Thoughts on Completing, Marketing and Distributing Before El Finâ

By Nathan Buck — 04/10/19 - Berlin

Overview

When Christina Mallet and I set up Bearlift Films GmbH in the spring of 2019 our short term goal was to immediately produce a feature film, take it to market, see it through its distribution process and use the hard data gleaned from the experience to set ourselves up for a 2nd feature, and then a 3rd feature, etc.

Fully aware that filmmaking, even at an ultra-low budget level, is an expensive and financially risky business, we worked hard to create a story and set-up that would deliver a high production value for a minimal cost.

The story that we created was built around a single location, 5 characters, and a 48 hour story timeframe. The resulting script, Before El Finâ, was a compelling, character-based drama which we were able to make in 14 shooting days in Spain. Leveraging the beautiful location, 5 excellent actors and a dedicated and talented crew we shot a 100 minute drama for a production cost of €100,000.

Of the €100k, €50k was raised on Kickstarter in a successful crowd-funding campaign. This money was essentially a series of small donations from family and friends and a dozen or so large donations of between €1k and €8.5k. Of the other half of the money, approximately 40K was a cash investment by Alex Mallet and 10K was a tax deductible donation from another private donor.

To make the film at such a low budget, we relied on goodwill from cast and crew members most of whom agreed to work on deferred salaries, accepting only a small minimal payment upfront. However, this was coupled with an understanding that from every dollar that the film makes in terms of sales, they would be paid back on a pari passu basis with the cash investors.

Before El Finâ is now in its Post-Production phase and we are seeking €60K in additional investment to finish the film. This money will be used to pay for editing, music composition, pick-up camera work, audio editing, the final picture grade, master mix, promo trailer and poster and the final copies of the film to deliver to distributors/buyers (the Digital Cinema Package or ‘DCP’).

Thus, to get the film finished and ready to be sold the actual cash price tag is €160k. When deferrals are factored in, the final budget of Before El Finâ is approximately €225K. However, the break-even point, from an investor’s point of view, is really 175K, as the first €50K raised from Kickstarter were donations.

Will Before El Finâ Make Its Money Back?

As mentioned earlier, from the beginning we approached this film production as a business experiment and set ourselves the task of creating a film that would make it’s money back. Our aim was to begin to establish a track record of producing high quality, profitable films which would give investors in future projects confidence that we could deliver a return on their investment.

We have now reached the critical post-production phase of the film and, with about 6 weeks to go until we have the film completed, we have a much clearer idea on the threshold that we need to reach in order to achieve recoupment and profitability.

In short, I believe Before El Finâ will make its money back because

1) Our budget is extremely low in relation to the film’s production quality. As our editor commented, in terms of production value, we are ‘punching above our weight’.

2) We have 2-3 cast members with “name” recognition in their respective markets. (North America, Egypt, and Germany). That translates into sales – this is what is meant by “star power”.

3) We have built a strong social media presence and ‘brand’ and have already successfully tested ‘proof-of-concept' with our €55K Kickstarter campaign.

4) We have not given away any exploitation rights or equity to make the film. Therefore, we are in a strong position to either self-distribute, or hybrid-distribute (see the next section) and can avoid unnecessary middlemen, commissions and fees.

Traditional Distribution, Self-Distribution and Hybrid Distribution

Below I will delve into the mechanics of Distribution, with an analysis of territories, revenue streams and the role of sales agents in the process. But it is worth noting that, although the basic problem – How do we get a paying audience to watch our film?– is always the same, the strategy for doing this is very different across these three categories.

Traditional Distribution

Traditional Distribution is the process by which a filmmaker produces a movie and then licenses it to a professional distribution company, or studio which then takes care of marketing and selling it through print, broadcast and electronic media across a progressive series of marketing “windows”: Theatrical (perhaps 3-6 months), then DVD/Video (6 months-1 year), then, possibly VOD (1 year), or in the old days “pay TV” (like HBO or Cinemax), and finally to advertising funded broadcast TV (after 2-3 years).

