Modern Cinema Group | 100 Title Worksheet Guide
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100 Title Worksheet Guide

100 Title Worksheet Guide

Version – 10 Million Subscribers

March 2015

 

Spreadsheet Overview

The purpose of this worksheet guide is to explain the performance data for the 100 movies selected for analysis, however extend the worksheet to include data relevant to Multichannel Operators looking to participate in the Channel Islands Studios film financing co-operative.

Please see the explanations for the various tabs and columns within the spreadsheet named “100 Title Worksheet” below:

Analysis Tab

The first tab in the spreadsheet, “Analysis” shows the estimated revenues and expenses for the comparison films. For each film, a calculation is made of the producer profit/(loss) based on the assumptions made in the “Service Deal Distribution” and “Other Assumptions” tabs. What we are presenting here is the profit or loss these films would have made (based on our revenue estimates) assuming they had the same distribution agreement as we are assuming for the client’s film project. The figures presented here may be a good reflection of how much these individual films made for their producers, but we do not consider factors such as international pre-sales, shared P&A costs, favorable (or poor) distribution agreements, or other factors that will have affected the actual earnings for these projects. The reason we take this approach is that we want to show the range of likely outcomes given the sales/distribution goals of our client.

This tab contains the following columns:

Column A – Domestic theatrical release dates for each movie. The domestic market is defined to be the United States + Canada + Puerto Rico + Guam.

Column B – Movie Title

Column C – Stars (if any)

Column D – Production Budget. This is either the actual budget, as reported to us directly by producers/studios, as reported in reputable trade press, or as estimated by NIS based on the creative talent involved, the type of film, and the distribution pattern.

Column E – Advertising Costs for the domestic theatrical release of the movie

Column F – Print Costs for the domestic theatrical release of the movie (i.e., the cost of copying and distributing the spools of film sent to movie theaters)

Column G – Total revenue collected by the distributor of the movie. We make the simplifying assumption that a single distributor distributes the film in every territory worldwide and estimate revenues for the first seven years the film is in release. The revenue collected is based on a number of assumptions about the revenue share with movie theaters and retailers, as described in the Assumptions section below.

Column H – Distribution Fees and Costs include all fees and costs that we anticipate the studio would charge against the distribution of the film. These include P&A costs for the theatrical release, marketing costs for the video release, marketing overhead charges, guild fees, and the distribution fee charged for distributing the film.

Column I – The Producer Revenue column is an estimate of the revenue received by the producer after the studio fees and expenses have been deducted. This is simply the difference between the previous two columns (Distributor Collected Revenue and Distribution Fees and Costs), or zero if the fees and costs incurred by the studio would be greater than the revenue they would receive under this model.

Column J – The Net Producer Profit / Loss is the amount the producer would have made (or lost) based on the revenue figure in the previous column, subtracting the production budget of the film.

Column L – The domestic theatrical box office receipts for the movie. i.e., How much people spent going to see the movie in theaters.

Column M – The most theaters the movie played in at any one time in the domestic market, otherwise known as the point of “widest release.”

Column N – International theatrical box office receipts. Again, this is the amount spent by moviegoers, this time for the rest of the world.

Column O – Domestic Video Sales. The amount spent by consumers purchasing the movie on video at retail stores, or paying to download a permanent copy of the movie from the internet. This includes VHS tapes, DVDs and Blu-ray, as well as online digital purchases. Since studios do not generally release official sales numbers for video, these numbers are NIS’s estimates, which are based on retail surveys and official and unofficial studio reports. These numbers are believed accurate to within about ±10% for major films and ±20% for independent films.

Column P – International Video Sales. These are estimates for consumer spending on video at retail internationally.  Again these are estimates based on market models, retail surveys and studio reports. These numbers are generally accurate to within about ±20% for major films and ±30% for independent films.

Column Q – Domestic video rentals. The amount spent by domestic consumers renting the movie, for example at Redbox kiosks or via Netflix. This also includes digital online rental and video-on-demand (VOD). Again, these are NIS’s estimates, accurate to within about ±10%.

