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Part 4: What the producers say

Film production is expensive and an unpredictable creative endeavour. No wonder there are no guarantees a film will go into profit.

The Quick read

Readers can take their own lessons from these interviews with the producers of the films that are the 10 best financial performers, but here are ours:

  • Make the best film possible.
  • Know who the audience for the film is and ensure the distribution and marketing partners and plans are relevant to that audience.
  • Budget realistically, that is, according to the level of interest the film is likely to get from buyers and audiences.
  • Understand that only a good package will get a high level of presales. A good package generally needs name cast and/or a proven director and/or not just a great story but a plan to execute that story in an interesting way.
  • Understand what the nature of the film is from the market’s point of view.
  • Don’t undersell the film.
  • Producers can consider attracting private investors by giving them an accelerated recoupment position but hold on to as much of the equity from the producer offset as possible.
  • Understand that the “cost” of finance varies dramatically, for example, interest and fees make bank borrowings much more expensive money than, say, direct investment from government film agencies.
  • Learn everything there is to know about the international marketplace, because that is where most of the recoupment comes from.
  • Sign with the sales agent with the right skillset and a passion for the film.
  • Set up the film so that if it is successful, those with equity investment share in that success.

Film production is expensive and an unpredictable creative endeavour. No wonder there are no guarantees a film will go into profit.

There were constant reminders of the tension between getting a film financed and creative considerations when talking to the producers of the top 10 financial performers in this analysis. One can easily knock the wind out of the other.

The starting point for the interviews was why each producer thought their film was one of the top 10. Several were surprised their film was on the list but how would they know given that they don’t have data on the other 93 films.

More than half the producers emphasized that films must be set up so that equity investors share in any success. That’s not always easy though.

Red Hill

1. RED HILL

<h6>Al Clark</h6><p>Producer</p>
Al Clark

Producer

There was a clear and emphatic plan behind Red Hill: write a script for a Western that could be filmed cheaply enough to finance privately and use the footage to attract completion funds. And that’s exactly what happened.

“It was threaded into the fabric of the film that it would have to be low budget,” says producer Al Clark. Production finance came from writer/director Patrick Hughes’s family, friends and colleagues, including executive producer Greg McLean. There was no completion guarantor, distributor, sales agent or government agency on board at the time of filming.

“Patrick’s yearning to make Red Hill and the precision of what he saw in his imagination was strong enough to eclipse everything,” says Al, referring to the challenge of filming in a small isolated Victorian town (Omeo) in the middle of winter with limited resources. Patrick was galvanised by failing to get two different and more expensive films into production.

“The cast and crew all worked for scale: if they couldn’t or wouldn’t we couldn’t employ them. In a way this simplified things,” says Al. “To Ryan Kwanten’s credit, he understood this and instructed his CAA agents accordingly.

“Every morning we met and worked out how to get the best from the day. We had to end up with a film that made the struggle worth it. Restrictions and limitations can be a source of strength. It was a crazy shoot and the cold nights were corrosive.

“Patrick was the guy with the flaming torch. He has a filmmaker’s eye for detail, nuance and character as well as all the visual flourishes one associates with commercials directors.”

Screen Australia put in $475,000 for post once Arclight signed on as sales agent. Red Hill premiering at the Berlinale (2010) and Sony Pictures Worldwide Acquisitions bought US rights.

“It was a terrific way for a first-time director to say ‘I’m here’. There is no question the film put Patrick on the map in a substantial way. Sylvester Stallone cleared the way for him to do The Expendables 3 after seeing Red Hill.”

Red Hill doesn’t resemble other films and that helped it get attention, Al says. He believes the film will soon go into the black, helped by interest in Patrick’s third film, The Hitman’s Bodyguard, which is being released in August.

Producers Al Clark, Patrick Hughes
Writer / Director Patrick Hughes
Cast Ryan Kwanten, Steve Bisley, Tom E Lewis
Sales agent Arclight Films
Aust/NZ distributor Sony

The Babadook

2. THE BABADOOK

<h6>Kristina Ceyton</h6><p>Producer</p>
Kristina Ceyton

Producer

“I think the story hit a nerve and gave a taboo a voice,” says producer Kristina Ceyton, referring to The Babadook’s theme of not being able to love your child. “We have had so many heartwarming emails from people telling us that their own deep, dark feelings towards their mothers or their children were legitimized by the film.”