The Distributor pays the filmmaker an upfront fee – called the Minimum Guarantee (MG) and then a 35-50% slice of the net profits once the film has recouped the MG + the P & A costs + the Distributor’s fee. In return, the Distributor has full exploitation rights for 5-20 years in their “territory” or even “worldwide”. In the past the MG could be expected to at least cover the cost of making the film and once the filmmaker received that big check they could leave the film in the hands of the distributor and move on to producing their next film. If the film was a big hit, then the producer would enjoy a steady stream of residuals and pajama profits as well.

Sadly, nowadays this old model is more the realm of fantasy. It goes something along the lines of: a young auteur director makes a brilliant low budget film, submits it to Sundance, gets in, and the distributors line up and have a bidding war on the film which then goes on to box office success and an Academy Award the following year.

Aside from the fantasy element of this scenario, a key flaw in the story is that it is predicated on what used to be the central reality of the film business: it was based on a dearth of product. Films used to be really hard to make: you needed expensive equipment and huge teams of people and you had to have the film developed in a lab, and then you needed to go through a whole slew of specialized professionals like editors, negative cutters, optical title creators etc. Just to finish the film. When digital came in, and video started to compete with and then destroy the celluloid film business, filmmakers could use DV cameras and then DSLR and now iPhones and edit at home, suddenly the Seller’s Market became a Buyer’s Market as the industry was now based on an excess of product. At the festivals, the distribution companies have far more movies to choose from than they could possibly buy – and that is just the films that get in.

In 1992, Quentin Tarantino’s first film, Reservoir Dogs, was one of 250 films submitted to the Sundance Festival. It got in. So did 133 other films. So, in that year, a filmmaker who had made a feature had a 54% chance of getting into the biggest film festival in the USA.

In 2019, Sundance had 4,018 features submitted and 112 got in. That would give a filmmaker now a 2.79% chance of getting in. These figures are reminiscent of the golden ticket to meet Willy Wonka in the Chocolate Factory. One can’t base a sales and marketing strategy on a 97% probability of failure. Therefore, it is not surprising that more and more filmmakers are turning to...

Self-Distribution

This is the DIY approach. Essentially it means that the 100% of the responsibility for a film’s success depends on the filmmaker. That entails not only making the film, but creating the marketing campaign, the PR materials, the website and social media and spending money on print, web and media advertising. It can also mean renting (or ‘4-walling’) movie theaters and making sure people fill them. It means making DVDs and selling them (or paying a DVD company to handle all of the manufacture, postage and packaging). All of this is time-consuming and also takes a lot of money.

A rule-of-thumb in the film industry is that whatever the budget of the film is needs to be duplicated in P & A costs for a film to have a chance of making back its money.

The upside, of course, is that the filmmaker is always in control of the revenue and has not given exploitation rights away and that there are fewer middlemen to whittle away at profits.

It is my belief, however, that Bearlift best served by taking a hybrid distribution approach with Before El Finâ.

Hybrid Distribution

In this model the filmmaker works to find traditional distributors and sales agents who can buy/sell the film in some territories and make licensing deals on some of the revenue streams, while retaining rights and self-distributing on others. Most important, in my view is trying to limit Distribution deals to Theatrical while holding on to the rights to exploit television, VOD and possibly DVD as well.

Alternatively, Bearlift could make a traditional all-in distribution deal in some territories, while retaining rights in others. For example, the excellent case study on Stephen Follows’s website for a £1m feature: Papadopoulos & Sons used this approach:

Getting an Independent Feature Film Distributed

Marcus made the film without any industry support and without any distribution deals in place. This meant that once it was complete he had to figure out how he was going to get it to the public and recoup his investment.

At one point, he was close to signing a deal with YouTube to premiere the film online via a ‘pay what you want’ recoupment model. The idea seemed to be well-received at google but in the end the deal stalled when YouTube insisted that Google Wallet was used to collect the donations, despite the fact it was only active in 8 countries at the time.

Marcus turned to self-distribution in the UK and collaborating with a producer’s rep for the international rights. He signed up with producer reps 7&7 who would take 20% of any deal they negotiated but they wouldn’t ever control the distribution of the film, as a traditional sales agent would. Marcus was on the hook for the sales costs (such as attending Cannes and other film markets) but this would be recouped first from income.

Soon after taking the film to the Cannes Marche du Film (the film market where the rights to films are bought and sold), 7&7 secured distribution deals for Greece, Germany and an airline distribution deal.

