Episode 015 | How Do Indie Films Make Money In Theaters?
This is Truly Independent, a show that demystifies the indie film journey by documenting the process of releasing independent films in theaters. Each week, Garrett Batty and I, Darren Smith, will update you on our journey, bringing guests to share their insights into the process and answer your questions. Today on the show, it's the episode you've all been waiting for. We are going deep into the numbers. How do movies make money?
Daren:You'll wanna watch this one on YouTube because we are gonna draw it out for you today on Truly Independent. Dude, Garrett, how the heck are you, man?
Garrett:Hey. Good. How are you?
Daren:Oh, so good. Because today, even though it's August 20th, tonight as this episode comes out is our premiere, and this is release week. Like, our movie comes out this Friday. It's so cool.
Garrett:Yeah. Yeah. That's feeling feeling good. That is so exciting, and, man, it's gone so fast. And it is kinda strange because we are recording 2 and a half, 3 weeks early.
Garrett:I guess, 3 weeks early, but, but, yeah, I I gotta get in that mindset.
Daren:Yeah. It's it is weird. I've been trying to, like, transport myself all morning, but I I do that anyway. Like, I've I've subscribed to the, Think and Grow Rich, principles of, like, set a goal and, you know, use it every morning, every night and reiterate it and memorize it, say it back to yourself, like, these, not mantras, but just these, what's the word for those things? Sayings.
Daren:There's a better word for that. It'll come to me. Yeah. But, yeah, it's been really fun going through this. We still have a lot of work to do over the next 3 weeks, but, I'm really excited because people can now go see our movie this week.
Daren:They can buy tickets. They can go see it. Like, holy cow. It's here.
Garrett:Yeah. This is the Utah opening weekend. So our plan right now is to be on, you know, 25, 30, maybe 35 screens as we open on Thursday night. You guys can go see the Faith of Angels movie, and, and I think next week, we'll be talking about box office receipts and how it went.
Daren:Yeah. We get to transition from talking about other people's box office to trans talking about our box office, which I'm very excited for. And it kinda sets us up for the conversation we're gonna have today. We have we should look at box office, but and then we'll get into the topic for today. So how about we do that?
Daren:Let's swap over to box office mojo. Looking at the weekend, August 16th through 18th 2024. What do we got?
Garrett:Alien, Romulus came out over the weekend, $42,000,000 gross. They played on 3,885 screens. So great. I mean, that's a $10,000 per screen average.
Daren:Yeah. And I was reading this morning, they did a a hun they did a, I think, a 100,000,000 worldwide opening weekend, which is also awesome for them. Yeah. Disney's just killing it this year. I saw something else this week where Disney now has the highest, box office for every single rating for g, PG, PG 13, and r.
Daren:They have now the highest grossing movies in each one of those categories, which is just domination. Pure domination is what that is.
Garrett:Yeah. Well, they're they know how to distribute. They know how to distribute. Thank goodness. And they've proved that over and over.
Garrett:Yeah. This number 2 was still Deadpool and Wolverine, also Disney, which
Daren:feels still did 30,000,000 in its 4th weekend.
Garrett:That, but we've got Deadpool and Alien released by Walt Disney Studios. So Yeah. So not sure how I feel about that. But good good for them. Scroll down to number 9.
Garrett:Here we go. Number 9, a movie called Stree 2. Looks like a then let's see. After the events of Stree. Okay.
Garrett:So it's a sequel. The town of Shandary is being hunted again, haunted again. Okay? This was released. It's a comedy horror, released on over 600 screens, and it is the number 9 movie with a box office, total of $2,500,000 on its opening weekend.
Garrett:600 screens. The plan works. The goal works. Hopefully, November 1st, you'll see carpenter 1 on there, right, breaking into that top 10. 600 plus screens right around that $1,500,000 weekend.
Garrett:We'll see.
Daren:Are you just Let's go. Ing yourself up for a possible Carpenter 2? Is that what you just did?
Garrett:Say, oh, hey, man. The story is there. The story is there. Lots of stuff, going on. Lots of action.
Garrett:I mean, the Carpenter is a fun movie. We haven't talked about it for a little bit, but it is a, I mean, essentially, it's this fight movie and this action movie, set in Nazareth, and it's unlike anything people have seen. It has a heavy metal soundtrack, and when people watch it, they take the first 5 to 10 minutes to be like, wait, what is going on here? And then they're immediately, like, taken and go, okay. I'm in.
Garrett:I'm in. And then they go for the fun ride. And so, yes, I could do we we could do another series of Carpenter movies.
Daren:That is true. Man, exciting. I'd go back to to, Cape Town in a heartbeat. I'm sure I've said that a dozen times on this podcast now at this point. But what's exciting, and I wanted to point out with street 2, like, that's one of the highest indie openings we've seen since we've been covering this.
Daren:Usually, it's kind of the 400,000 to 1,500,000. This did 2 and a half 1000000 in its opening weekend. Yes. It's a sequel, but they still use the same model, 600 screens just over 600 screens, and, like, they killed it. So I I haven't seen any of the marketing for that movie.
Daren:I haven't seen a trailer. I haven't heard about that movie, but, obviously, they did a good job tapping into the audience that liked the first one and got them to show up because they sold, what is that, 250,000 tickets in a weekend, which is amazing.
Garrett:So That's good job, guys. That that's a that is having an audience and knowing what they want, which is what we knew. It's fine if, come November 2nd when we're, you know, if we're landing somewhere on this chart in that top ten area, people say you know, we might get plenty of people to say, what? I've never heard of The Carpenter. What is that?
