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Independent Film Industry

From Most recent Oscar Winners Million Dollar Baby and Crash, to critically acclaimed successes like Capote, Good Night and Good Luck, and Clerks, and audience pleasers like horror classics, Blair Witch Project, Nightmare on Elm Street and Friday the 13th, independent movies attract bigger audiences and generate ever increasing profits.

Motion Pictures By Independent Filmmakers

 

Motion Picture Production Budget Box Office Revenue Only
Brokeback Mountain $14 million $178 million and climbing
Million Dollar Baby $30 million $100 million and climbing
Crash $6.5 million $55 million (US only)
Blair Witch Project $30,000 $248 million
Capote $7 million $30 million
Good Night & Good Luck $7.5 million (est.) $32 million and climbing
Saw $1.2 million $103 million
Halloween $325,000 $47 million
Nightmare on Elm Street $1.8 million $26 million (US only)
Friday the 13th $700,000 $40 million (US only)
Broken Flowers $10 million $46 million
Hustle & Flow $2.8 million $23.5 million
The Squid & The Whale $1.8 million $9.2 million
Clerks $27,000 $3.2 million (US only)

There are a simply limited amount of industries with an small capital requirement as low as motion pictures where the potential return can be as unlimited over time. For instance, HALLOWEEN, costing as little as $325,000 to produce, earned $47,000,000 and it does not stop earning money - for a lifetime. RETURN OF THE SECACUS 7 cost only $60,000 and grossed $2,500,000. BENJI cost $550,000 and grossed $45,000,000; NIGHT OF THE LIVING DEAD cost $114,000 and grossed $40,000,000, GRIZZLY cost $700,000 and grossed $31,000,000, DAWN OF THE DEAD cost $700,000 and grossed $55,000,000 and BLAIR WITCH PROJECT costs $30,000 and grossed over $248,000,000 and just when we thought nothing could top BLAIR WITCH, along comes MY BIG FAT GREEK WEDDING which was produced for about $1.5 million as an independent film (turned down by all the studios for financing) and it has so far generated over $200,000,000 and it hadn't even hit home video or foreign markets, yet. There are countless of other examples where the return was at least three times or more.

Low Budget Feature Track Record

Using data on 253 low budget features and extrapolating this data for 1996 dollars, the average gross of each picture was well over $9,002,030 - theatrical income only. The top 8 pictures made more than $30,000,000 each and the top picture made $70.4 million. Averaging these 8 pictures gives an UPSIDE AVERAGE of $48,175,478. The bottom 8 pictures made less than $2 million each and the lowest picture earned only $1,593,848 for a DOWNSIDE AVERAGE of the 8 lowest pictures of $1,872,552 each.

If these 16 UPSIDE AND DOWNSIDE pictures are completely deleted from the sample of 253 pictures, we get an average gross of the remaining 237 pictures of well over $7,920,377 each. Call this the NORMAL GROSS.

For our computations in computing projections, we modified the UPSIDE AVERAGE and the DOWNSIDE AVERAGE figures with the NORMAL GROSS and got a conservative $28,047,927 for the AVERAGE UPSIDE and $4,896,464 for the AVERAGE DOWNSIDE on the theatrical market alone.

A feature is released on video cassette after the initial theatrical run. Even if revenues generated in this medium are only 5% greater (and they are now even more) than the theatrical market, this gives an upside of $29,450,323 and a down side of $5,141,287. At this time home video revenues are generating more than twice theatrical so you can really double the $28,047,927 for the AVERAGE UPSIDE and $4,896,464 for the AVERAGE DOWNSIDE figures.

Next release is cable (such as HBO or CINEMAX) and this market earns over 15% of the theatrical market. This generates $4,207,189 on the upside and $734,470 on the downside. Pay-per-view (such as found in motels, hotels and resorts) is the next market. We used a figure of 5% of theatrical revenues giving an upside computation of $1,402,396 and a downside of $244,823 for this market. When these four markets are added up and the upsides and downsides are averaged, we get a bottom line figure of $37,062,440 over a 3-year period for each low budget feature. This is the Short Term gross return at the Exhibitor level.

Syndication, the selling of a movie to each of the thousands of individual television stations across domestic U.S., Canada and abroad, is a form of exhibition that may proceed for 15 years or longer. This can, and usually does, generate about 200% of what theatrical revenues were and ordinarily commences about 3 years after release in the cable markets. Any film, no matter how bad or good, can be syndicated - as you can readily illustrate to yourself by taking a look at some of the films on local late-night TV. Gross income from syndication, based on the average of the upside and downside theatrical revenues, may be as high as $32,944,391 for each low budget feature over the course of 15 Years.

At this time foreign revenues have been generating even more than domestic U.S. revenues, but we won't even consider this in this discussion.

Additionally, none of the above revenues include network or ancillary sales which can be immense for medium and high budget films. Take a look at the toys generated from BAT MAN and TEENAGE MUTANT NINJA TURTLES. Now, even low-budget feature producers are getting involved with local merchants for ancillary sales.

Thus the above data indicates that the total long and short term gross for one feature motion picture is estimated to be $70,006,831 over an 18 year period.

Global Entertainment and Media Outlook: 2008-2010By PricewaterhouseCoopers

Filmed Entertainment

The filmed entertainment market consists of consumer box office spending for theatrical motion pictures plus spending on renting and purchasing home video products in both DVD and VHS formats. It also includes online film rental subscription services, such as those whereby DVDs are delivered via overnight mail, and streaming services, whereby films are downloaded via a broadband Internet connection. The figures do not include music videos (which are counted in the Recorded Music chapter), or video-on-demand (VOD), or pay-per-view (PPV), or movie distribution by cable, satellite, or telephone companies (which are covered in the TV Distribution chapter).