Thus, in the case of Papadopoulos & Sons the filmmaker wisely chose to retain the rights in his core, domestic market – the UK – while selling all rights in others (Germany and Greece) through a producer’s rep* (not a Sales Agent).

Because we are not locked into any kind of Distribution deal at the moment (as many films are who have financed production through “pre-sales”) Bearlift has the flexibility to tailor our Distribution strategy in a way that is most likely to allow the film to make its money back.

*A Producer’s Rep normally works for the producer for an upfront fee, whereas a Sales Agent works on commission. However, in this example, it appears that the Producer’s Rep was being paid based on commission so the distinction in this case is a little unclear, but the principal is that the producer was careful to maintain control over distribution rights in the UK.

So, now that I have posited a Distribution strategy for Before El Finâ, let’s take a closer look at the landscape of the world wide film industry.

The Film Business – An Overview

In 2018, the Worldwide Box Office Gross was $41.7b. Of this figure, the major Hollywood studios account for a little under half of the total revenue at $18b. Hollywood has deep penetration into markets worldwide with its “tent-pole” Superhero, Action and Horror films which are easily over-dubbed for local markets. However, in the last decade, China (62% domestic) has successfully created a local market which like Bollywood in India (85% domestic), and the US market (88.8% domestic) is not dependent on foreign films.

INSERT GRAPH

At this stage, it is critical to note that Box Office gross effectively must be cut in half to get a clearer picture of the gross profit for any particular film: as a rule of thumb 50% of Box Office gross goes to the Exhibitor (Cinema or cinema chain).

So, for example for a film budgeted at $30m that Grosses $75m at the box office, which is the figure we usually see in the media, the exhibitor is retaining roughly $37.5m, leaving $37.5m for the distributor, sales agent and filmmakers.

We will examine more closely how this $37.5M is dispersed in the waterfall from distributor through to filmmaker below, however, first let’s take a look at the way theatrical distribution works, as well as the other ways that a film makes money.

As I discuss these films, I will often make the distinction between “Studio” films and “Independent” films. By “Studio” I am referring to films that are entirely produced and distributed in-house at one of the 5-6 major Hollywood Studios (Disney, Warner Bros., Universal, Sony-Columbia, Paramount and 20th Century Fox*)

“Independent Films” though often these are fully or partially funded by large media companies and government bodies (but no govt. funding in the USA) are basically everything else.

A rule-of-thumb distinction is:

<$20m = Studio film

>$20m = Independent film.

*In 2019 Disney acquired Fox from NewsCorp, so the number is really 5. Furthermore, it is helpful to remember that aside from Disney, all of the Studios are part of a major media conglomerate: Warners is owned by AT & T, Universal by Comcast, Paramount by Viacom, and Sony-Columbia obviously by Sony).

Domestic Theatrical

This is the income a film generates at the Box Office on its home turf. For an independent film in the USA, a North American distribution deal is the key deal and will determine its box office success.

International Theatrical

This is the income derived from sales to “territories” or countries outside of a film’s domestic market. For blockbuster, Hollywood films this has become often more important than Domestic sales. (for example the recent film “Skyscraper” starring The Rock cost $125m to make, but grossed only $68m in the USA and Canada, however, in the rest of the world it made $236m).

For non-US Independent films selling internationally is also extremely important. Although many films in France, Japan, Egypt, Thailand, Brazil, etc. Are intended mainly for their domestic market, a non-US produced English language film like Before El Finâ will rely more on international distribution deals than domestic ones.

But how does the film get sold in the first place?

The Sales Agent

A key intermediary between filmmaker and distributor, a Sales Agent will assess a film’s prospects across different territories and choose to represent the film, for a commission, at film festivals and markets across the world – Cannes, EFM (during the Berlinale), AFM in L.A., TIFF, etc. A Sales Agent will provide Low/Medium/High sales figures for each of the worldwide territories.

Samples of these figures are extremely hard to obtain without having a Sales Agent as this is, in the best cases, information gleaned from years of hard data and experience which is the greatest asset that a good Sales Agent can bring to bear on a film. Investors, distributors and producers all want to have the most accurate, realistic figures obtainable as this will help them determine whether or not a film will make its money back.

