B-list accounting
April 9, 2013 1:48 PM Subscribe
So how exactly do straight-to-DVD movies make a return on investment these days?
I just watched Sexy Evil Genius, a low-budget/production dark comedy starring the likes of Seth Green and Michelle Trachtenberg, among others. Shooting was finished in 2011 and only recently saw release this month, albeit straight-to-DVD (I *cough* came across it online).
If I had to ballpark the total cost of production/talent/marketing, I'd be conservative in estimating around the high 6/low 7-figure bracket. But according to what Hollywood accounting could a movie like this render any sort of profit?
Is it part of a bigger picture whereby hundreds of movies are produced and slotted through, and inevitable losses are expected? By the looks of the movie, it didn't seem a lot went into it, but I'm just perplexed (beyond art) how this movie got green-lit by a studio.
Anyway, apart from this one example, I'm more curious about the larger picture: how do low-budget B-movies generate any profit in this day and age?
I just watched Sexy Evil Genius, a low-budget/production dark comedy starring the likes of Seth Green and Michelle Trachtenberg, among others. Shooting was finished in 2011 and only recently saw release this month, albeit straight-to-DVD (I *cough* came across it online).
If I had to ballpark the total cost of production/talent/marketing, I'd be conservative in estimating around the high 6/low 7-figure bracket. But according to what Hollywood accounting could a movie like this render any sort of profit?
Is it part of a bigger picture whereby hundreds of movies are produced and slotted through, and inevitable losses are expected? By the looks of the movie, it didn't seem a lot went into it, but I'm just perplexed (beyond art) how this movie got green-lit by a studio.
Anyway, apart from this one example, I'm more curious about the larger picture: how do low-budget B-movies generate any profit in this day and age?
A couple of factors just to start you off:
Europe. They fucking love shitty movies over there. Making back the investment on your shitty movie just by DVD sales in Europe alone is a time-tested strategy.
Production costs are lower than you think. DVDs are incredibly cheap and quick to make and distribute compared to, say, video tapes. Digital distribution ever moreso.
posted by griphus at 1:58 PM on April 9, 2013 [3 favorites]
Europe. They fucking love shitty movies over there. Making back the investment on your shitty movie just by DVD sales in Europe alone is a time-tested strategy.
Production costs are lower than you think. DVDs are incredibly cheap and quick to make and distribute compared to, say, video tapes. Digital distribution ever moreso.
posted by griphus at 1:58 PM on April 9, 2013 [3 favorites]
I once had the full Barton Fink experience, writing a small horror film* for an indie producer. In that particular case, the movie got funded because the producer was an incredible salesman who had a decent track record, and the ability to talk shady Eastern European millionaires into investing in Hollywood, usually because they thought it would be glamorous and/or needed somewhere to launder their ill-gotten gains. The producer in question didn't need the film to be a hit; he just needed it to be 72 minutes long with a few semi-recognizable actors on screen. And that's what he got.
* The true horror is that the thing got made, with my name attached to it all eternity.
posted by roger ackroyd at 2:24 PM on April 9, 2013 [6 favorites]
* The true horror is that the thing got made, with my name attached to it all eternity.
posted by roger ackroyd at 2:24 PM on April 9, 2013 [6 favorites]
I believe the laws for Germany have changed since he was a big deal, but Uwe Boll's career was basically making shitty movies as a big tax dodge.
posted by Ghostride The Whip at 2:25 PM on April 9, 2013 [2 favorites]
posted by Ghostride The Whip at 2:25 PM on April 9, 2013 [2 favorites]
There are a lot of ways in which the studios make money off of movie production before the first audience ever sees it. A lot of American states, and a lot of European nations, have various tax benefits and outright subsidies for movies produced (at least in part) in their own territory. I saw an article one time that explained how productions companies could end up breaking even on a movie before it even reached a theater (or a cut-out bin).
Some of the accounting magic involved has been cut off since then, but other new ones have appeared since. States like Louisiana give filmmakers really big benefits for filming in-state, even if only for a day or two.
posted by Chocolate Pickle at 2:28 PM on April 9, 2013 [1 favorite]
Some of the accounting magic involved has been cut off since then, but other new ones have appeared since. States like Louisiana give filmmakers really big benefits for filming in-state, even if only for a day or two.
posted by Chocolate Pickle at 2:28 PM on April 9, 2013 [1 favorite]
(I believe that German tax loophole has since been closed, Pickle.)
posted by incessant at 3:46 PM on April 9, 2013
posted by incessant at 3:46 PM on April 9, 2013
Spacewrench, do you have a cite for your claim that feature film copyright trolling has been used recently or was ever part of a Hollywood movie's budget plan? I'm sure some porn was produced or honeypotted with the explicit intent to cash in on the Prenda trolling, but the USCG doesn't seem to be operating anymore, and were only active for a brief moment regarding a handful of films. Worth noting: the MPAA has never condoned suing downloaders.
