The film business has always looked glamorous for people outside of the industry. It’s all about celebrities, fancy ceremonies, beautiful gowns, and bright smiles. Actors, producers, and directors walk down the red carpets to receive their golden BAFTA statuettes and pose for the cameras. While the cover of the film industry looks marvellous and the money invested in this business is impossible, the economic side of filmmaking is far from simple.

The main saying about the financial side of film industry in general and film investment in particular was said by William Goldman, an American novelist, playwright, and screenwriter. He said: “Nobody knows anything”. And it’s the reality. The public is very fretful, and no one in the industry knows which film will be a success. For instance, ‘Inception’ was predicted to be a great flop as well as ‘the Avatar’, yet today they are among the greatest British films over the past ten years.

In the current world of filmmaking, the success of a film depends not only on the ticket sales, as it was at the beginning of film era. Today you need to calculate a number of variables to ensure that your film project will be a success and to attract the attention of a film investor. There is no difference if you are an individual filmmaker trying to earn a place in the sun, or you are a representative of filmmaking studio; the rules of film financing are universal for everyone. To get the desired money, you will have to make proper calculations. Here are top variables that influence the profitability of a motion picture.



A few words about budget planning

To get the funding and to ask any investment company for it, you will have to demonstrate a budget. Gary Collins, the head of Red Rock Entertainment film investment company, says that it is a common trick for major studios to disclose their full budget. What does this mean? This means that a studio calculates its budget without expenses required for marketing and advertising costs. Basically, they uncover the veil only from their production needs. Not to speak of ‘Kingsman: Golden Circle’. Its budget is £75 million, and almost a half of it was spent on marketing and advertising.



However, there is a difference in marketing needs for films. Such film as ‘Kingsman: Golden Circle’ required less marketing because the first part ‘Kingsman: the Secret Service’ was a success. The same rule is applied to films based on bestselling books, such as ‘The Hunger Games’. New films that have narrow viewer audience need to get the audience interested in them, and so more money is spent on their promotion. Furthermore, in this case not all means of the film are possible which leads to a more aggressive strategy for the available sources. For example, romantic comedies or children’s films can be and are promoted via TV commercials, billboards, and subway ads. This, however, is not the case for ’50 Shades of Grey’ and its sequels. Generally, a film with a budget of £28-54 million, can expect to spend about £15 million for advertising and marketing needs.



You should also remember about the magic wand called tax incentives and revenues from product placement that can help you pay down the budget. For example, tax incentives in Britain would be significantly lower than in Canada. This means that you will be able to attract more investors by shooting the major part of your film in Canada.



To sum up this point; remember that in film industry “nobody knows anything”. You can never be sure whether your film will be a blockbuster or it will sink into oblivion. Yet, to ensure that it gets its share of success in the market, you need to include marketing and advertising needs into your budget to create ballyhoo around the picture and get capricious viewers fall for your film.



Cinema tickets

Films have been earning a fortune on theatre attendance. Unfortunately, the glorious era of cinema is passing by because people go to the cinema much less. Yet, in the UK this statistics is not that straightforward. The success of annual admissions significantly depends on the films released in a particular year.



The greater portion of ticket sales traditionally does to the theatre owners, and the remaining part is divided between investors, studio owners, and distributors. Domestic ticket sales are around 50% in total for a studio, while overseas sales will be about 30% if not less. This percentage that you will receive as a part of film profitability depends on the contract for each film. The trick for getting more money, in this case, is in giving more money. This means that if you shoot a sequel of a blockbuster, then you can bargain about the percentage to get a bigger share of the profit on ticket sales. In this case, you are the game changer. For example, if you are to release ‘Deadpool 2’ then you can be the person to set the rules because the audience will come to see this film. If your film predicted to be a success, yet it is not known to the wide audience, then you need to be smart. For example, representatives of Red Rock Entertainment film investment company say that in the case of ‘That Good Night’ they had to give away some more percentage of the ticket sale to get the film theatres interested in the film. As a result, the film was displayed in most cinemas of the UK, gained the rating of 7.8/10 and brought a huge wave of profit to the company.



Be ready that for films with more universal topics, such as superheroes or sci-fi, will be easier to get invested in. This is an issue of universality. The idea of a superhero is clear for both the British and the Malaysian, so the overseas ticket sales will be higher.



Foreign sales

When the budget for the independent film is calculated, it is essential to include distribution rights in foreign territories. For instance, for small (not low) budget films (around £20-25 million) it is essential to include distribution rights because they can bring in revenue. In most cases, it is advised to cooperate with a professional foreign sales agent who is aware of the tendencies of the overseas markets and can focus on the proper one.



The basics of great overseas sales is to have big names in your film. If Anthony Hopkins or Benedict Cumberbatch is co-starring with Helena Bonham Carter or Tilda Swinton, then you are very likely to sell the rights to Russia, Australia, or France. Of course, don’t expect that this is a bullet-proof way to make your film earn millions, but this is the most reliable element of the financial side of film investment and profitability.



Merchandising

Merchandising is a great way to earn a couple of dollars and get investors interested in your project. The era of film merchandising started with George Lucas in 1977 and his ‘Star Wars’. The story says that this franchise licensed particular film-related toys and earned on the sells of them £8 billion. Almost 40 years later, ‘Star Wars: The Force Awakens’ levelled up its retail sales and brought a pure profit of £500 million. The International Licensing Industry Merchandisers’ Association conducted a study in 2016 about global merchandising sales. It found out that in 2015 the sales rose by 4.2% to £180 billion.



Of course, don’t rush into printing T-shirts and ordering cups with your film characters. This strategy works for big-budget films that appeal to Comic-Con addicts and small kids. (Retail sales of ‘Toy Story’ franchise were about £1.7 billion.) For low budget films like ‘Get Out’ which is horror/documentary/comedy this strategy wouldn’t work at all.





VOD/Streaming Rights/TV/DVD

Before the Internet occupied the minds of the viewers, it was the era of DVD. Today the times of Video On Demand (VOD), television and streaming rights has come.



Selling pay-TV rights can be a great way to earn a profit because in this case you can literally forget about the advertising and marketing expenses. This means that even though the profit in numbers can be not that great, the money spent will definitely be significantly lower. Furthermore, once the release of a film is over, sooner or later it has to get on TV. Whether you go for traditional TV channels, for online channels, or for airline TV, you still can make a fortune on such offers.



The bottom line of a studio can add hundreds of dollars due to the VOD. There are several strategies for VOD that you can opt for:

• day-and-date (the film is simultaneously released in theatres and VOD)
• day-before-date (the film is released in VOD before the theatre release)
• VOD-only

The last option is always great for films that don’t have bid-stars in their cast.

The DVD market is definitely going not through its glorious times, however, it’s not the case for all films. For instance, ‘The Hunger Games’ in the first week sold 3.8 million DVD/Blu-Ray copies. This means that the DVD market is still open for branded films or those having a huge built-in audience.

The bottom line

You now know that “nobody knows anything” in the film industry. Your film can be a great success or it can fail loudly. However, you now understand what strategies to go for depending on the genre and primary budget of your film. The more factors you include in your final budget calculations, the easier it will be to get the attention of film investment companies.


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