Saturday, March 6, 2010

Guest Blog: 3 Part Series from Jeff Steele, Expert on Film Finance, Part 2

70% Gospel for Foreign Sales Estimates

by Jeff Steele (www.filmclosings.com/NOTE: Film Closings Inc. will review only projects over $3m, and Magnet will only consider projects over $10m, but please no unsolicited materials.)

PRODUCER: Hey Jeff, I’ve got an awesome $10m sci-fi project.

JEFF STEELE: How much is foreign?

PRODUCER: $6m, but it’s really more of a domestic play anyway.

JEFF STEELE: Yeah well, they all seem to be domestic plays when they're made for the wrong price.

PRODUCER: What!? Really!? Explain.

In the beginning, there were foreign sale estimates, and they were good…

These estimates are such a fundamental truth of goodness that it’s worth bolding: 70% of your budget should be covered by the gross-take-value (gtv) of your foreign sales estimates. And if you don’t, your film budget will be adjusted downward. And, you can’t fool me, I know what your thinking, “Jeff, don’t worry, I’ll just shop around for a sales agent that will give me my magical numbers.” Problem is your magicians won’t be able to deliver. So, to be smart about it! I prefer to recommend 75%-80% (gtv), due to the steep discounting lenders apply to presale contracts today. But 70% should be all film projects’ gospel. Why? Because, to mitigate your domestic risk to an acceptable one, you’ll need :

1. Elevated foreign values

and

2. Tax credit benefits and pre-sales

Don’t delude yourself, the domestic market is saturated with product right now (I’m sure you’ve heard of the $20m direct-to-videos) — the less reliance on the United States the better.

The 70% gospel has spoken; the gospel is good.

4 comments:

Samantha said...

Another good one!

razor films said...

Is it correct to assume that you're going off the high foreign estimates (not middle or low) when determining gross-take-value?

Martin said...

@razor films. It's just the opposite actually, you want to go off the low foreign estimate. High and Middle are meaningless. I asked Jeff Steele for you off his blog at filmclosings.com.

Jane Kelly Kosek said...

Yes, always work from the lowest as they may be all you will ever see -- if that. Good luck!