From my experience working for independent producers in London, I remember that sales figures were an important addendum to any package being shown to potential investors or coproducers along with the script, the attached stars and director.

Here is a sample sales figures chart that I found on the internet after a lot of poking around, although it is 12 years old, it is a rare insight into some real data on international sales, territory-by-territory for the range of all low-medium-high budget feature sales from Cannes in 2007.

The figures are in thousands:

INSERT CHART

And here is another chart that a sales agent used for a real low-budget feature the same year. Each of these numbers (in thousands) represents the Minimum Guarantee, meaning the amount that a distributor guarantees regardless of sales:

INSERT CHART

Of course, it is highly unrealistic to expect a sale in every or even most territories. As an English language, German and American produced arthouse drama featuring French-Canadian, Egyptian, Dutch, American and Swedish actors shot in Spain with an English crew let us just put together numbers based on just those territories except the U.S.:

Territory Max Probable Min Benelux 30 20 10 France 90 45 30 Germany 110 55 40 Scandinavia 55 20 20 Egypt 10 5 3 Spain 65 45 20 United Kingdom 110 85 55 North America 305 165 110 $775K (€707K) $440K (€401k) $288K (€262k)

A Sales Agent will normally take a 20-30% fee + Expenses (which are negotiated with a cap). It is a high commission, however, the best sales agents have deep, long term relationships to distributors and they trade on this access and knowledge of the buyers.

In our rosiest scenario, Before El Finâ would be represented at several film markets around the world by a good sales agent and sold to each of these (and more) territories. Although the figures above are for a different film 12 years ago, I think this data is useful to see the relative weight of the different territories, and to gain at least a ballpark idea on the sales figures. Even sales at a fraction of these levels would have the film achieve or nearly achieve it’s break even point of €175K with just the proceeds from the minimum guarantee (MG).

However, in the event that the film does well in any particular territory and the distributor is able to recoup their P&A costs + the minimum guarantee + their fee, then any additional revenue, or net profit, would be split with the production company. The split is usually between 50/50 to 65/35 in favor of the production company.

A final note on distribution deals: Usually a distribution deal encompasses exploitation rights for a film across all media (theatrical, television, VOD, and DVD) for that particular territory. So once the film has left the cinemas, the distributor will continue to sell the film in that territory and, again, once all the distributor’s costs and fees have been recompensed, then net profit share with the producer will kick in with every DVD sold, every VOD rental, download, etc.

A distribution deal usually lasts anywhere from 5-10 years in Europe and 10-25 years in North America after which all rights revert to the production company.

Television

For many films, like the case study of Papadopoulos & Sons, television rights are the largest source of income for a feature film. According to UK film industry analyst Stephen Follows:

• Television is the largest source of money for feature films

• On average, over a third of the income a film makes will be via selling its television rights

• In 2014, gross film revenues from television reached £1.4 billion

• Out of all UK terrestrial broadcasters, Channel 4 screens the most movies

• 40% of the films screened on ITV are UK films (compared with just 13% of those on BBC One)

For Before El Finâ it is entirely possible that 2-3 sales of television rights in, for example, North America, the UK, and Germany could well net the film 30-60% of its budget. In the case of Papadopoulos & Sons Follows notes:

UK TV Deal

For the last few years, television has been the largest driver of income for British films and that’s certainly the case for Papadopoulos & Sons. The UK cinema release netted Marcus a profit of £10,000 for half a year’s work whereas by contrast his deal with the BBC netted him £50,000.

Ordinarily, the sales agent (7&7) would have taken a 20% cut but it had been agreed that Marcus would keep the full figure to recoup money he’d spent promoting the film in Cannes.

The BBC deal is for five screenings over the next five years, starting in autumn of this year. The deal stipulates that during the first two years, the BBC have the exclusive “UK Free TV’ rights, meaning that the film will be removed from the UK edition of Netflix until autumn 2017. Clauses such as this are fairly standard and explains why Netflix has different inventories between territories.”

The note about Netflix brings us on to the next source of revenue...

VOD

The following is from Film Blogger and VOD Specialist, Jason Brubaker:

“Video on demand falls into 3 general categories:

• Transactional Video On Demand (TVOD)

• Subscription Video On Demand (SVOD)

• Advertisement Supported Video On Demand (AVOD)

Even though digital distribution has become the norm, in an effort to maximize revenue, distributors still follow a traditional release strategy.