The Babadook is elevated genre, specifically psychological horror/thriller, and Kristina says this helped it gather a fan base in addition to pleasing highly regarded critics. That it has a very strong voice and is a female story also appeals.

Getting good word of mouth without a big marketing budget didn’t happen by accident: Kristina sings the praises of sales agent Charlotte Mickie (then with eOne) who positioned and launched the film, up to, during and after it got into the Sundance Film Festival.

“It was a slow build,” says Kristina. “I was surprised how well it was received. I thought it would divide audiences more … You don’t know if a film is going to be a winner until you see it with an audience.

“Our first application to Screen Australia was rejected: it was a first time feature film and we went for more money (than was eventually secured),” she says. “In the end that was a good thing because it made us push to improve the film on all levels: interrogating the script, the budget and so on.”

There were reservations in some quarters about the believability – on the page – of the end of the film, she says, but it worked in the execution.

“At its core the film is a love story between a mother and son going through hell, and the resolution at the end also pleased audiences. We strived to make the film genuine and stay true to the vision.”

The $2.5 million budget came from Screen Australia, which was last in, the South Australian Film Corporation, modest domestic and international minimum guarantees, an investment from a post house, the producer offset and a private investor, who was given a preferential recoupment corridor and a small a percentage of the PO margin to mitigate the risk.

The Babadook has won more than 50 awards, is the sixth best performer of all 94 films in the sample by international gross box office (excluding Australia) and is one of the top 10 by US sales price.

Producers Kristina Ceyton, Kristian Moliere
Writer / Director Jennifer Kent
Cast Essie Davis, Noah Wiseman
Sales agent Seville International / eOne Films
Distributor Umbrella

Red Dog

3. RED DOG

<h6>Nelson Woss (& Koko)</h6><p>Producer</p>
Nelson Woss (& Koko)

Producer

“I advocate the Bill Goldman quote that nobody in the film business knows anything and that includes me,” says Red Dog producer Nelson Woss, borrowing from US screenwriter and author William Goldman. “I had certain expectations of Red Dog and I was wrong, and I was completely wrong on the second film (Red Dog: True Blue).”

“Films have a long lead time from concept, through development, production, editing and on to market; it is impossible to know whether your film is going to hit that certain zeitgeist which influences the box office,” he says.

“An amazing team of people busted their guts to get Red Dog made and I’m really proud of it. I don’t think ‘we were smart and got it right’; I think ‘thank god we survived’. The star dropped out, we cast another, then three weeks before shooting that person dropped out too. We then cast Josh Lucas and he turned out to be by far the best choice.”

Knowledge about the workings of the business comes with experience, he says, but that knowledge may no longer apply if years have passed between films and that’s the case with many producers.

“Find projects you are passionate about, that are meaningful to you, which allow you to tell stories you know about. Those who finance films get hundreds of proposals and can only pick a few. While the elements and the numbers have to make sense, if they see passion and enthusiasm it may help you get backing. Then you just do the best work you can.”

Red Dog had huge domestic success across all platforms. It bucked the trend that films generally get more of their revenue from international sources.

Producers Nelson Woss, Julie Ryan
Writer Daniel Taplitz
Director Kriv Stenders
Cast Josh Lucas, Rachael Taylor
Sales agent Myriad Pictures
Aust/NZ distributor Roadshow

The Sapphires

4. THE SAPPHIRES

<h6>Rosemary Blight</h6><p>Producer</p>
Rosemary Blight

Producer

Producers Rosemary Blight and Kylie du Fresne were under some pressure to bring down the budget of The Sapphires because a first-time director was on board.

“Sales agents are always saying ‘it’s about the realization of the director and we have no proof’ but there’s no point giving a director $2 million for a film that needs a lot more,” says Rosemary. “If we’d made it for less we couldn’t have used the music we did for example.”

Most Australian films seen in cinemas are heavily dependent on taxpayer funding but Rosemary uses considerable gusto when she says the film was “totally reliant on Screen Australia support”. ScreenNSW too was in the mix. The only presales cash flowed into the budget came from eOne in Australia, a distributor in Portugal and airlines. The producers deferred their fees. A construction company in Singapore put up $2 million in gap financing.

“If a (non-film) investor comes in they should get their money out first. The film is not a cultural fit for them, it isn’t enhancing anyone’s careers. For everyone it is a gigantic risk; for them more so.”

Gap financiers want sales estimates to give their loans at least 60 percent coverage, she says. How accurate international estimates can actually be is a moot point.