Garrett:And that's absolutely fine, and we're going for the audience that, that we're building with that brand and and, that's who we need to support the movie. I will note that, scroll down a few more. Number 12 is my penguin friend, on a 1000 1,000 screens Yeah. Distributed by roadside attractions and they usually they do oftentimes do a similar model of that 600 to a 1000 screens and, just came in at number 12 with another with a 1,020,000 at the box office. And so, kudos to them again just like I love this model, and I think we can make it work.
Daren:Yeah. It's exciting to be testing it out and be learning from this one. I think faith of angels is gonna do really well. We've already seen a really good swell since we've been talking about premiere and tickets and stuff happening this week and next week. It's really exciting to see it the ground swell start.
Daren:Right?
Garrett:It is. Well, and, Darren, I know we're recording this, you know, we're listening to this September 9th, but we're recording it in August, we just just put our premier tickets on sale, kind of announced that via Yeah, an hour and a half ago, announced it via our email list that was built by people sharing the trailer and people, logging on to request, you know, a theater near them, and so we have this list of active audience, potential audience, and we're seeing a a little bit of a hubbub with the, you know, good action, good good activity with our premier tickets being on sale. So, I'm I'm excited. It's very encouraging.
Daren:Yeah. It's also fun to be able to reengage with a lot of the cast and crew that we worked with a year ago, whereas the last year has got to be pretty quiet. Like, you make a movie, and then everybody kinda goes away, and they all go make other movies. And we finish the movie and get it ready for release. But, like, now that we get to talk with Cody and Charlotte and all of the crew that's been, like, oh my gosh.
Daren:I can't believe it's finally coming out. I can't wait to be there. Like, it's so fun to have another opportunity to see all them, to chat with them, and I'm excited for this premiere. So good times ahead.
Garrett:Yep. Yep. Should be fun. Yeah. Okay.
Garrett:What are we gonna talk about today? We don't have a guest because we wanted to kind of dive into some of the behind the scenes, the analytics and numbers and quants and everything associated with what's been driving our decisions, on this.
Daren:Yeah. You just said so many of my favorite words. Hey, indie filmmakers and movie lovers. This show is sponsored by Purdy Distribution. Since 2011, they've been bringing incredible independent films to theaters, like Garrett Batty's The Saratov Approach, T.
Daren:C. Christensen's Love, Kennedy, and McClain Nelson's Once I Was A Beehive. They've worked with top notch directors like Mitch Davis and Mark Goodman specializing in family, faith based, and funny films. This year alone, they've released hits with JK Studios like Go West and Villains Inc, and have even branched out internationally with films shot in South Africa and Japan. Purdy Distribution works closely with indie filmmakers, designing personalized distribution plans, whether it's a theatrical release or straight to streaming on platforms like Amazon, Itunes, Google, and more.
Daren:If you have a PG or PG 13 film ready for the world, think about reaching out to Purdy distribution. They're approachable and knowledgeable, ready to help you visualize film's distribution. Even if your film isn't fully polished, they can offer valuable guidance. Plus, if you need that crucial distribution piece for investor packages, Purdy Distribution can provide a letter of intent to distribute, helping you secure funding without locking you into a contract. Mark your calendars for Purdy Distribution's upcoming releases, Tokyo Cowboy on August 30th, the digital release of Thabo and the Rhino Case on September 1st, Faith of Angels in theaters on September 12th, Villains Inc on Amazon and Itunes on October 1st, and The Carpenter on November 1st.
Daren:To stay updated on these releases and more, sign up for their newsletter at purdiedistribution.com. That's purdiedistributiondot com. Now back to the show. Yeah. We're gonna dive into the numbers today, and I'm so excited.
Daren:So if you're listening to this, I would encourage you to pause it and go over to YouTube and watch it because what I'm gonna do right now, Garrett, is I'm gonna share my screen, and I've got my iPad pulled up. And so what's gonna happen now is you and I can see my screen, and we're gonna talk through 2 different aspects of the numbers that really have been driving this strategy that we're talking about. So one of them is, how do you make money? Like, this is a question every investor is always asked when we have these conversations. Like, okay.
Daren:Well, how does your movie make money? So we're gonna walk through kind of we call it the waterfall of once a ticket is sold and your movie is in theaters, how does that trickle down to money in your and my and the film's bank account? Right? So we're gonna talk about that. But we also want to talk about and I think we want to talk about this one first is, you know, a few weeks ago, we had an almost 2 hour conversation, you and I, where we were diving really deep into some data.
Daren:And so why don't we start there? The the data that we were looking at was really around there's a term called comps, which stands for comparable movies. So if we look at other movies in the same genre, in the same budget range, and, really, that followed kind of a similar strategy, a 1000 or or less screens or maybe 2,000 or less screens. So we're not talking wide release studio movies. Where did they perform really well?
Daren:What theaters? What chains? What locations? What regions? And let's kind of handpick the the theaters we want to release this movie.
Daren:And so why don't we dive into some of those numbers? I don't know if you've got that spreadsheet pulled up, but I certainly do. Can't share the data because it's a little proprietary, but we can definitely talk about what we learned and what we took away from that. So where do you wanna start with this, Garrett?
Garrett:So yeah. So anytime we're budgeting a movie, I mean, it even starts long before, hey, where are we gonna put it in theaters? Comp titles come when you're pitching a movie. Right? And you're saying, hey.
Garrett:I I want to do a faith based movie set in 1989 about a true story. And so you'll start to put together comp titles and say, has that been done before? Is there an audience for these types of films? You know, and you start to say, okay. Well, let's look at, you know, everything from his only his only son is a low budget independent film released by Angel Studios, faith based story, about Abraham.
