Friday, June 11, 2010

Independent Film Profit Probability

According to the Sundance Institute, the total number of U.S. feature films submitted to the festival was 1,920 for the 2010 festival, 1,905 for the 2009 festival, and 2,021 for 2008. Taking an average of these three years we arrive at  1,949.
At any one time, there are about 1,949 U.S. films waiting to be picked up for distribution. This assumes, that all applicants to Sundance have no distribution already in place.
To see how many of these films are distributed.  Films with no theatrical distribution in place prior to financing (i.e., most of the films applying to Sundance) end up opening at 1,000 domestic theaters or less, if they open theatrically at all. Hence, a good a place to turn for some rate of success analysis is this pool of limited opening films (specialty films) 
The definition a specialty film is any film that opened theatrically at 1,000 domestic venues or fewer, “domestic” meaning the U.S. and Canada.

The  definition an independent film is any film that has received no funding from one of the six major studios (Disney, Fox, Paramount, Sony, Universal, or Warner Bros.) or their corporate parents. That is, no development, pre-production, principal photography, or post-production monies prior to being picked up for distribution. In turn, the specialty market is where you should turn for your indie film analysis.  If your film achieves  its theatrical release it will start out as counter-programming to the week-in, week-out mass appeal movies already in the market. Secondly, the specialty market is comprised of roughly 90% independent films. This is where indies battle it out for supremacy every week. However, in their battles. They must watch out for the studio interlopers. These films that can royally screw up your all important first weekend.                                                                

There were 286 English-language specialty films released into theaters in 2009 (and about 11% had studio financing). Using this 286 number as an approximation of U.S. specialty films, we can examine how they did and come up with a rough probability for turning a profit.                                                                                                                   

Of the 286 specialty films released in 2009. 52 English-language specialty films appear to be headed for a profit, with the rest not likely to make back their investment.
Films produced 2009 (1949)   Films distributed in 2009 (286)   Films returning a profit in 2009 (52)   Profit probability (2.7%)

Saturday, June 5, 2010

Bechdel Test for Women in Movies

Cable Channel Strategy

  1. Today’s most typical cable strategy is built entirely around profit maximization utilizing affiliate fees. If you own a cable channel, your goal is to develop one or two key, hit programs, and fill the rest of the linear lineup with very inexpensive content. The “hits” make you a “must have” for any cable or satellite carrier – granting you the right to ask for fees. Too many hits drive up costs. This is why you will see more and more hit shows on the less well-known cable channels. Mad Men on AMC is a perfect example. How can a cable company not offer Mad Men? Once you nail the single channel game, you immediately try to proliferate that into multiple channels a la MTV and ESPN. 
  2. For those who do not know, affiliate fees are the primary revenue stream that funds today’s mainstream television content development. These are basically a “share” of the subscription fee you pay to your cable or satellite operator that is then shared back to the content owner/distributor (typically on a per subscriber basis). As an example, you will hear that some less notable cable-only channel was able to negotiate $0.25/sub/month, or that ESPN can negotiate $2.00/sub/month, because any aggregator would be afraid to market a television package without ESPN. Over the past 30 years, these fees have become the lifeblood of the TV content business – affecting how the major aggregators think and operate, and also affecting how content is produced, financed, and packaged.
  3. Here are some specifics to help frame the issue.  In 2009 DirecTV paid approximately $37/sub out of an ARPU (Average revenue per user) of $85/sub, to content owners for programming costs (i.e. affiliate fees). In this case, affiliate fees represent roughly 43% of total revenue for DirecTV. Similarly for Comcast, estimates are programming costs at 37% of video revenue (Comcast has high-speed data and voice revenue that are separate). These are just two examples, but to give you a sense of scale these numbers represent around $7-8 billion/year each for Comcast and DirecTV. The  aggregate fees of all content providers are approximately $32B per year. These are big numbers. To put things in perspective this is about 33% higher than Google’s annual global revenues including revenues for its advertising network.