Column R – International video rentals. Estimated using NIS’ models and accurate to about ±25%.

Column S – Domestic TV Rights. The amount spent by cable and network TV acquiring rights to show the movies. For most movies, this is an estimate, based on standard industry ratios.

Column T – International TV Rights. The amount spent by international cable and network TV companies on the movies.

Column U – Other ancillary income. This includes soundtrack sales, licensing of intellectual property for posters etc., licensing to airlines for inflight entertainment, and other revenue that doesn’t fit in the other categories above.  The numbers are all broken out for each movie, and then there is an analysis at the bottom of the spreadsheet with the median and average in each category, along with the maximum, minimum and standard deviation, for the mathematically inclined. The “Revenue Adjustment, Based on Budget” line in the sales projection adjusts for budget differences between the sample set and the target movie in a sales projection. This is used when the median budget for the sample movies is significantly different from the actual budget of the target movie and adjusts for the fact that movies with higher budgets tend to make more money across all revenue streams. For example, a movie with a $40 million can be expected to make about twice as much as a movie budgeted at $20 million. The budget adjustment percentage is equal to the ratio between the median budget in the sample set, and the actual budget for the target movie.  In general, the Revenue Adjustment line provides the best guidance — this gives an idea of what a typical movie like this makes in each area.

Notes on Columns AA through AH – Impact on Operators

Columns AA through AH show projected financial results to operators if they had made equity investments in these 100 movies by way of the Channel Islands Studios co-operative model.

There is one important distinction to make as follows:

The analyses for these 100 movies do not include P&A as part of the producer’s investment.  Most likely the assumption is: the producers use a P&A financing fund and repay these costs from cash flows.

In the Channel Islands Studios model, the constituent operators pay all costs including P&A keeping the following in mind:

  1. Operators pay the P&A costs as borrowing from a P&A fund is expensive plus it demonstrates financial weakness to “rent a distributor” partners, who might be inclined to increase distribution fees.
  2. Operators only pay half of the anticipated P&A costs as the constituents in the co-operative provide ad avails that are worth this much money if not more.

Therefore, in columns AA through AH, it is assumed the operators pay for production and P&A as well, and no P&A financiers are needed.

Also, please keep in mind the columns below assume the operator has a total of ten million paying subscribers.

Column AA – The backend equity percentage the operators will own in each movie.  The calculation is as follows:

The operator receives 95% equity for its money invested (to pay for production costs, print costs and half of the promotional costs – Column AB).  Likewise, the studio receives 95% for its money invested as well.  This results in a total of 5% of the equity will be available to offer talent and other necessary participants who are looking for an equity ownership position – 2.5% of the total from the operator and 2.5% of the total from the studio.  If less than 5% equity is needed for talent and other participants, the unused equity percentage will be equally apportioned between the operators and the studio.

Column AB – Half of the promotional costs used for calculation in Column AA.  This column assumes the operators are providing large numbers of ad avails that will reduce the promotional costs by half.

Column AC – The estimated amount of money invested into each movie.  This calculation is based on a CPS of $.25 (twenty-five cents) for the operator’s 10 million subscribers resulting in a one-time payment of $2,500,000 for each movie.

Note:  If losses end up being greater than the sum total of the investments made by the collective group of operators, then the studio will pay these additional losses taken from its distribution fees.

Column AD – The operator’s profit or loss for each movie.  This columns demonstrates how the operator is only at risk for the initial cash investment and no more.  In most cases, the operator will lose money from the investment alone (without waiving the license fee – which in most cases results in a net gain for the operator).

Column AE – The estimated CPS based on the international box office results.  These CPS numbers are considered reasonable by a major Hollywood studio.

Column AF– The amount of money that would need to be paid by this operator under an “Output” deal.  This amount being waived in the Channel Islands Studios model as the operator is an investor in the movie and has provided valuable ad avails as well.

Column AG – Ad Avails provided prior to the theatrical opening of the movie are paid back in this column.