Garrett:Then we look at, Ordinary Angels, which is, from the the Erwin Brothers and Kingdom Story and, just really kind of the the high bar of independent film, but faith based film and and a similar title. We have one called Escape from Germany, which is, we've we've we've had TC on the podcast. Now that wasn't out when we initially started raising money for this movie or building a budget, but we start to say, okay. These are our comp titles and then chosen. Obviously, we need to work that in as a faith based faith based title with which people are very familiar, but that's you know, if we want that success, let's put that not necessarily in our comp title for pitching the movie, but an idea of what what we can do if, if a movie like this takes off.
Garrett:So we have a number of different and unsung heroes is another comp that we used for faith of angels. We start to realize that these movies, you know, if we make a movie for a certain budget and put it in similar screens, that those films played in, that there is an audience for that. There's an opportunity to recoup based on what those similar movies have done.
Daren:Yeah. So as we start looking at the data, I'm gonna kind of talk about what we're seeing even though we can't show it, And, you can always stop me if I say something I'm not supposed to say about the numbers here. But we took data from across all of those projects, His Only Son, Ordinary Angels, Unsung Hero, Escape From Germany, and then 2 different releases of The Chosen where they put, you know, 2 or 3 episodes into theaters. We basically sorted them on the average box office for each one of those releases. So some of the theaters didn't release any of those, or or 4 out of the 5 or whatever it may be.
Daren:And we've got 2848 theaters that we have data for ranging from $24 in box office all the way up to scroll scroll scroll scroll scroll, lots of data. $56,000. Yeah. For 1 theater, like, 1 theater, the average was $56,000 So like on that one, we can see that some movies did over a $100,000 in that theater and others did closer to $30,000 so the average was 56 for that theater across those titles. Then what we did was we sorted the average gross and we said, okay, if these theaters have historically performed really well for the comp the comparable movies for Faith of Angels, We wanna know which theaters those are so we can target them and make sure that we're booking our movie in theaters that have a high average as opposed to a low average.
Daren:Right? Did I say that correct?
Garrett:Yeah. You did. And the reason that that is important to us is because, you know, these movies, you've got Ordinary Angels and, Chosen, and they they are they are they have comparatively much bigger marketing budgets and much bigger audiences that are already aware of of, the the filmmakers or the stars or the stories. And so they are going to be playing in these 1,000, you know, 2,000 plus screens. Yeah.
Garrett:Our movie, we have, you know, we're opening in Utah on 25 to 35 screens, and then, in 2 weeks, we'll open across the country on 200 to 400 screens. There's a cost associated with getting a movie to those screens, and so we want to make sure that we're not spending that cost sending our movie to a screen that doesn't perform.
Daren:Yeah. And there's not just the physical cost of, like, shipping a poster and a DCP, but as we've said before, if you put a movie in a theater and you don't tell anybody about it, that's a great strategy to make $24 because you sold 2 tickets over a weekend, and then that theater is not gonna book you the next weekend. And so, really, we wanna look at where can we place the movie, but also place some marketing dollars so that we can get people to show up to those theaters. Right?
Garrett:Correct. Correct. And then also, you know, even even deeper into that and you say, okay. If we're gonna open Faith of Angels in Atlanta, you know, and we're picking 5 theaters, Not only do we have hopefully some high grossing theaters based on the data, but also location wise. Okay.
Garrett:Is this north of Atlanta? Can the people that wanna see it who live south? Can they will they travel up there, or do we need to open another screen, you know, 30 miles away to get that audience? And so all of the research, has to go into that.
Daren:Yeah. And this is why you hire a distributor because they have this experience. They've done this multiple times and they know, oh, we're going to do these 5 theaters here because the map works and the strategy works and we know the people and we can negotiate some help with the marketing. You know, all those things come into play. There's a lot of variables, but we just wanted to make sure that we're targeting and looking at the right theaters.
Daren:Right? So once we got all that data and put it into a spreadsheet, we then sorted based on average gross. And what we found was if I scroll, scroll, scroll, scroll again, we set a target maybe you can speak to this. We set a target of any theater that's north of $5,000 kind of got the green light, the automatic green light. Right?
Daren:And so we found 1250 theaters that historically, for our comps, had done at least $5,000 for that theater, for the run of show, for that movie, or across the average of those movies. So we had 1250 theaters that were greater than or equal to $5,000. So tell me talk to me about that number, Garrett, because it doesn't cost us $5,000 to put it into a theater. Why that number? Why not 10?
Daren:Why not 4? Like, where did that number come from?
Garrett:Well, I think that comes from wanting to looking at our gross. And we say, 1250 theaters at 5,000 or more. And we, let's see. We might need to edit this. Darren, what's the answer you're looking for?
Daren:How you determined 5,000 was the the the cutoff?
Garrett:I don't know. Seemed seemed like a good number. Is there a logic behind it?
Daren:Oh, that's what I was curious about. If there's not logic behind it, then that's okay.
Garrett:No. There's no logic behind it.
Daren:Okay. Well, we'll pick it up from there. So essentially, we've we picked $5,000 as a cutoff to say that's a pretty, if we did average at that theater, we would get $5,000 from that theater. And if we, you know, extrapolate that out over 2, 3, 400 theaters, it's a pretty decent box office. That's kind of our thinking there.
Daren:And so we went to the distributor, to Purdy, and said, all of these theaters have an automatic green light. You can book any of these 12 50 theaters. We only have budget for 2 to 400, but any of any of them that are above this threshold, go ahead and book. And it was like a really cool conversation for them to go, oh, that's cool. Thanks for doing that work.