In most cases, a film is first available in theaters, followed by VOD. When it comes to video on demand distribution, most professionals agree that that you should explore your opportunities in the following order:

Transactional Video On Demand

With Transactional VOD, people can only watch your movie after they make a payment. Some of the platforms such as Amazon and iTunes have made transactions easy. These platforms keep customer credit card information on file, which means prospective viewers are only one or two clicks away from watching your movie. Popular transactional platforms for filmmakers are Amazon, iTunes, Fandango Now, Google Play and Vudu.

Subscription Video On Demand

Subscription Video On Demand (SVOD) is a convenient model that allows subscribers to sign up for a service, pay a monthly fee and in exchange, have access to unlimited programs. This model is great for consumers because, well, they can watch anything.

As a filmmaker, getting your title onto a subscription based platform could be a great play for getting your title discovered. As a possible downside, unless you strike an awesome licensing deal you may be a little disheartened if your title gets a gazillion views and you end up with a few dollars. Popular subscription platforms for filmmakers are Netflix, Amazon Prime and Hulu.

Advertisement Supported Video On Demand

Many platforms make money by placing targeted advertising in front of the viewer. This type of model can be win-win, as many ad supported platforms provide the filmmaker with a portion of the ad revenue. The viewer gets to watch your movie without making a transaction.

In the United States, TubiTV is gaining popularity as a great way to watch popular television shows and movies on demand. Unlike transactional platforms, TubiTV makes their money by peppering content with advertisements. And assuming they acquire your title, TubiTV will pay you a portion of the advertising revenue.

Leveraging VOD Release Windows

The reason for this VOD Release Windows sequence is simple. If you make your movie available on Hulu and Netflix first, will anybody bother to actually pay for it? Or will a popular platform actually feature your movie if it’s already free somewhere else?”

Brubaker’s rule of thumb is about 90 days for TVOD followed by 1 year for SVOD, and then 2-5 Years (or more) for AVOD.

And here again is Stephen Follows’s case study of Papadopoulos & Sons :

Video on Demand Income

Most filmmakers are hoping that Video on Demand (VOD) income will grow to replace the lost income from falling DVD sales. Papadopoulos and Sons is available on a number of VOD platforms including…

• £19,602 Netflix (UK and USA)

• £ 2,902 FilmFlex (UK)

• £ 2,889 iTunes (multiple countries in Europe, UK, Africa and middle East)

• £ 26 Blinkbox (Europe)

• £ 95 Google (UK)

• £ 9,428 Misc VOD*

• £34,942 Total

*These misc payments come via the same aggregator as most of the other payments (The Movie Partnership) but the bank statements don’t reveal which VOD platforms the amounts belong to. Marcus believes that iTunes sales account for around 80% of the ‘transactional VOD’ revenue (i.e. not including Netflix, which offers ‘subscription VOD’).

The Netflix deal is for the UK and America and the gross is around £15,000 per year for a two year deal. The sales agent takes 15% and the aggregator takes a further 15%, leaving Marcus with 70% of the gross.

The film has performed well on the platform, with an average rating of 3.6 stars from nearly 120,000 ratings. Marcus says that Netflix have indicated they want the film when they roll out to new territories across the world. This is pretty impressive for an independent feature film.”

Again, given the relatively low budget of Before El Finâ , with its break-even point of €175K, it is not unrealistic to expect a healthy 5 figure income from VOD to add to the gross income total.

It’s worth noting here as well, that VOD and ticket prices in general don’t distinguish greatly between a $100m Studio film and an ultra-low budget film like ours. Accordingly, the weight of each €3.99 rental is much greater for Before El Finâ than even a €1m film like Papadopoulos & Sons.

Finally, as Brubaker has noted on his website, https://www.filmmakingstuff.com, the challenge of selling the film digitally is all about driving traffic to the VOD platform and increasing the Conversion Rate (i.e a 1% conversion rate would have 10 sales for every 1000 clicks). This has to do with developing a strong web and social media presence and promoting the film through those channels.