“We instinctively knew The Sapphires had a local audience (because of the reaction to the play it was based on) but no-one really knew how it would go internationally: it was about four Aboriginal women who go to Vietnam. The lovely Chris O’Dowd got us our international sales because he was so good in Bridesmaids. We were delightfully surprised by the film’s performance in Australia.”

The Sapphires was successfully positioned as a film that could break out internationally by its international sales partner Goalpost Film UK. It got a gala midnight screening in Cannes and three months earlier, during post, distributors in France, Israel and Canada took the bait when a seven-minute promo was shown at the Berlinale.

“Then it was put back in the bag, a strategy that worked well for such a buzzy film,” says Rosemary. Between Berlin and Cannes, and once the film was completed, The Weinstein Company (TWC) bought the rest of the world including the US.

The Sapphires has a very high level of post-financing sales revenue. Rosemary expects the film to go close to profit in time, especially because of its very long tail in Australia. The story has now been repackaged for preteens via a 26-part half-hour animated series.

To keep the industry robust, she cautions against producers trading in the producer offset, which was introduced to give them a revenue stream, but acknowledges this is becoming increasingly difficult.

Producers Rosemary Blight, Kylie du Fresne
Writers Tony Briggs, Keith Thompson
Director Wayne Blair
Cast Deborah Mailman, Jessica Mauboy, Shari Sebbens, Miranda Tapsell, Chris O’Dowd
Sales agent Goalpost Film
Aust/NZ distributor eOne

Predestination

5. PREDESTINATION

<h6>Tim M<sub>c</sub>Gahan</h6><p>Producer</p>
Tim McGahan

Producer

Producer Tim McGahan sees setting up a film as no different to planning a business start-up. It involves listening to the market, examining precedents, carefully assessing commercial and creative appeal, constantly running the numbers as components change and allowing nothing to happen by chance.

“It had a balance of creative and commercial considerations in its DNA,” he says of the science-fiction thriller Predestination. “There was incredible value in the package: the Spierigs had written a strong script and were directing, the underlying work was a Robert A. Heinlein short story and to top it off we had Ethan Hawke, who has real box office value.

“The project was setup to attract international sales and finance. It is therefore essential that the content appeals to international audiences. I think the market is best placed to make decisions about the exploitability and commerciality of your film so it would be foolish not to listen.”

Predestination attracted very high sales – with many secured before cameras rolled.

Key to the film’s financial success was Sony Pictures Worldwide Acquisitions’ day-and-date strategy of releasing theatrically (limited) and on other platforms simultaneously in the US (January 2015). This approach and the nature of the film’s key audience meant DVD and VOD revenues were high. They continue to remain strong.

There was no private investment in Predestination – nor in Winchester, his next film with the Spierigs. Tim’s preferred business model does not include private investment because he wants to retain rather than trade away his equity. Retaining equity, he says, is what every entrepreneur’s goal should be, but not at the expense of the project.

“I’m not in the game just for fees. Feature film development, financing and production is an expensive, high risk, long burn enterprise. If the film does well, I want some upside ….”

Financing structures on films are often complicated and very rarely the same from one film to another. Tim’s view is that any film that attracts overages is a success.  That is, returns above and beyond the distributor’s minimum guarantee and expenses. Predestination achieved this, a feat made even more significant given that the film was heavily pirated – “we were number one on BitTorrent sites around the world and that equates to a massive loss of revenue”.

“It shouldn’t be forgotten that Predestination is a good film; it was reviewed well by audiences and critics,” he says, before adding that it’s never just one thing that makes a film financially successful.  “It involves considering every single detail: the very smallest deal points to the big picture and everything in between can greatly influence a film’s success.”

Producers Tim McGahan, Patrick McDonald, Peter Spierig, Michael Spierig
Writers / Directors Peter Spierig, Michael Spierig
Cast Ethan Hawke, Sarah Snook, Noah Taylor
Sales agent Arclight
Aust/NZ distributor Pinnacle

The Rover

6. THE ROVER  &  9. ANIMAL KINGDOM

<h6>Liz Watts</h6><p>Producer</p>
Liz Watts

Producer

“The budget on Animal Kingdom was reasonably modest and there were not a lot of minimum guarantees (MGs) to be repaid, so when it premiered at the Sundance Film Festival (2010) and (sales agent) Charlotte Mickie was able to make good sales it wasn’t up against massive MGs,” says producer Liz Watts, the only producer with two top 10 financial performers.