Column AH – The final result (profit or loss) in the project.  In this column 17% were losers and 83% are winners (after waiving the license fee and paying for the ad avails).  The total Net Positive for these 100 movies is almost $400 million.

Operator Tab

The second tab in the spreadsheet (“Operator”) allows for three adjustable fields as follows:

  • Number of Subscribers
  • Payment per Subscriber (one-time fee charged for each subscriber to invest in a Channel Islands Studios movie
  • Total Payment per movie (total of Number of Subscribers x Payment per Subscriber)

This 100 Title Worksheet has been pre-set to 10 million subscribers each paying a one-time fee of $.25 (twenty-five cents).

Service Deal Distribution Tab

The third tab in the spreadsheet (“Service Deal Distribution”) calculates a return on investment if the movie is released by a target distributor under the distribution assumptions at the top of this sheet. It assumes that the distributor pays nothing up front for the rights to the movie, and pays the producer only once their costs have been covered.

At the top of the spreadsheet, the “assumption” fields in yellow can be adjusted to set up the parameters for the distribution deal. The default percentage figures in the spreadsheet are typical industry averages, but can be changed to suit particular circumstances and model different scenarios.  The first four assumptions relate to the production company: the percentage of the budget that will be recovered by tax rebates or state/country incentives for shooting in particular regions; the share of the marketing costs that will be borne by the production company; and gross participation deals for key talent from theatrical and video revenue.

The second group of six assumptions relate to the distribution agreement with the distributor (although note that the distributor will also be involved in gross participation agreements, should there be any). The theatrical, video, TV and ancillary distribution fees are the percentage of revenue received by the distributor that it takes “off the top.” The advertising overhead is the amount the distributor will pay on agency fees etc. on top of the actual advertising costs associated with a film. The distributor overhead is the additional overheads, such as taxes, currency conversion fees, guild fees, and other expenses that the distributor will charge against the film. The distributor overhead is usually about 20% of the P&A budget of the film.

The remainder of the cells in the Service Deal Distribution tab break down the revenues earned and expenses incurred, and how those translate into profit for the studio and the producers. The final cell shows the Return on Investment based on the production cost of the movie. As in the Analysis tab, a negative % figure indicates a loss and a positive % figure indicates a profit for the producer.

Minimum Guarantee Tab

The Minimum Guarantee tab estimates the returns to the producer under a negative pick-up deal (where the distributor pays for the film, possibly in its entirety, on delivery of the master negative print), or the returns to a profit participant in the film. The defaults in this sheet assume that the film is picked up by the studio for 100% of the production cost and that the profit participation deal is set according to infamous “Hollywood Accounting” standards. It should be noted that very few films are “profitable” under these accounting standards and the final Payment to Profit Participant field will most likely be $0, unless the projection is particularly high. Having said that, this projection can be useful if a producer is expecting a negative pick-up deal, and additional payments under profit participation can be made if a favorable deal is reached with the distributor. The first four assumptions relate to the production of the film. The profit participation rate is the share of eventual profits that this participant will receive. Production Tax Rebates/Incentives is the percentage of the budget that will be recovered by tax rebates or state/country incentives for shooting in particular regions. The Minimum Guarantee is the amount that will be paid by the distributor when the negative is delivered, measured as a percentage of the production budget. The next two fields specify the gross participation rates for key talent from theatrical and video revenues.

The next group of ten assumptions relate to the distribution of the film. The distributor overhead on production is the amount of overhead the distributor charges during the production of the film (to cover costs related to overseeing production by the studio). The theatrical, video, TV and ancillary distribution fees are the percentage of revenue received by the distributor that it takes “off the top.” The advertising overhead is the amount the distributor will pay on agency fees etc. on top of the actual advertising costs associated with a film. The distributor overhead is the additional overheads, such as taxes, currency conversion fees, guild fees, and other expenses that the distributor will charge against the film. The distributor overhead is usually about 20% of the P&A budget of the film.

