General Filmmaking

How to Allocate Money for Low Budget Films (Part One): Estimate Earnings

Should your low budget film cost $10,000 or $100,000? Read this article before you begin.

What is the ideal budget? The ideal budget is one which allows you to:

  • Earn it within your current means
  • Spend it without penalty
  • Recover it with reasonable activity

I have already written an extensive three-part series on how to finance your film, and you should begin there. This article is the ‘prequel’, and will give you ideas on arriving at a practical number for your budget. Still in school and dreaming you’re going to make that $200 million movie next year? Grow up.Oh wait, what? You have an example to show me of some guys who did just that? Well, I have a few examples of kids who contracted fatal diseases and never lived to see their dreams being fulfilled; so should you live your life as if there’s no tomorrow? Don’t get me wrong, I’m all for optimism, but not unrealistic optimism. Shoot for the stars if you must, but never forget you have earth to deal with first.piggy bankHow much money is within your grasp?Too often people think of story ideas for projects without trying to juxtapose it with their financial ability. Loans are great business for lending firms because it’s the easy way out, until you realize it isn’t – and by then it’s too late.Think about this: You buy gear and it lets you shoot your projects. You buy once, and shoot multiple projects. Money works similarly. You earn once, and as long as you can recover it after having spent it, you can continue spending it as many times as you want.If you’re a little smart, you’ll try to recover a bit more than you spend, because there’s always the following kinds of expenses that suck your fund dry:

  • Inflation
  • Failure of gear
  • Per diems
  • Unexpected expenses
  • Failure of project to recover money
  • Taxes and fees

So, let’s get down to the main issue. If you’re in a small town or city, and you want to get your filmmaking dream (or video business) underway, what kind of budgets should you look to spend?The wrong answer is: Whatever you can afford to lose. No, the budget for your movie is not what you have with you right now. The budget for your low budget film depends on factors you might not even have considered yet.How much will you earn?What is the size of your audience? In the articles on film financing, I’ve given some statistical numbers that should be an eye-opener. Let’s compress that down to a little town:Let’s say our small town has one multiplex with two cinema screens showing four shows per day. Each screen can hold about 250 people. Out of this, you only get to show your movie in one screen because the other screen will be showing a ‘big movie’. Let’s say you want your movie to run for 14-days (not in your hands, really). The total number of human beings who can (theoretically) watch your movie = 250 x 4 x 14 = 14,000.If your town has a population of 100,000 people, that’s 14% of them who can show up if they wanted to. But they won’t. In most likelihood, the seats will be empty more than half the time. Which means, you might be lucky to get 5,000-7,000 people to watch your movie over the 14-day run, with more people coming in the first week than the second.If each person is willing to pay $10 (just a number), then the total revenue from such an exercise is about $70,000. All this doesn’t come to you, because the cinema owner will get a percentage, usually 50% (or more!). That means you will be able to collect a theoretical maximum of $35,000. Will you really see this money? Only under two conditions:

  • If you movie is really good, and more importantly
  • If you have marketed your movie well, like it was toothpaste.

We’ll get to the latter bit in Part Two. But first, let’s extrapolate our income to other sources of revenue. Traditionally, a film’s revenue is split in this fashion:

  • Theatrical = 25%
  • DVD, Blu-ray = 40%
  • Television = 28%
  • Ancillary = 7%

Television? Forget it. Even if your movie plays on the local cable network, you’ll hardly see any income worth counting. That means, ancillary income (today, that is VOD) must make up 35% of your revenue. This is how our theortical scenario unfolds:

  • Theatrical = $70,000
  • DVD/Blu-ray = $112,000
  • VOD = $98,000

Total = $280,000 gross revenues. Will your DVD or Blu-ray really earn that much? If you price your DVD at $14.99, then you’ll have to sell about 7,500 DVDs. In a town of 100,000, there might be 25,000 families. One third of them should buy your DVDs. Will they? Only if you make a marketing splash! Otherwise forget it.Finally, we come to VOD. If you price your movie at a respectable $7.99 on average, you’ll need 12,250 eyeballs. Think about this – 7,000 people watch your movie in screens, 7,500 buy DVDs and 12,250 watch it on the Internet. Surely there’ll be some some overlap, but the total amounts to about 25,000, which is one-fourth the population of your little town. The population could be more or less than this number, but it’s both a good thing and a bad thing if it is more.Any sales rep will tell you a 10% conversion rate is a great year – no matter which industry you’re in. But if you need 25,000 buyers from a pool of 100,000, you’re asking for a conversion rate of 25%! Unless you have inundated your town with stories about your movie, like it was a new shoe from Nike, this is unlikely to happen.But to close this half of the article, let’s say it does happen. Your movie has a total gross of $280,000, out of which you get about half = $140,000. This amount must account for:

  • The production of the movie
  • Marketing
  • Cost of “prints”, DVDs, etc. – the hard costs of distribution

It shouldn’t take a degree in rocket science to figure out that the budget of your movie depends on how much you have to spend for marketing it. That’s what we’ll look at in Part Two.

Important Disclaimer

This is not legal, investment, financial or career advice. I am not an expert on film financing, so please don’t assume it.

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