Tuesday
Jul212009

Distribution

Until recently, the Industry has been controlled by the major studios, making investment opportunities in individual films generally unavailable to the public. But due to the increased demand for American made films worldwide along with the development of new markets including network, pay and cable television, DVD and video on demand market there is a tremendous shortfall of quality product. The growth of all these markets has created a demand which cannot be met by the studios alone. These major studios and distribution companies now rely on independently financed films to fill this void. Although the major studios have large budgets, many have had a careless attitude towards spending which has resulted in budget waste and cost overruns. Bigger is not always better.

    Historically, the motion picture business as a whole has been very consistent and stable. It tends to be recession-resistant and market-neutral, avoiding the volatility experienced by investors in other markets. The U.S. box office totals for 2008 are estimated at approximately 8.5 billion even with last years economy. DVD’s are rapidly changing the scene in home video stores both domestic and foreign, and are greatly impacting the revenue being generated. Perhaps no other format for movies has so much profitability built into the retail prices. Video Business reports that United States DVD sales and rentals in 2008 were 23.4 billion 2007 was 22.5 billion, 2006 21 billion, 2005 it was 20 billion and 2004 15.1 billion. This means that the average US household purchased 17.9 DVDs in 2008.

    In the independent feature film market, distribution companies constantly comb the festivals for unique films with a wide appeal. We believe THE BLACK SHIELD falls in that category. It boasts an unusual story with a strong ensemble cast of African American actors. We plan to exhibit the Black Shield at New York’s Independent Film Market, Toronto International Film Festival, The Sundance Film Festival and the Cannes Film Festival, which are major venues for securing distribution deals. Companies like Sony Classics, The Weinstein Company and Lions Gate use venues like these to find finished projects. For a finished film advances are paid against potential profits. We will be in a very strong position with the Black Shield because the minimum advance we intend to accept is the actual cost of the film (around $2,500.000), but if several companies show interest in the project we could expect to receive an advance as high as $3,000,000. This is paid to the production company upon delivery of the picture to the distributor—which means investors would recoup their initial investment (production costs) at this point. Keep in mind, however, that the distributor’s cost is more than an advance. It eventually will include all film prints, advertising, and shipping. The distributor’s cut of the Box-office grosses is about 50 cents of every box-office dollar, as exhibitors keep the other half.

    The picture now goes into general release in theatres across the U.S. The distributor will cover all marketing expenses and take a standard fee of about 30% of gross box-office receipts. A share of the profits for investors and filmmakers comes after the distributor has recouped the advance as well as all print and advertising cost and distribution fees. The above scenario covers only domestic theatrical distribution. Advances from foreign distributors in more than 50 territories can far exceed the domestic advance. However, a foreign-sales representative for the picture may wait for the domestic deal to be in place first t secure even better advances. In addition, there are other venues for generating profits, from DVD rental and sales to cable rights, both in this country and abroad.