Daren:And we felt really confident that, oh, that's a winning strategy. If we know we're only booking theaters that have had a good showing for our comps, maybe that helps us in the box office when we release our movie. Right?
Garrett:Yeah. And, Darren, you you asked about the 5,000 threshold, and I I kinda struggled to come up with an answer there. And I'm realizing the 5,000 was selected because by the time and we'll go into this for the next second half of this conversation is once the theater takes their money, you know, their share and the distributor takes their share, then it gets back down to us, then that's about then then that be it's still a profitable endeavor. But once we get kinda below that 5000, 4000, 3000 area, the the profit of doing the work and marketing the movie and get it out there to that theater starts to really be kind of like diminishing returns. And we and so we said, look.
Garrett:Because we don't have a lot, this is not a quantity of scale. This is like, so like handpicked selecting theaters. We have to be very efficient and selective at where we're going. And 5,000 seem like a good number to do that at.
Daren:Yeah. Well, if you think about it, it also saves us a lot of energy, potentially wasted energy because the way distributors go and book a movie is they reach out to all of their contacts, the theater bookers, and they say, We have a movie coming out. Who wants it? And if we say, Look, out of the 2,000 contacts that you have, only speak to these 12 50 theaters. That cuts out nearly half of the work that they would have to do normally if they were trying to put it out on only 500 or 600 screens like the Carpenter or only 2 to 300 screens for Faith of Angels.
Daren:So obviously you need to reach out to more people than 2 to 300 theaters because if some of them say no or they can't they can't take the movie because they're already booked or because they don't see it as like the most valuable again, it goes back to supply and demand. If they think they can make more money for that weekend from another movie, they're going to keep that other movie in theaters. So it's all supply and demand. So we're reaching out to a1000 in order to get 2 to 3 or 400. Right?
Daren:It's probably somewhere in that range. But if we can say don't reach out to these 1500, that that just saves them time and effort of having to do email replies and everything to all those theaters. So it's actually helping us be more effective and efficient with our time and when the the limited small team that we have for this movie.
Garrett:I think that there's also the benefit of saying, does the theater qualify? You know, does it do 5,000 or more on these comp titles average? And if it doesn't, you know, Purdy has been approached by different distributors. You know, you've got everybody from AMC and Cinemark to, maybe small independent mom and pop type theaters. And and as word of the movie gets out, theaters want good content and so they'll reach out to Purdy, and Purdy can look and say, if they've if they've booked below 5,000, it's not that we don't want to book there, but what can they do to maybe mitigate the costs of us getting the movie there?
Garrett:Do can we can we negotiate better terms instead of the theater taking 60%, let's have the theater take less and so that, we can offset the cost of opening in a lower producing theater.
Daren:Yeah. So so true. So that really nicely kind of transitions us into the next aspect of this. But to summarize, like, we went through a whole bunch of data. We identified 2848 theaters that had released comparable movies in our genre and kind of our size of release and identified 1250 that had done at least $5,000 for the run of show in that theater.
Daren:And we basically said to our distributor, these are the ones we want to book. Right? And so that hopefully helps us increase our per screen average for the run of show so that we've got a better chance of doing better numbers. So that was our thought process with going through, you know, for 90 minutes, 2 hours one day a few weeks ago and coming up with this data. So hopefully that's helpful for those of you because I know a lot of listeners are kind of listening to this podcast for strategy and we're we're more than happy to share it because if more indie movies do well, guess what?
Daren:We can make more indie movies, all of us, not just you and I. So that's our release and our comps and then the second part is how do movies make money? Now we're talking right now specifically the theatrical release because there's certainly plenty of other, we call them windows, where movies make money. You have different flavors of streaming and you have purchases, like people can buy Blu Rays or DVDs. They can purchase digital downloads.
Daren:They can rent them. They can stream them. They can watch them on cable. They can watch them in a plane. There's all these different ways that you can do it.
Daren:So we're specifically talking about the theatrical release right now, and maybe once we're done with the theatrical release in season 2 of this podcast, we can dive into the digital strategy as well. But that's the question we're here to answer today. Right? How do movies make money? So, Garrett, how do you wanna walk through this so that it's clear for the audience to go, oh, I get it now?
Garrett:Well, I can I'll walk through that and you can diagram it. In that way, if you're listening, you can just hear me describing it, and if you're watching, you can see Darren's diagram. I will say that, yeah, that post theatrical revenue is growing and a challenge, and I'm excited. We've got some partners that we'll invite on the podcast who for Faith of Angels have come on early, have been very very supportive of the theatrical release in hopes to, grow that post theatrical revenue through SVOD or TVOD or AVOD, and all of the different licensing opportunities that come with that. The better we do in theaters though, significantly impacts the post theatrical opportunities.
Garrett:So that's why we want an audience. That's why in a theatrical release, you don't come out of the gate saying, Hey, we're in theaters in September, and we'll be on DVD and whatever. It's like, No, no, no. This may or may not ever ever see the DVD. We have to, like, drive an audience to go see it in theaters, and and there's truth to that.
Garrett:If it flops in theaters, it's a little bit harder to make a, DVD deal or streaming. Yeah. I keep saying DVD that that I was like dating myself, but, streaming or licensing deal. So at any rate, back to your question, Darren, you've got theatrical written on your board, theatrical revenue and how that works. Basically, let's just start with just say there's the gross box office, right?