Although we certainly want and need to grow our audience much more, before we even shot the film we were catapulted into a fairly dynamic social media game with the pressure of the Kickstarter Campaign which saw us raise an incredible €55k in 35 days with an extremely hands on social media approach.

In the 5 weeks since we shot the film, we have continued to grow our social media presence, releasing Instagram posts each day, and uploading several videos to Facebook and Instagram.

We also are excited with the success of Nahéma Ricci at the Toronto International Film Festival and have great hopes of leveraging Amr Waked’s millions of followers in the Arab world to this end as well.

In conclusion, although there is much work to be done, we have already built a robust social media base, and I think that Before El Finâ is poised to do well in the digital distribution arena once we are ready to go public with a great trailer, other promo material and, of course, the completed film itself.

Airlines

A source of revenue that has similarities to the VOD business as more and more airlines are opting toward the Netflix model, giving passengers hundreds of viewing choices on a given flight. Generally these sales are made at the film markets and through sales agents.

Back to the Papadopoulos & Sons example:

Totalling The Income

It’s certainly possible that the film will recoup more money in the coming years so these figures are true up to 15th April 2015.

• £158,000 UK tax credit

• £ 88,259 TV

• £ 45,601 UK theatrical

• £ 34,942 VOD

• £ 32,667 Airline

• £ 15,594 Germany theatrical

• £ 12,753 Greece

• £ 9,374 DVD

• £ 1,131 US screening

• £ 459 UK screening

• £ 275 Speaking fees

• £399,055 Total

While it must be noted here that Papadopoulos is a middle-of-the-road comedy, and probably more saleable in this arena than Before El Finâ, it is still fascinating, that again, a single sale of a low-budget film of similar production quality could conceivably net 5 figures.

DVD

In the 2000’s DVD sales reigned supreme in the post-theatrical film distribution cycle, however, this revenue source has been crushed by the advent of VOD. Nevertheless, it is still a small and viable source of income, and should not be overlooked.

There are many other ways that films make money such as merchandising, product placement, etc. But these are the province of blockbuster studio films and are not at all applicable to Before El Finâ.

There is, however, one category of income listed above that I should talk about tax credits.

Tax Credits

A Tax Credit is basically a government (national, regional, local) subsidy to stimulate film production in its territory. It is considered “Soft Money” because it does not need to be paid back.

In Europe, tax credits form anywhere from 20-60% of a film’s budget and, as long as the film qualifies, it is guaranteed money.

Unfortunately, Before El Finâ does not meet the criteria for any of the tax credits out there because:

• They usually require a minimum budget of €1m

• They must be applied for before the film goes into production.

However, Tax Credits and the way they can be maximised by co-productions with companies in other countries (like Amr’s company in Spain), will form a big part of the finance strategy for Bearlift’s next efforts. This is a subject for another lengthy document.

The Recoupment Waterfall

In the event that we do get one or more distribution deals, I think that it is important to understand the basics of how they work. As mentioned above, it is critical to understand that the relation of Box Office Gross to the actual monies that are divisible between Distributor, Sales Agent, and Production Company is usually 2:1 to 3:1, with the exhibitor retaining half or more than half of the receipts. So in the table below, again from Stephen Follows, we can see that only $34.425m is returned from the $75m box office gross. This is where the ancillary income sources of DVD, TV and VOD can be seen to be so critical, as they account for 2/3 of the film’s gross profits of $91.925m.

INSERT DIAGRAM

This diagram represents a very successful film, however, even with that $102.5m in Gross Profit ($75m + 18m + 28m + 8.5m + 3m – 30m = $102.5m) one can see that after all the Exhibitor, Distribution, and Sales Agent fees and expenses have been deducted, the actual net profits that are split on a 50/50 basis by the investors and producers is under 4m.

Finally here is a a fairly detailed schedule for a medium budget 10-20m independent film. This comes from a NY based entertainment attorney https://rodriqueslaw.com.:

What A Realistic Recoupment Schedule Looks Like

Although no two investment agreements are exactly alike, there is nevertheless a certain standard deal structure for recoupment that is reasonably popular, particularly among lowbudget indie films. Below is a generalized example of the stages money passes on its journey down the revenue-sharing waterfall from movie-consumers to the investors:

• 1. First, distributor is paid from sources, such as film rentals from gross worldwide box office revenues; theatrical outright license; Government subsides; home video; pay television; pay cable; streaming; VOD; airlines (non-theatrical); free TV; syndicated television; music publishing; music recording; merchandising and other ancillary and allied sales revenues - after deductions for exhibitor’s fees (usually 40%-65% of box office gross) and four walling expenses.