Global facts and forecasts:

  • "U.S. box office growth will average 4.3 percent compounded annually during the next five years from a weak 2005, taking total box office spending from $9.0 billion in 2005 to $11.1 billion in 2010. However, admissions in 2010 will remain below the levels achieved during 2002-04."

  • "In Italy the EMEA online subscription services and video streaming services are entering the market. Together they will reach $2.2 billion by 2010 from only $216 million in 2005, averaging 59.1 percent growth compounded annually."

  • "Asia Pacific high-definition video and reduced piracy will stimulate the sell-through market. We project sell-through spending to grow at a 6.2 percent compound annual rate to $6.2 billion in 2010 from $4.6 billion in 2005."

  • "Countries in Latin America are supporting local production through various subsidy programs. As the experience of 2004-05 indicates, the success of local films can have a dramatic impact on the overall market."

Television Networks: Broadcast and Cable

The television network market consists of advertiser spending on broadcast and cable networks, plus other sources of revenue that vary by region. In North America, the television network market includes license fees paid by cable systems and satellite providers to basic and premium cable networks. In EMEA (Europe, Middle East, Africa) and Asia Pacific it includes public TV license fees. Net advertising figures, consisting of spending less agency commissions and discounts, are tracked in EMEA, Asia Pacific, Latin America, and Canada. Advertising in the U.S. is reported with agency commissions included, as is customary. The television distribution market is covered in a separate chapter.

Multichannel advertising refers to advertising on networks that are accessed by viewers via cable (analog or digital), satellite, digital terrestrial television (DTT), or other means but that are not otherwise available without these services. Terrestrial advertising refers to advertising generated by free-to-air broadcast networks, even if viewers may receive such networks through a cable, satellite, or DTT service.

Global facts and forecasts:

  • "In the U.S. digital video recorders (DVRs), digital television, and high-definition television (HDTV) will enhance the appeal of television, leading to increased viewer ship and advertising."

  • "The United Kingdom and Germany are the two largest markets in EMEA, at $10.7 billion and $10.1 billion, respectively, in 2005. Italy ranks third, at $7.8 billion, and we expect it will reach the $10-billion threshold in 2010."

  • "Japan is the dominant country in Asia Pacific in terms of value, at $19.7 billion in 2005, equivalent to 54 percent of total spending. Japan is slowly emerging from its long-term economic slump, and its television network market will expand at a 3.9 percent annual rate through 2010, a significant improvement compared with the 0.2 percent growth compounded annually during the past few years."

  • "Venezuela will be the fastest-growing market in Latin America, at 14 percent compounded annually, but growth will be artificially augmented by continued high inflation, a factor no longer present to a significant degree in the rest of the region."

"The television network market will expand at a relatively steady 4.3 percent compound annual rate to $4.5 billion in 2010 from $3.7 billion in 2005."

Television Distribution

The television distribution market consists of revenues generated by distributors of television programming to viewers. It includes spending by consumers on subscriptions to basic and premium channels accessed from cable operators, satellite providers, or Internet protocol television (IPTV) services, as well as on video-on-demand (VOD). In the United States, EMEA (Europe, Middle East, Africa), and Canada, it also includes pay-per-view. VOD operates through a server and enables viewers to access a program at any time. Pay-per-view uses dedicated channels to show films at scheduled intervals. In the United States, advertising on local TV stations and local cable systems is also included.

Global facts and forecasts:

  • "In the U.S. VOD will be the fastest-growing category, at 22.0 percent compounded annually, and will grow to $3.9 billion in 2010."

  • "Italy will be the fastest-growing country in EMEA, with 22.9 percent compound annual growth, fueled by a rapidly expanding satellite market and growing IPTV."

  • "In Asia Pacific Hong Kong has been the fastest-growing market during the past two years, more than doubling as a result of the introduction of new channels and a developing IPTV market. Although Hong Kong constituted less than 1 percent of all subscription households in Asia Pacific in 2005, it accounted for 57 percent of the regionís IPTV households."

  • "The TV distribution market in Latin America, regardless of distribution platform, has been gaining momentum during the past three years and will post double-digit increases beginning in 2008 that will extend through 2009 before dropping to a high-single digit gain in 2010."

Recorded Music

The recorded music market consists of consumer spending on album and single sound recordings and music videos distributed in traditional formats and sold in record stores, including compact discs and cassette tapes. It also includes licensed digital distribution services that provide electronic files for use on computers, iPod devices, and MP3 players, as well as mobile music. Mobile music is music distributed to mobile phones through wireless carriers. Mobile music may be in the form of ring tones, which are monophonic or polyphonic tones that play aloud when the phone rings; or ring backs, which are ring tones or actual songs that the caller hears when a call is placed; or ring tunes, also known as master ring tones and true tones, which are either portions of or an entire actual music track with full vocals and orchestrations, heard either when the phone rings or as a ring back; or music video clips.

Global facts and forecasts:

  • "Licensed digital distribution will rise from $653 million in 2005 to $4.9 billion in 2010, a 49.5 percent compound annual increase. From a 5 percent share in 2005, digital distribution will constitute 33 percent of recorded music spending in 2010."

  • "The launch of new digital distribution services and growth in the number of broadband Internet subscribers in EMEA will fuel digital download spending."

  • "In Asia Pacific piracy will continue to cut into sales, but improved enforcement, combined with an increasingly more sophisticated and enabled economy, will lessen its incremental impact as antipiracy efforts begin to yield results."

  • "In Latin America antipiracy initiatives are beginning to yield results, and although still a major problem, piracy will have less of an adverse incremental impact on unit sales."

"New services and an expanding broadband market will boost licensed digital distribution services."

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