I was curious about this statement: Number one, box office revenue has no relative correlation to your recoupment nor does past performance of even ‘similar’ films indicate current market realities.
When I helped vet films for an investment group, we would use box office revenue for similar titles when evaluating a film as a potential investment. This did not necessarily take the place of bona fide sales projections from a reputable distributor or sales agent, but it did help to get a rough sense of "is it possible for this movie to make money" in the early screening process. Is it maybe too strong to say that there is NO relative correlation with box office revenue and recoupment?
If a potential investment is similar in relevant ways to several films that all made about $1M in box office revenue, you can make an educated guess that you will not recoup $7M from the investment. Is your point more that box office revenue isn't a sufficient predictor to obtain an investment in today's market?
HI Francisco, thanks for your thoughtful question! I feel b.o isn't a sufficient predictor in today's market. Because if you're comparing Film X in the financing stage to Film Y who had a theatrical release - what if Film X doesn't even make it to theaters? Also, Film Y could have made $1 million in B.O revenues but by the time the Exhibitor takes 50%-60% and the distributor 10%-30% of that, you're left with a lot less. Finally, theatrical releases are essentially a marketing expense and loss leader for digital - when you see $1 million in B.O revenues the studio or production company could have spent $10 million on marketing the release and it's a total loss. Hope that makes sense?
Yes, thank you! I have been out of film finance for a little while and that is a great clarification. What you are saying makes sense. Also, really enjoy your always well thought out newsletter!
I was curious about this statement: Number one, box office revenue has no relative correlation to your recoupment nor does past performance of even ‘similar’ films indicate current market realities.
When I helped vet films for an investment group, we would use box office revenue for similar titles when evaluating a film as a potential investment. This did not necessarily take the place of bona fide sales projections from a reputable distributor or sales agent, but it did help to get a rough sense of "is it possible for this movie to make money" in the early screening process. Is it maybe too strong to say that there is NO relative correlation with box office revenue and recoupment?
If a potential investment is similar in relevant ways to several films that all made about $1M in box office revenue, you can make an educated guess that you will not recoup $7M from the investment. Is your point more that box office revenue isn't a sufficient predictor to obtain an investment in today's market?
HI Francisco, thanks for your thoughtful question! I feel b.o isn't a sufficient predictor in today's market. Because if you're comparing Film X in the financing stage to Film Y who had a theatrical release - what if Film X doesn't even make it to theaters? Also, Film Y could have made $1 million in B.O revenues but by the time the Exhibitor takes 50%-60% and the distributor 10%-30% of that, you're left with a lot less. Finally, theatrical releases are essentially a marketing expense and loss leader for digital - when you see $1 million in B.O revenues the studio or production company could have spent $10 million on marketing the release and it's a total loss. Hope that makes sense?
Yes, thank you! I have been out of film finance for a little while and that is a great clarification. What you are saying makes sense. Also, really enjoy your always well thought out newsletter!
Are you traveling to Park City? I'm not going this year. But! I'm watching to see what sells and at what price for sure!