Value Chain and Recoupment
It is critical to all independent commercial filmmakers to know and understand the Value Chain and Recoupment model as it applies to their sector. There is little point embarking on a film targeted at commercial success if all you know is you budget, It is vital to understand how much money wll come back to you, from where and when. You cannot make genuine truthful commitments to investors without it.
The Independent Film Project Value Chain and recoupment model
Revenues come from sales and sales come from promotion and exhibition. Therefore single largest generator and consumer of revenues, are the Sales Agents, Distributors and Exhibitors. They take their money immediately the film is released and revenue flows start and they take 80% of all revenues over 25-30 years of the life of the film. Leaving 20-25% of revenues to be shared between investors, filmmakers and star players.
Big Film studios have in house staffers but independent film makers must bring in partners or outsource components to subject matter expert partners to complete the making of the film. The diagram below shows the stages of a films life along the top, against the people and services down the left hand side, with who is involved at what stage, detailed in the matrix centre.
Then they need to strike effective pre-sales and distribution deals to ensure the Film reaches the intended audience and many more besides. Film makers rely on most that of these parties investin their stage of the film making process up front, thereby reducing the cost of production and post. This is one of the many deferred payments methods that ensure the film gets made for the minimum investment with the partner’s investment returned with profit. (see the Budget & Recouopment Schedule Relationship)
Tracking and paying out on these deals is no small task. Recoupment specialists are usually hired to ensure revenues generated by the film come back to the film makers.
Diagram extract from
Re-defining the Independent Film Value Chain
, courtesy of a paper by Peter Bloore.
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