Garrett:That's what we see on the news, you know, on the top 10, say, hey, top 10 box office this weekend, you know, oh, Deadpool did a $100,000,000 or whatever it is or or or this little movie did 2,000,000 at the box office that weekend and we could probably just break that down. So we actually just looked at that title on box office mojo, which was at street 2 or something and said, hey, they did 2,000,000 at the box office. So let's take that 2,000,000, right, gross box office in an opening weekend, and I'm gonna put it in a waterfall, and the waterfall is just a Google Doc that everybody has a strategy or a way to track. I've developed this waterfall for my first film and I've just been doing it, repeating it over and over. So we you take your gross box office for the weekend, $2,000,000.
Garrett:The theaters for an independent film, it's all negotiated, but it averages that the theaters take 60%. Again, depending on the scale of the theater, the brand of the theater, the owners, what are they playing, how long your movie has been in theaters. You know, your opening weekend, they might take 60, but then it trickles down so then now they're taking less and less and less, but it it it averages 60%. It's kinda that's how we work it out. So from 2,000,000, now the theaters take 60%, so they take 1,200,000 that leaves 800,000 net that goes to your distributor.
Garrett:The distributor then takes their percentage and that is going to vary from whatever your agreement, whatever you've negotiated with your distributor. 15%, 0.5%, I've I've seen as much as 27 be asked, I've paid as little as 15%, so you just have to kind of average that out, but in your waterfall you say okay, the distributor takes their fee from the net, after the theaters take theirs. A lot of times there's confusion when we say, hey, theaters take 60 and distributor takes 20. And the filmmaker goes, well, that leaves very little. I mean and the truth is it does leave very little, but don't let your distributor take 20% of gross.
Garrett:The distributor takes 20% of net. So 20% of the 160, or or or of the 800,000 is 160. So that leaves 640,000 off of a $2,000,000 gross box office. 640,000 then goes back to the production company or the film company. Now depending on where your funding came from and your agreements with your investors, that 6 140,000 goes to pay back, in our case, our P and A investors our P and A lenders, which are lending, you know, for the marketing of the movie.
Garrett:They're usually first in line. P and A lending is a good way to be involved in movies because it's kinda last money in, first money out, but the upside isn't as great. You know, you get your, you know, your p and a lender is usually, here's your cost plus 10% back. As you get to bigger and bigger films, you can do different types of loans on that. You know, you can just go get a bridge loan or finishing loan or bank loan, that might have a lower percentage, but you just want to make sure that that money is as cheap as you can find it.
Garrett:So in our case, P and A lenders come in and and we give them a 100% plus 10%.
Daren:So we assume for a $2,000,000 movie, can we assume a $500,000 P and A investment?
Garrett:Sure. Sure. That So that would be The P and A investment is dependent on 1,000
Daren:that they're paid back. Right?
Garrett:Correct. So, yeah, so from that 640 640,000 that came to the production company from the distributor, they're gonna pay back their P and A lenders, which is 550,000, which leaves, what, 90,000 to start to pay back your negative cost. And your negative cost is the cost of your film. Usually, those investors are equity investors, and so they are there's more upside on that. They come in when the film is just an idea, like a random no name director is pitching the movie to, you know, somebody with funds and, they're taking a significant risk.
Garrett:And so that money is usually more expensive. So for our investment on Faith of Angels, it's a 125%. Yeah. The investor paid for the budget of the movie. We're gonna pay them back the budget plus 25%.
Daren:Yeah. So we're running out of, money from the box office at this point because if they're spending 500,000 on p and a, we're assuming that's at least 50% of the production budget, which would put it around $1,000,000. Right? So if you if they spent $1,000,000 and the negative cost plus recoupment of 25%, that'd be $1,250,000 We only have $90 left from the the box office of this movie. So why don't we do another example over here to the right, and do, like, a $5,000,000 global box office or a
Garrett:gross one? Yeah. We'll keep going on. Alright? Yeah.
Garrett:I mean And Just to show And, like, your point your point is made. I mean, that that 2,000,000 people look at that and go, $2,000,000 box office, that's, you know, oh, you guys are you're you you got it made in the shade, and that's not true. I mean, the filmmaker at this point hasn't seen a dime because we haven't paid back our negative cost on a you're suggesting that, you know, in this model, the negative cost is a $1,000,000. Well, that's 1.25 that the filmmakers gotta pay back to his investor, and he's got $90,000 to do that. Now we took the opening box office of 2,000,000, you know, that was the opening weekend for that movie, so you might scroll down and say, hey.
Garrett:Let's check back in 5 weekends when that movie has run its course. Your your opening box office is usually there's usually a multiplier of about 4 for your for the run of the movie. So you can say, okay, scree 2, scree 2, you know, if it's opening box office is 2,000,000, do a multiplier of 4, so you're at 8,000,000 probably for your run of show, you know, and it starts to starts to add up a little bit. Okay. What were you saying?
Garrett:Let's do let's do a $5,000,000 example. You've got that built in. So I'm gonna Yeah. Go into my water talk.
Daren:Box office for a movie.
Garrett:Yeah. So okay. Let's say at the end of the day, we collect no. That's 50,000,000. I gotta put in the right amount of zeros.
Garrett:Say at the end of the day, our gross box office is 5,000,000. Alright? Again, theaters take 60%, so they take 3,000,000 of that. That's 2,000,000 back to the distributor. The distributor takes their fee, which is 20% of that 2,000,000 of that net.
Garrett:So the distributor takes 400,000. That leaves 1,600,000 to the filmmaker. The filmmaker recoups 1,600,000 from that. So from a P and A loan, you're suggesting the P and A loan is 500,000. So I'm gonna just make that work in in my waterfall real quick, 470.