Charlotte, now at Mongrel International but then at eOne, took a big leap of faith on Animal Kingdom and its first-time director, she says. The crime thriller won the World Cinema Jury Prize for drama at Sundance and the buzz grew louder as it won more and more awards from festivals and critics – and scored Academy and Golden Globe Award nominations for Jacki Weaver’s performance. That the film was made into a US television series, helped generate revenue.

Liz says it is no coincidence that David Michôd also directed The Rover, her other top 10 financial performer.

“We would not have achieved the level of presales we did on The Rover if he had not proven himself on Animal Kingdom. Making presales early can be a very good thing – as long as you are not tying up the world for nothing. But the finance plan on each film differs and sometimes, preselling may not be worth it. It was all very calculated: (sales agent) FilmNation put up a good-sized MG and made sure they’d covered themselves and we had some output territories that they were safe against. FilmNation had pretty well sold the world – the territories available – by the time we’d finished shooting.”

That The Rover was a thriller also helped secure the presales – as did the casting of Guy Pearce and Robert Pattinson. Liz says – rather wistfully – that she would have liked to have got a cut of the commissions in The Rover’s presale waterfall. (The Hunter, a third film from production house Porchlight, is biting at the heels of this top 10 and also has thriller elements.)

“Post-financing sales were healthy but the film didn’t connect with an audience to the degree we hoped.”

It felt like she’d stepped up into another league as a result of The Rover: “Having the ability to choose your partners is the level you want to be working at for any kind of real success to occur. I learned a lot about distribution around the world, including the best companies to deal with. But things change so fast and every film is different. Players such as Netflix and Amazon are changing finance models massively”.

She sees thrillers, dramatic mysteries and stories inspired by real life as being among the genres that can be of interest internationally as well as domestically.

“A film has to have relatability in order to get interest and a commitment from (high-profile) cast and for it to have reach. It’s all about trying to keep as many unencumbered rights as possible or selling them in advance at a price point that makes sense.”

When she’s looking at deals she carefully considers what she needs from a sales agent – still a critical part of the financing and sales structure – when and when not to take an MG and the value of dealing with North America via a broker.

“The producer offset is incredibly valuable for producers because it gives them an equity position. Profit potential is all about the structure of the waterfall and how revenue is split.”

She laughs in an oh-yeah-there’s-no-doubt-about-that way during a discussion about how a film may be making a lot of money for others even though it has not returned all its production, distribution and marketing investment.

THE ROVER
Producers Liz Watts, David Lind, David Michôd
Writer / Director David Michôd
Cast Guy Pearce, Robert Pattinson
Sales agent FilmNation
Aust/NZ distributor Roadshow

ANIMAL KINGDOM
Producer Liz Watts
Writer / Director David Michôd
Cast Ben Mendelsohn, Joel Edgerton, Guy Pearce, Luke Ford, Jacki Weaver
Sales agent Seville International / eOne Films
Aust/NZ distributor Pinnacle

The Railway Man

7. THE RAILWAY MAN

<h6>Chris Brown</h6><p>Producer</p>
Chris Brown

Producer

Produce films that touch a nerve, make them audience specific and ensure budgets are realistic advises producer Chris Brown. This is easier said than done given what he says next about how long it took to make The Railway Man.

“It suddenly became relevant because PTSD (post-traumatic stress disorder) became a hot topic but it took 12 years,” he says. He was on board the co-production with the UK for six of those years.

The “over 50s art movie business” is the best place for independent filmmakers to be, he says, because the population is aging in Australia, Japan, the UK and other countries too. That’s exactly where The Railway Man sits.

“That audience is a slam dunk if you give them the right thing. Films need to be character driven and can be confrontational but not too violent. There are a lot of women in that audience. If you want to make content for younger people, you should make it for online. That audience absolutely exists; the problem is the jury is still out on how to monetize it – with the exception of Netflix and Amazon of course.”

On the topic of budget he says: “You have to know what a film is worth. Whether you’re making art or artifice, we live in the world of the bottom line. To get any film financed you have to have a lot of soft money and you have to give your investors a chance of recouping.”

To Chris, that equates to securing presales and for that cast is king, but it will probably be necessary to get two B listers as well as an A lister.

“The US wants the next best thing, Europe wants a sure thing and Australia wants its favourites. The number of actors that can green light pictures is getting fewer and fewer, plus you’ve got to serve all the markets without creative compromise – or you’ll end up making a pudding.”

