold more than $6 billion dollars in sports apparel last year.  That’s a lot of shoes.

 

Now as producers, especially those amazing operational geniuses we call line producers, unit production managers and production coordinators, they will find every dollar in your budget, squeeze it, move it, save it, and spend it where needed.  Heck, work with the best and they can even squeeze water out of a turnip if you asked them too.  They are great problem solvers.    Heck, even if we can’t explain it–we can probably solve it.   So how do I solve the problem that a $6 million dollar movie won’t get sold?

 

Easy.

 

Make it for $10 million and cut out $4 million in savings.  Then you can tell your distributor, your investors and your bond company that the project came in on-time and under budget.  At least that is what I would do.  Remember, strategy follows budget.  The buyer wanted a $10 million dollar movie, so that is what I gave them…that is…along with a great story.

 

‘Cause without a great story….do not pass go.
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