April 10

What They Don't Want You To Know About Film Budgets

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Do you research film trivia after you've seen a film? I do. Right after seeing a movie, I jump on wikipedia and look for the budget. It's right there under the poster, with some release information.

$65 million. $32 million. $14 million.

But here's a question-- do you think that is the actual budget? Do you think that is really what the film cost? If you didn't already know, then I'm sorry to be the one to break it to you: that number is complete garbage.

It's all Lies!

"They're lying on the internet?!" Of course they are.

Growing up, I was taught that there's 2 things you must never ask: 1) Never ask a woman her age; 2) Never ask someone how much money they make. Although I don't follow that advice, I believe it.

How much money you earn, and how much money you spend is no-one else's business- right? Right! Just the same way that the amount of money someone spent on making a film is none of your damn business, either!

There are only 3 people who know a film's true budget.

Not me. Not you. Not the film critics. Not the cast of the film. Not the crew. The only people that know are:

  1. The Film Producer. They know their budget. They've got an excel spreadsheet somewhere with an exact dollar amount that their film cost to produce.
  2. The Film's Accountant. This is the person responsible for actually managing all the costs. They have to make sure the production company is paying the correct taxes, so yes- they know the cost.
  3. The Government's Tax Department. Although they might not know the exact dollar figure, they will certainly know exactly how much money all different people were paid for the making of that movie.

That's it! No-one else knows!

Wait- Why are they lying to us?!

Once upon a time, someone asked a film producer how much their movie cost to make. They didn't answer. Someone else asked. Then someone else. Then the movie producer realised, "Hey, I can tell them any kind of number I want-- they won't know the difference". So what number did they tell them?

The one that helped the producer the most.

See, Cinema is a strange product. A $100 million movie and a $1 million movie will both sell tickets in the cinema for the same price: about $20, depending on where in the world you are. The price is the SAME! Because of that, films often compete with each other.

What's one way to make someone see your film at the cinema instead of someone else's? Convince them that your film is better value. It's more entertaining, it's more fun, it's more interesting.

What's the quickest way to make someone think your film is better? Tell them it cost more.

Let's say I'm selling you shoes. I've got 2 pairs I'm offering. One pair is an exotic pair of limited edition shoes, worth about $250. The other, a pair of cheap converse knockoffs, probably worth $20. I'm offering you either pair of shoes-- you pick-- and it'll cost you $10.

You have to choose. Which do you choose? The one that you think is worth more.

Now do you catch my drift?

Public Budgets only exist in the Film Industry

Do you ever walk into a restaurant and when you order a meal for $40, ask the wait staff- "uh, how much does it cost the restaurant to make this meal for me?". Do you see Nike posting on their website what it costs them to produce their shoes? Do you see Apple telling you the value of all the physical parts inside their iOS devices?

No. In fact, I cannot think of any other industry in the world where they openly tell you what it costs to produce a product. It's ridiculous! Why would a company tell you that?

So then why do we say this in the film business too?

So how do they calculate that number?

There are a number of ways. But let's look at how the business of film works, regarding a traditional distribution model. I say 'traditional', because the film industry is changing rapidly, and there are many non-traditional forms of distribution. A "traditional" model is the one they used predominantly for your big hollywood films over the last 40 years or so.

Here's where the money flows from:

  1. A Producer starts by developing a 'package'. It might be as complete as a screenplay, with directors and key cast members attached-- or it may be as simple as a poster. Literally just a poster and a concept/ logline.
  2. The Producer then shops it around. They're trying to sell the film package before it's even been made. This is called 'pre-selling territories'. Let's say the package is a romantic comedy starring a B-grade TV Celebrity. German distribution companies see the poster, and decide they like the look of what the film could be, and so they purchase the rights to distribute the film in Germany, in advance. For sake of calculation, let's say Germany pays $100k for the right.
  3. The Producer then keeps selling into more territories. France pays $100k too. Australia pays $150k because there were two distribution companies that wanted it, so the price went up.
  4. Eventually the Producer has sold the film a number of times before it's even been made... for a total of $1 million. Now that money they've collected is going to be spent making the film.
  5. Secretly, though-- the Producer knows that they can get that film made for only $400k. They know this because they know how to schedule a fast shoot, and they know how many cast and crew they need to pay, and how many days. They know the cost of post production, they know all of it.
  6. So they pay $400k in costs to get the movie made. What happens to the other $600k? The Producer puts it in their own pocket.

I'm not kidding. This is why the idea of Hollywood producers driving sports cars from their mansions in Los Angeles is sometimes a reality. They just made $600,000 profit, before the movie has EVEN BEEN MADE! And no-one is complaining, because Cast and Crew are being paid their rates, and the different territories get the film delivered to them a few years later, after it's completed.

And the selling doesn't stop there either! The Producer is then free to continue selling it into new territories, then on DVD and BluRay, then into Streaming Video on Demand services, etc.

Then, How do they calculate their fake budget?

So the film actually cost $400k. But the Producer will treat the other $600k as their Producer's Fee, which is part of the budget. So they know the the budget, on paper, is now $1 million.

But it's also in their best interest that they convince the general public that their film is worth more, because it cost more, so the public should go and see their movie rather that something else.

So they're going to inflate that price, and they will say: "It's budget was $2 - $3 million".

And they're not entirely wrong, either, because all those foreign territories? France/ Germany/ Australia... the distribution companies that bought the rights to that film are now going to spend a lot of money marketing the film in those countries and getting people to come and see the movie.

So if you add up the marketing budget of all the different territories and add it to the original budget, you'll end up with a figure closer to $2 million. As far as the popcorn-eating consumer is concerned, it cost $2 million to get the film up on the cinema screen for them to watch it. Even though those distribution costs were not paid for by the film producer.

All these loopholes are called Creative Accounting. 'Creative', because they're being quite clever in how they hide money in the budget.

So what does this mean for a Micro Budget Filmmaker?

Firstly, it means-- one of the ways you can get a stable career is to establish yourself as a filmmaker that creates high quality content that sells. If you can do this, then a Producer may look to include you in their 'package' that they shop around. You won't end up rich, but you will get a job on a fully financed film project with substantial marketing behind it.

In other words: you've got to prove to a Big Name Producer that they can make money from including you in their production.

You don't need to prove that you can make a fantastic $2 - $3million dollar film. You need to show that you can make a good Micro Budget Film (for $350,000 or less), since that's the kind of budget you'll be working with anyway.

In other words: you'll only get your chance to play with the big budgets once you've made a smaller budget first. Climb the ladder. Work your way up.

But perhaps more importantly...

here's how NOT to get selected for big budget films:

Wait. Whinge. Criticize movies without making any yourself. You've got to get off your ass and make one yourself. For no money. Just do it. It won't be perfect, but don't worry about that-- if you play your cards right, your next film will have a big enough budget that you can pay the right people to iron out the imperfections.

Just get it done.

And feel free to lie about your budget too. Since it's no-one's bloody business.


Tags

big budget, hollywood


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