Garrett:What do I need to do to make that work? I need to add 31. Okay. So at 500,000, then so we've got 1,600,000 to start to pay off the PNA. If the PNA is 300,000, that didn't work.
Garrett:Let me just do this real quick. 10. P and a is 5 a 100,000, from that 1.6. 1.1 is left. The p and a interest is 565 on that.
Garrett:Is that right? Yep. So 565 from that 565, we've got 1.043 is left, so just over, 1,043,000, and that then starts to pay back your negative cost. If the cost is a million plus 25% interest, guess what? You're still short.
Daren:It adds up. Short. Right?
Garrett:It adds up.
Daren:It's pretty crazy. And people you know, this is why a lot of investors are afraid of this this investment. Because if you actually if you haven't even done this math as a filmmaker, if you're just like, oh, yeah. We're just gonna put the movie in theaters and make our money back. If you haven't actually run the numbers, like, this is really serious stuff.
Daren:I was talking to an investor just the other day, at a meetup, and it was like, how do you guys make money? And it was like, I was walking him through this essentially just with my in in my head, and they were like, I I don't see it. I'm like, well, you gotta make sure that you have a good strategy beforehand because if you just go into the marketplace with no plan, it really doesn't work out for everybody. But if you have a plan and if you've run these numbers, well, guess what? You can figure out what it takes to be profitable.
Daren:Now we should include that, like, yes, it would be amazing for your movie to get into profit during a theatrical run. Lots of movies have done that. It's not impossible. Plenty of indie movies have done that. It's not impossible, but you have to have a plan for how to do it.
Daren:So you need to understand what's the number that you have to hit in the box office in order to get to break even, in order to enter into profit. And so let's do one more just for the sake of people being able to see because we haven't even got to Producers Net. Right? And we wanna get there at some point. You and I wanna get paid.
Daren:Our filmmakers wanna get paid.
Garrett:Yeah. We haven't we haven't made anything yet and we've if we're looking at a gross box office of 5,000,000, which is huge for an independent film and, at the end of the day, we're still holding an empty bag, I guess that's why we have day jobs.
Daren:Yeah. But simultaneously, if you get to the point where your negative cost is all but recouped, like at this point, we're about $200,000 short of covering the 125 percent of investment from that, the negative cost.
Garrett:Right. You
Daren:know, that means we only need to do about 5 5,500,000 in theaters in order to break even break into profitability. But then you have all those other windows that we talked about that there are fewer participants in. Right? You don't have a theater taking 60%. You don't have P and A lenders still getting recouped.
Daren:Right? And so you're now able to make a larger percentage of the money you make from streaming deals, from rentals, from all the other windows that are out there. So it doesn't mean that if you're not profitable in theaters, you'll never be profitable. You just wanna get as close as you can to profitability and ideally into profitability from theatrical so that you can do really well. Okay.
Daren:So let's do one more example just so we can, go into what it looks like for a producer, for example, like yourself, the production company who owns the film, how how and when do they make money and how much do they need to make given these kind of same numbers? Same budget of $1,000,000, same p and a of $500,000. So where do you wanna start? Do you wanna do an $8,000,000 box office or a 7 and a half or a 10?
Garrett:So I'll show you a secret. I wanna show you a secret. You take your list of comp titles, and you say those 1,000 plus screens that did 5,000 or more, you take those averages and say, if we were to play on those, you know, if this if this takes off or whatever, and there's always the if. And once you start hypothesizing like that, I think it's you're in dangerous water, but, for the sake of this podcast, we'll hypothesize. So that that is in it essentially, you take all of those theaters and say what were their averages and what do they total and you're at a $11,000,000 box office.
Garrett:Great. So let's play Do an 11.
Daren:Love it. So we have 11,000,000 right here at the top. And then so same thing. Let's let me get my calculator out because I don't do public math.
Garrett:I got it. It's all built in. So 11,000,000 gross box office theaters take an average of 60%. You're at 6,600,000 to the theaters. So the distributor is going to collect 4,400,000.
Garrett:4,400,000. They're gonna take their 20% of that. Wait.
Daren:Wait. Wait. I'm I'm behind.
Garrett:Okay. You're fine. Oh, you're just getting the colors right.
Daren:So it's one of these
Garrett:these charts that are so visibly, they're, like, aesthetically organized and pleasing and colored. Yes. So the distributor is gonna take 4,400,000 or recoup 4,400,000. They take 20% of that, which is 88, 8 880,000. So that leaves for the film production company to pay off their costs, 3.53,520,000.
Garrett:Seems like a lot of money. This is great. Hey. We did it. We made a lot of money.
Garrett:Wait till we start paying people back. Now I'll just add this little, asterisk, this disclaimer. These are all very clean numbers. Right? The theaters, again, you're negotiating your your their take on that.
Garrett:The distributor, you're negotiating their take, but also distributors can be notorious for having distribution fees on top of that or, you know, they're paying your costs. I think it's very good to have a good distributor that's transparent and have a great contract and agreement to say, look, distribution, your costs come out of your fee and there's $880,000 that's going to the distributor. They do an incredible amount of work, but that's the risk that they take. At this point, everybody is risking. Okay.
Garrett:Yep. You know, so we're at 3.300 3,520,000, that goes back to the production company. Our p and a lend was 500,000 plus interest is 56,000.
Daren:560? Oh, interest is 56. So 5.56 is the total back to them?