First: this movie, like nearly all small movies, is an independent production with no relationship to the Hollywood studios. Studios account for only a handful of releases every year. While many studios have divisions that make small direct-to-DVD films, the vast majority of those movies are independently financed through polyglot collections of banks and film funds and individual investors and presales (more on that later).
What Chocolate Pickle is talking about is tax credits, which are calculated in a number of ways, but the most common is as a percentage of spend in the state or country with the tax credits. Louisiana and North Carolina are the two big ones right now. New Mexico also has a nice tax credit -- a lot of post production work (editing, mostly) has moved there. Hungary and Bulgaria and the Czech Republic have strong tax credit set-ups as well. The percentages change frequently, but somewhere between 20% and 40% of "local spend" (however much money you spend in that area) can be recouped. Because you have to spend the money before the state or country will reimburse you and it can take months to get reimbursed, there are companies that will cash flow your tax credit before you go into production.
Some countries have film funds where they assist in financing movies, often providing what's called "gap," which is usually the last 5 or 10% of a film's budget, literally "filling the gap in the financing."
Countries also use their film funds to finance movies written or directed by their citizens. Four years ago, for instance, the UK's film fund was more interested in funding productions in the UK, regardless of filmmaker, while the Scottish Film Fund was only interested in material written or directed by Scots. Canada will give hefty tax credits, but need a certain amount of Canadian content in the production -- usually actors or writers or directors.
Movies can also be 'presold,' which entails selling the rights to distribute the movie in various overseas territories before the movie is finished. Distribution is a local business, and needs to be targeted to local film markets. Movies starring Seth Green and Michelle Trachtenberg might play well in the UK because of the Buffy connection, but might not be worth as much in India, where Buffy was never popular. A local distributor in India would know to put more emphasis on Michelle Trachtenberg in that case -- attractive women are a universal draw. Once a producer has the cast, script, and director, she can go to Cannes or the Berlin Film Market or AFM (in Santa Monica) and pitch the package to distributors, who might agree to purchase the distribution rights for their specific territory. Often, producers will hold on to domestic, in hopes that the movie is really great when they finish it and then they can sell the domestic theatrical rights for more money. Domestic distributors also tend to be more discerning, and preselling here can be difficult if the package isn't just right.
I haven't seen the movie in question, so I have no idea what the budget might've been, but judging from the description and the talent involved, I'm guessing it was $2 mil. My database says it spent a year in post, which I'm guessing was because they had to find finishing funds to finance the editing and sound. It was completed in June of last year, and probably took a little time to find a distributor, and then released now, which is a half-decent schedule. I'm sure the producers were kicking themselves taking a year on post. It's hard to devine what was really going on behind the scenes, though. Judging by the cast, I'd guess they were able to presell some of the movie, or at least once it was in the can, probably got some money from it at AFM or whatever market they took it to. I can't imagine it was much, though.
I strongly doubt that the movie will end up making them any money at all -- which is true of most independent movies. Sometimes things work out great though -- and you're always hoping for that home run.
The producer might do a little better if people interested in the film don't "*cough* come across it online" ...
posted by incessant at 4:04 PM on April 9, 2013 [6 favorites]
First: this movie, like nearly all small movies, is an independent production with no relationship to the Hollywood studios. Studios account for only a handful of releases every year. While many studios have divisions that make small direct-to-DVD films, the vast majority of those movies are independently financed through polyglot collections of banks and film funds and individual investors and presales (more on that later).
What Chocolate Pickle is talking about is tax credits, which are calculated in a number of ways, but the most common is as a percentage of spend in the state or country with the tax credits. Louisiana and North Carolina are the two big ones right now. New Mexico also has a nice tax credit -- a lot of post production work (editing, mostly) has moved there. Hungary and Bulgaria and the Czech Republic have strong tax credit set-ups as well. The percentages change frequently, but somewhere between 20% and 40% of "local spend" (however much money you spend in that area) can be recouped. Because you have to spend the money before the state or country will reimburse you and it can take months to get reimbursed, there are companies that will cash flow your tax credit before you go into production.
Some countries have film funds where they assist in financing movies, often providing what's called "gap," which is usually the last 5 or 10% of a film's budget, literally "filling the gap in the financing."
