The Two Main types of Financial Projections for an IndieFilm
As a key part of writing a business plan for independent film, a filmmaker must figure out how much the film is likely to make back. This involves developing or obtaining revenue projections.
There are generally two ways to do this, each with its own advantages and disadvantages. The first way is to do a comparative analysis. This means taking similar films from the last 5 years and plugging them into a comparative model to generate revenue estimates. The second way is to get a letter of intent from a sales agent and get them to estimate what they could sell this for in various territories across the globe.
This blog will compare and contrast these two methods (Both of which I do regularly for clients) in an effort to help you better understand which way you want to go when writing the business plan for your independent film.
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Comparative Analysis - Overview
A comparative analysis is when you comb IMDb Pro and The-Numbers.com to come up with a set number of comparable films to yours. These are films that have a similar genre, similar budgets, similar assets, are based on similar intellectual property, and are generally within the last 5 years. If you can match story elements that are a plus, but there are only so many films with the necessary data to compare.
When I do it, I compare 20 films, average their ROIs from theatrical, pull numbers from home video wherever I can (Usually the-numbers.com), and then run them through a model I’ve developed to come up with revenue estimates. Honestly, I don’t do a lot of this work. Most of the time I refer it to my friends at Nash Info Services since they run The-Numbers.com and the brand behind these estimates means a lot to potential investors.
I will do it when a client asks though, generally as a part of a larger business plan/packaging service plan.
Sales Agency Estimates - Overview
Sales Agency Estimates are when you get a letter of intent from a sales agent, and as part of that deal the sales agent prepares estimates on what they think they can sell the film for on a territory-by-territory basis. Generally, they work from what buyers they know they have in these territories, whether or not they buy content like this, and what they normally pay for content like yours.
These estimates are heavily dependent on the state of your package, who’s directing your film, and who’s slated to star in it. If you don’t have much of a package and a first-time director, then you’re not going to get very promising numbers.
Comparative Analysis - Benefits
Generally, anyone can get these estimates. Some people figure out the formula and do it themselves, others pay someone like me or Bruce Nash to do it for them. There’s either a not insubstantial fee involved or a lot of time involved in getting them. They’ll generally satisfy an investor, especially if Bruce does it.
Sales Agency Estimates - Benefit
The biggest benefit to a sales agency approach is that if they’re doing estimates for you, they’re probably going to distribute your film. Also, these estimates have the potential to be more accurate, because they’re based on non-public numbers on what buyers are paying in current market conditions. Finally, if a sales agent has given you an LOI, these estimates are generally free.
Comparative Analysis - Drawbacks
The first drawback is likely that they’re either very time intensive or somewhat costly to produce. Also, because VOD Sales data is kept under lock and key, it’s very difficult to estimate total revenue from VOD using this method. Given how important VOD is, that’s a somewhat substantial drawback.
Further, these estimates are greatly helped by the name value of who made them. Likely, if the filmmaker makes them themselves, then they’re not as viable as if someone like Bruce or Me does them. This is not only because we both have a track record in them, (Bruce much Moreso) but also because we’re mostly impartial third parties.
These revenue estimates can be very flawed if a filmmaker makes them because many filmmakers have a tendency to only pick winners, not the films that lost money. In business, we call this painting too blue a sky, as it makes everything look sunny with no chance of rain. In film, there’s always a substantial chance of rain.
Sales Agency Estimates - Drawbacks
The biggest drawback to these estimates is that not everyone can get these estimates. You have to have a relationship with the sales agency for them to consider giving them to you. Generally, you’ll need to have convinced them to give you an LOI first. That’s not always the case though.
If you have a producer’s rep, they can sometimes get you through the relationship barrier, but they’ll often charge for doing so when we’re talking about a film that’s still in development.
Also, Sales agencies can sometimes inflate their numbers to keep filmmakers happy and convince them to sign. This does not look good to investors if that money never comes in
Conclusion
Overall, which method you use to estimate revenue depends entirely on what situation you find yourself in. If you have the ability to get the sales agency estimates, they can be VERY strong, if you don’t, the comparative estimates are reliable enough to do what you need them to do. That being said, I wouldn’t advise taking a comparative analysis to a sales agency.
Thanks for Reading! Creating revenue estimates is only part of raising money for your film. There’s a lot more you’ll need to know if you want to succeed. That’s a large part of why I created my indie film resource package, to help filmmakers get the knowledge and resources they need to grow their careers. It’s totally free and has things like a deck template, free e-book, and even specialized blog digests sent out on a monthly basis to help you understand how to answer the questions your investors will almost certainly have. Check it out at the button below.