The Video Revenue Recognition Rate is the share of video revenue that will actually be counted by the studio in its profit calculations. For major studios, a producer will negotiate distribution with the theatrical division of the studio.  However, the video division will release the film on DVD, Blu-ray etc.. The video division “pays” the theatrical division a certain percentage of its revenue, and this figure reflects that percentage. It is often 20%, and can be fixed at that level even by small distributors that do not have a separate video distribution arm. A 20% video recognition rate virtually guarantees that the film will make a “loss,” according to studio accounting practices.  The final two fields are the interest rates charged by the studio against negative and distribution costs. Essentially, the studio assumes that it has had to borrow money to finance the acquisition and distribution of the film and charges interest to the producer accordingly. We make a simplifying assumption that the interest is not compounded, but charged at a fixed fee annually over seven years.

Other Assumptions Tab

The Other Assumptions tab includes other assumptions used in the calculations in the sheet. These are NIS estimates based on industry standards and analysis of financial reports for other films.

The Domestic and International Theatrical Rental Rates are the share of the theatrical ticket price that is kept by the movie theater in domestic and international territories respectively. The Video Rental and Retail

Margins are the average profit margins enjoyed by the retailers and renters of video products.

The Video Rental and Retail Wholesale Overheads are the overheads incurred by the distributor for manufacturing and shipping video discs, and for handling returns and spoiled goods.

Video Advertising vs. Theatrical Advertising is the amount a distributor will spend on advertising the video release of a movie compared to their advertising on the theatrical release. For major theatrical releases, this will be about 10%, but it can be considerably higher for limited releases where the distributor concentrates their marketing efforts on the home market.

International Ad Rates vs. Domestic Ad Rates is a measure of the expense of advertising internationally vs. the domestic market. Conceptually, if this field is 70%, say, it means that for every $1 you spend on advertising in the US, you would only need to spend 70 cents overseas to reach the same number of people. The projection assumes that international advertising spending will be in the same proportion to international revenue as domestic advertising is to domestic revenue, adjusted by this percentage. Generally, international advertising is less expensive than domestic advertising, and this field provides a means of making an appropriate adjustment to the projection.

 

Sources

Our goal at Nash Information Services is to collect as much information as possible about the film industry in order to help us produce the most accurate analytical models possible. As such, the list of sources below is inevitably incomplete.  It does, however, list the major sources we use repeatedly.

Studios and Distributors

Domestic and international theatrical distributors provide us with daily, weekend and weekly box office tracking information for films in current release, as well as release dates, some budget information, cast and crew lists, and other materials related to their films.

Trade Press

  • Variety
  • Screen International
  • Hollywood Reporter
  • Home Media Magazine (and previously Video Store Magazine)
  • Video Business
  • Movie Maker

Major News Outlets

  • New York Times
  • Los Angeles Times
  • Wall Street Journal

The three newspapers above are generally the most reliable sources for movie-industry and business information.  However we treat other major newspapers as being reliable if they have well-sourced information (for example a direct quote from a film’s director or a studio executive).

National and International Trade Groups

  • Digital Entertainment Group
  • European Audiovisual Observatory
  • National Association of Theater Owners
  • Motion Picture Association of America
  • Motion Picture Distributors Association of Australia
  • Motion Picture Distributors Association of New Zealand
  • British Film Institute

Court Records

We obtain public records of film finances from court filings arising from disputes between distributors, producers, agents, financiers etc.

Profit Participation Statements

Producers and others in the industry provide us with profit participation statements for their films. Confidentiality agreements generally prohibit us from revealing numbers from these statements, but the numbers are a core component in the construction of our revenue estimate models.

Tracking Services

  • Rentrak Home Media Essentials
  • Nielsen VideoScan
  • Data provided to us privately by retail and rental outlets

Books

The following is a very partial list of some of the books we refer to most for historical information and to help build our analytical models.

  • Entertainment Industry Economics, Harold Vogel
  • The Hollywood Reporter Book of Box Office Hits, Susan Sackett
  • The Big Picture, Edward Jay Epstein
  • George Lucas’s Blockbusting, Edited by Alex Ben Block and Lucy Autrey Wilson