Countries also use their film funds to finance movies written or directed by their citizens. Four years ago, for instance, the UK's film fund was more interested in funding productions in the UK, regardless of filmmaker, while the Scottish Film Fund was only interested in material written or directed by Scots. Canada will give hefty tax credits, but need a certain amount of Canadian content in the production -- usually actors or writers or directors.
Movies can also be 'presold,' which entails selling the rights to distribute the movie in various overseas territories before the movie is finished. Distribution is a local business, and needs to be targeted to local film markets. Movies starring Seth Green and Michelle Trachtenberg might play well in the UK because of the Buffy connection, but might not be worth as much in India, where Buffy was never popular. A local distributor in India would know to put more emphasis on Michelle Trachtenberg in that case -- attractive women are a universal draw. Once a producer has the cast, script, and director, she can go to Cannes or the Berlin Film Market or AFM (in Santa Monica) and pitch the package to distributors, who might agree to purchase the distribution rights for their specific territory. Often, producers will hold on to domestic, in hopes that the movie is really great when they finish it and then they can sell the domestic theatrical rights for more money. Domestic distributors also tend to be more discerning, and preselling here can be difficult if the package isn't just right.
I haven't seen the movie in question, so I have no idea what the budget might've been, but judging from the description and the talent involved, I'm guessing it was $2 mil. My database says it spent a year in post, which I'm guessing was because they had to find finishing funds to finance the editing and sound. It was completed in June of last year, and probably took a little time to find a distributor, and then released now, which is a half-decent schedule. I'm sure the producers were kicking themselves taking a year on post. It's hard to devine what was really going on behind the scenes, though. Judging by the cast, I'd guess they were able to presell some of the movie, or at least once it was in the can, probably got some money from it at AFM or whatever market they took it to. I can't imagine it was much, though.
I strongly doubt that the movie will end up making them any money at all -- which is true of most independent movies. Sometimes things work out great though -- and you're always hoping for that home run.
The producer might do a little better if people interested in the film don't "*cough* come across it online" ...
posted by incessant at 4:04 PM on April 9, 2013 [6 favorites]
Remember, according to Hollywood Accounting, it's best if the movie doesn't officially show any profits, because then you'd have to start paying them out to the people dumb enough to sign up for a cut of the net.
posted by ckape at 4:41 PM on April 9, 2013
posted by ckape at 4:41 PM on April 9, 2013
(I believe that German tax loophole has since been closed, Pickle.)
Yes, it has. But new ones open all the time. It's an everchanging landscape, but there are studio people whose job is to figure out production strategies to take advantage of as many of these kinds of tax breaks and bonuses as possible.
posted by Chocolate Pickle at 5:25 PM on April 9, 2013
Yes, it has. But new ones open all the time. It's an everchanging landscape, but there are studio people whose job is to figure out production strategies to take advantage of as many of these kinds of tax breaks and bonuses as possible.
posted by Chocolate Pickle at 5:25 PM on April 9, 2013
Not just studio people -- film financiers and bankers spend all their time looking for those tax breaks and bonuses, but the German tax loophole was a very specific, very favorable moment in time that is over, and referencing it in a conversation about film financing today is disingenuous.
posted by incessant at 10:45 PM on April 9, 2013
posted by incessant at 10:45 PM on April 9, 2013
Straight to DVD can also just be a consolation prize. They got investors to pay for production, but couldn't get distribution in theaters. So they release it to DVD and hope to make some of the money back.
posted by gjc at 3:19 AM on April 10, 2013
posted by gjc at 3:19 AM on April 10, 2013
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1. Premium channel viewings (HBO, Showtime, etc.)
2. Streaming/Home purchase (Netflix, Wal-Mart)
3. Distribution overseas
4. Airlines (They pay to show that drek on long haul flights.)
5. Network showings (TNT, TBS, etc.)
6. Ancillary games, merchandising, fast-food tie-in.
The reason movies get made doesn't always have to do with money. There may be a contractural obligation (a 3 movie deal with a director or actor) or a big box-office person wants to make the film so the studio does it to keep him/her happy (Any Adam Sandler movie without laughs for example--excluding Jack and Jill).
The movie may be profitable, but not a block-buster.
Sometimes the studio may be nursing a talent along, and will throw a bone to someone, "Well, the studio head is screwing this chick, we can't use her in Terminator XX, but let's give her a part in this indy thing..."
Sometimes, it's just the cocaine.
posted by Ruthless Bunny at 1:55 PM on April 9, 2013