Garrett:Total back to, lenders, p and a lenders, it's 556 plus 5056565, but it's okay. That leaves us just about 2.785 for our negative cost investor. Guess what? He came in. You know, if we're saying the budget for the movie is the same, it's a $1,000,000 movie, plus their $250,000 interest.
Garrett:So now our negative cost investor has recouped. At that point, we're in the green. We're in the black. What's it called? Black?
Daren:We're in the black. Yeah. I'm gonna go back to black now.
Garrett:Yeah. That's our Black Friday. So
Daren:What's that math? 2785 minus 1250.
Garrett:So 1.5. 1.535 is our is is the is the now the take that the production company has, and it depends on what your agreement is with your negative cost investor. They came in for their cost plus 25%. Our agreements is 5050 for the life of the film. That's again, the the amount of risk that a negative cost investor comes in is substantial and so we try to say, hey, if we win, you win.
Garrett:If the film does big, everybody benefits. And so we do a 5050. So from that 1,535,000, 50% goes to negative cost investors, so 767 1,000 goes to negative cost, and 760,000 767,000 goes back to the production company. So that's the risk. Again, the that it's like, oh, that's a big number.
Garrett:That's an exciting number, 7,06, 7000. That's from an $11,000,000 box office, which is a a a unicorn. That's a lightning in a bottle thing, and so there has to be different ways to recoup. This yeah. Again, this you've you've actually sketched out, Darren, exactly what I pitched when I pitched these initial investors which is, hey, guys.
Garrett:Here's a very conservative estimate, And at $2,000,000, we may or may not make money, negative cost investor, may or may not make money in the theaters. Here's a here's a, you know, regular type amount. Here's a $5,000,000 box office. Still, we're at not paying you back all the way. So I try to manage expectations when I pitch and say, this is not you know, if you're if you're looking at this and going, hey.
Garrett:We're gonna make $2,000,000 at the box office. Let's spend $1,000,000 to make the film. It's a bad plan. Not gonna it doesn't work that way.
Daren:Yep. Oh, man. I love this stuff. So, you know, somewhere in that range of, call it, 5 or 6, probably closer to 6,000,000 to 11,000,000 is where you're into profitability as the production company that made the movie. And so what do we take away from this?
Daren:So for me, the more that you can own and do on your own, the less you're splitting. So starting at the beginning, 50.50 is a big split. Right? That's half. So if you can finance the movie yourself, you don't have to give 50% away, and you don't have to have someone in position before you who's going to recoup plus 25%.
Daren:I've seen people do a 135% or 35% preferred interest for the first people that come in on an investment in the movie. That's a lot of money. That's a lot of your profit you're giving up right now. It's always a trade off. That doesn't mean investors are bad.
Daren:It just is showing the economics of this to say, if you want to make more from your movies, you've got to take on more of the risk. So you've got to take on the risk of investing in the movie. You've got to take on then the risk of financing the P and A for the movie. That's another 10, 15% that you're giving away. And then it this is where you get into the territory of being your own studio because you're now producing films and distributing them.
Daren:That's what studios do. So if you look at a 24 and Neon and Focus Features and Roadside and, like, they're financing the movies, but then they're also they may or may not be producing them, but they're hiring, contracting a company that's a work for hire. Maybe they get a little percentage. We don't want to get too into the weeds on the details of this stuff, but, like, that's why companies go from producing films to producing and distributing films. And I know a couple of, individual executive producers that have been so frustrated with how little comes back to them from a release of a movie, they're just like, I'm gonna do this myself.
Daren:I'm gonna do the distribution all on my own because they were upset with how the deals played out. So if you can take on distribution, now you've got that percentage. Now the likelihood of you starting your own theater chain that has a 1,000 theaters, good luck. Right? Like Cinemark has done that.
Daren:I think AMC is only at, like, 500 or something. So there's not a lot of chains that have 100 of theaters. Even Megaplex, our local big guy is, like, 25. Right? So you can the more you take on, the the less you're giving away, the less, quote, unquote, middlemen there are that are in position before you.
Daren:So if you want to have this be a more profitable endeavor, you gotta take on more of that risk. But also thinking about, okay, this is only one of many windows where your movie can make money. This is the initial kind of big push where it makes kind of the most money, but from there you have forever that you can put the film online. You can license it to other streamers. You can sell the movie, rent the movie, stream the movie.
Daren:There's all these different flavors of doing that where you can continue to make money for the life of the film.
Garrett:As an indie filmmaker, you know, putting these waterfalls together, I look at this and go, look. This is this is very deflating. Like, how why why do we even do this? And, obviously, there's that drive to tell stories and and there's that thrill of testing it out of risking it like this is inherently a risky business. When I have conversations with investors and they talk about how can we I mean to a certain extent it's important to mitigate the risks but if there's that mentality of I don't wanna take a I don't wanna risk anything, that conversation ends pretty quickly.
Garrett:It's like, we we gotta we gotta do this together. We're gonna be nervous together, and we'll get through we'll run this play, and, at the end, we'll we'll see how it turns out. And and there were ups and downs all along throughout throughout the entire process. It's important not to be deflated though to go, okay. People are doing this.
Garrett:This is if if this is the business that we're in, and we're gonna just keep swinging at it until we can make it work. And I think that that's what we're trying to do with these 2 films.
Daren:Yeah. Exactly. There's one other number that we didn't talk about, but, like, once you've kinda hit that breakeven point, your, negative cost investors, your equity investors are recouped fully, that 125%. Now now you're into 5050 split. So whether that's 5,000,000 or 5 and a half 1000000, everything after that point, you can kinda look at somewhere in the range of 15 to 20¢ per dollar that comes back to you as the production company that owns the movie.