• 2. Second, distributor makes deductions for distribution expenses, such as sales taxes, collection costs and residuals that are due to the talent guilds and unions.

•3. Third, distributor takes a distribution fee (usually 10%–30% of gross receipts).

• 4. Fourth, gross participations are paid to A-list talent.

• 5. Fifth, bonuses are paid to A-list talent.

• 6. Sixth, distributor deducts the advance/MG paid to production company.

• 7. Seventh, distributor deducts its P&A and publicity costs.

• 8. Eighth, the rest of the money goes to a collection account manager (CAM), who takes its commission and expenses for administering the collection account on behalf of beneficiaries.

• 9. Ninth, the sales agents are paid their sales commissions (usually 5%-35% of gross receipts) and expenses;

• 10. Tenth, Interest on production costs is typically recouped before production costs (debt is paid first, then equity investor is paid).

• 11. Eleventh, production loans are paid.

• 12. Twelfth, equity investors are paid their equity investments.

• 13. Thirteenth, deferred fees and bonuses are paid to talent.

• 14. Fourteenth, completion guarantor recoups any amounts advanced towards the production under a completion bond;

• 15. Fifteenth, at this point the net profits are reached. The film may be said to have reached its break-even point. The net profits are divided between the producers and financiers. The talent is paid their net profit participations from the producer pool. The investors share in the investor pool, pro rata.

In the case of Before El Finâ, a tiny film in comparison, many of these steps are eliminated or flattened. Because we have no A-list talent, steps 2,3,6, and 7 effectively happen at one time.

Presumably we will have to contract with a CAM (step 8) at some point. But this will only be in the event that we make sales to multiple distributors across different territories.

Step 9 is again, if we do have a Sales Agent representing us.

Step 10: is the premium built into the investor’s agreement that Dirk will be providing for Alex and any other cash investors (usually 10%).

Step 11: We have no production loans.

Steps 12 and 13 are Pari Passu (distributed on an equal proportional basis at the same time).

Step 14: we are way too small for a completion bond which is usually a condition imposed on a film by professional or institutional investors who want to make sure that the film is finished no matter what (I once saw a film take away from a Producer because he had gone way over budget and the Completion Bond people stepped in to take control).

Step 15: Our structure is slightly different. We divide our Net Profits 50/50 into the Cast, Crew Pool and the Production Company/Investor Pool.

Conclusion

When I set out to write this I had an idea that I would present a 3-5 year business plan which would start with our first feature, Before El Finâ and then outline a strategy to achieve short term cash flow in the company by:

1) Co-producing Arabic-based entertainment content with Amr Waked’s company, designed for distribution on You Tube and other digital platforms.

2) Leveraging our experience in grassroots fundraising with Kickstarter, to produce campaigns for others who are looking to do a similar type of thing.

3) Applying for Grants and Public money available for Development from Regional and European funding bodies like the DFFF and Creative Europe.

Then, our 3-5 year goal would be to produce 2-3 feature films that:

1) Were written and producible at a budget level that would have a very good chance of returning money to investors thereby building a track record which enabled us to make progressively larger films.

2) Were co-productions with producers elsewhere in Europe and other countries (like Canada) that have good soft money (tax credit) resources and to design budgets that could rely on 40- 60% of their budgets from these resources.

3) That met the minimum budget (usually €1m) and local spend requirements to access that money.

However, as I dove into the weeds, I realized that we are actually still at the beginning of a very complex process with Before El Finâ and that before we begin dividing our energies on other projects we must ensure that we give BEF all of the attention it needs to achieve success.

I am convinced that we have a high quality film to take to market, and that with a lot of effort, elbow grease, boot-strapping, and hustle we can prove to investors, and more importantly, to ourselves that we have what it takes to be in the arena.

I look forward to your comments!

And thanks for reading.

Nathan Buck

October 4, 2019 - Berlin