Daren:So that's kind of a fun number that I I know I think about all the time. It's like, oh, okay. If I if we hit 5,000,000 or 6,000,000, everything after that, I get 15¢ or 13¢ or 18¢ or whatever the numbers work out to be. And so that's where you're motivated to not just put the movie in theaters and see how it does. It's like what we're doing through this podcast or at least documenting on this podcast of here's how we're gonna get to 5.
Daren:Here's how we're gonna get to 10. Here's how we're gonna do it, and it's not a hope strategy. It's a plan. And if the plan doesn't work out, okay. We we tried, and now we have data that we can use the next time.
Daren:But at least we had, an objective and, some data that says, here's our plan to do this. And then we can adjust the plan in the future to say, oh, well, we planned this last time. It didn't really work, so we need a different plan this time. And then we do a different plan. Right?
Daren:Yeah. And so it's exciting to get data from theatrical from our own plan, being run-in a few weeks, really this week as this episode comes out, like we mentioned. But it's very exciting. And I I think it's a really smart approach to the business of filmmaking. It can't just be, oh, we're really passionate about this movie, and we think it's really good, and it deserves to be in theaters.
Daren:And we hope that you guys show up and and do it and buy tickets. It's like, well, that's that's not a strategy.
Garrett:There's more to the way I can. Yeah. I think, 2 other numbers we have talked about too is, like, how do you how do you avoid being that deflated thing or how do you, you know, for an independent film to make $6,000,000 at box office is very, you know, that's very rare. They just don't do that, so why do it and how can you do it? And at this it starts at the top and say, how can we make this movie for cheaper?
Garrett:Where can we where can we save money? Certainly can't sacrifice the quality of the content or or the idea that you want to tell, but filmmakers can win big as we have done in the past by making your film for much cheaper, you know, maybe spending less on your marketing that brings down that theatrical nut that you have to make before profitability.
Daren:Yeah. When I think it also goes back to this idea from day 1 of this podcast is the importance of an audience because that's free marketing. So if you can build a brand like Pixar, like Blumhouse, like A24, like the one we've talked about, Well, when you have a movie come out, all they need to do is say, here's a new trailer, and then everybody's excited. There's a million people right there. Even Angel Studios has figured this out where they can pretty much guarantee a couple $1,000,000 opening weekend at about a 10 to $15,000,000 box office for each movie that they do.
Daren:So if they spent 5,000,000 on the movie and another 5 on the marketing, that's not profitable. But if the you know, you look at His Only Son or you look at some of the other movies they've done for 2 and a half or $3,000,000 or less. His Only Son was, I think, a $250,000 movie. That's massively profitable at a $12,000,000 box office. So and also Angel did what we were just talking about.
Daren:They own all of it. So they own the movie. They own the marketing. They're putting up the money for their P and A. They're actually raising it from their audience, but we won't get into that.
Daren:But, like, they own it. They own all the pieces, and then they distribute it. So they have a much bigger chunk coming back to them than just the 20 to 35% as being a distributor. They own everything that comes after that theatrical, take. So they're getting 40%.
Daren:They're going to recoup a lot faster. So I think that's the big takeaway is like, if you're if you don't want to be discouraged, start building your audience today and then have a strategy that really aligns with the type and size of audience you have. If you have a 1,000 people that'll show up and and see your movie, do a a release where you're profitable at a 1,000 people, and you're not losing money in theaters, but you're making a little bit of your money back. So rent a theater for a few weekends or a few days over one weekend. Seen plenty of films do that.
Daren:Some of these, music documentary or concert films that will release for 4 days and make $2,000,000 because there's a couple 100,000 people that'll go see it. It's like, great. Do that. They didn't put it on 4,000 screens. They put it on 500.
Daren:So I'm getting, redundant at this point. But, yeah, focus on building an audience that you can then deliver value to by putting your movies in theaters, and they'll show up.
Garrett:It's a good plan. Darren, tonight, premiere. We'll see you there. I cannot wait.
Daren:Go get my suit. I gotta go get a tux. I wanna dress nice tonight. I wanna look like I can't be like I came from church. Here's my suit that I wear every week.
Daren:I gotta I gotta show up tonight. So I'll plant that seed now, and everybody can see the pictures of what I'm wearing on the red carpet.
Garrett:I'm gonna be I'll be in my church suit. I'm trying to save money. After going through the numbers, I'm like, man, we gotta save some money.
Daren:Awesome. Awesome. Well, that's a very cool episode. I don't think we're gonna answer any questions today because we just answered a lot. But thank you all for listening.
Daren:Share this episode with your filmmaker friends and and investor friends because this is a huge resource to be able to understand the numbers here. And It does work.
Garrett:It does work. We've seen it work. There's evidence that it works. This is our 8th film. Some recoup in the theaters, some don't.
Garrett:There's post theatrical that, you know, it is a business and and, yeah, don't don't don't be downhearted about it.
Daren:Yeah. Awesome. Thanks, man. Another great episode. We'll see you tonight.
Garrett:Thanks, bud.
Daren:And we'll see you next week.
Garrett:Can't wait. Talk to you later.
Daren:See you. Thank you for listening to this episode of Truly Independent. To join us on the journey, be notified of new episodes and screenings, and ask us questions about today's episode. Head over to 3 coinpro.com/podcast, and put in your name and an email address. If you're a fan of the show, please leave us a review on your favorite podcast app, and be sure to share this episode with a friend.
Daren:Thanks for listening, and we'll see you next week. Our intro and outro music is Election Time by Kjartan Abele.