Sales agents are crucial to the equation, he says, and they either have to have output deals, pre-existing relationships, a fantastic ability to sell or all three. And they have to know exactly what the film is. The list of companies that will cash flow based on projections has increased but terms can be brutal, he adds.

“You need to get as many presales as possible for the investors because you’re protecting their money. Some investors are more aggressive than others about getting it back and you also have to give the government its money back. If you don’t why would they give you any more?

“The script has to work and that goes without saying – as Shakespeare said in Hamlet, ‘The play’s the thing’.”

Producers Chris Brown, Andy Paterson, Bill Curbishley
Writers Andy Paterson, Frank Cottrell Boyce
Director Jonathan Teplitzky
Cast Colin Firth, Nicole Kidman
Sales agent Lionsgate
Aust/NZ distributor Paramount/Transmission

The Dressmaker

8. THE DRESSMAKER

<h6>Sue Maslin</h6><p>Producer</p>
Sue Maslin

Producer

The Dressmaker unequivocally proves that women 35+ is indeed a commercially significant demographic, says producer Sue Maslin. But it required a lot of ambition, considerable risk and good timing to secure it.

“In order to make a film on the scale required by the story – the ’50s period setting, couture costumes, ensemble cast, location filming – creative ambition had to inform every decision,” she says. “The film had to be cast and crewed at the highest possible level, from securing Kate Winslet to getting Jill Bilcock as editor. It also meant not settling for a lesser budget that would mean compromises, making it impossible to deliver the vision. At the time I was strongly advised that Australian budgets should not be greater than $12 million.

“The minute Kate was cast the film had a market value which delivered estimates for up-front finance, distribution guarantees, presales and so on. She set the financial wheels in motion but in reality she was not enough for the international sales agent and we needed to add an A-list male actor – thankfully we found the perfect actor in Liam Hemsworth. But it came at a cost: even more money had to be raised.”

Realising the ambition of The Dressmaker meant great financial risk and the gap between market contribution and other available investment was significant. A private investor was interested but it took two years to make him comfortable the filmmakers could deliver and to craft a business plan in which the level of risk was offset by the potential for reward.

“In the real world minimum ROI (return on investment) is expected to be at least 15 per cent and the screen industry operates more on casino odds,” she says. “Had The Dressmaker performed at my medium estimates of returns – that is, better than 90 per cent of Screen Australia films – he was aware he would have lost his money. But if it delivered at the high estimate, he would make his money back and go into profit ahead of all other investors. This is exactly what happened.”

She says the film’s success was also due to timing: “The annual cinema release schedule is real estate that’s tightly fought over. Every weekend has a dollar value. Positioning films well is paramount. It was strategically important to open on the right weekend. The result could have been hugely different: opening a week earlier and we may not have retained a high enough screen average to hold the number of screens against such blockbuster franchises as the Bond and Star Wars films; a week later and we would have gone head to head with them and been starved of oxygen in the media cycle.”

Producer Sue Maslin
Writers Jocelyn Moorhouse, PJ Hogan
Director Jocelyn Moorhouse
Cast Kate Winslet, Judy Davis, Liam Hemsworth, Hugo Weaving
Sales agent Embankment
Aust/NZ distributor Universal

Tracks

10. Tracks

<h6>Emile Sherman</h6><p>Producer</p>
Emile Sherman

Producer

Tracks was presold to quite a few territories based on the director, the cast and the story itself – and on the relationships we have as the production company. It didn’t sell everywhere (in advance) and not to the US.

“Because the film turned out very well, it was selected for competition in Venice (2013), and also for Telluride and Toronto. It was probably a first for an Australian film to be selected for all three and it set the film up as a prestige title. It did the majority of its sales over this period. (The festivals were held within about a month of each other.)

“Harvey Weinstein (co-chair, The Weinstein Company) saw it at Venice and we did a deal with him shortly after. There were a few keen bidders in the US. Often it’s difficult to sell Australian films into the US. That sale made a big difference (to the bottom line) for Tracks.”

Emile refers to the saleability of films before completion as being a continuum.

There are films that attract a lot of presales. Life and Lion, which he’s produced since Tracks, fit into this category. The Weinstein Company bought numerous territories on Lion, on-sold many of them prior to the film’s completion and subsequently released the film in the US.

“To attract a lot of presales, distributors need to believe a film is worth paying for sight unseen and paying what is usually a substantive price – although a lower price than what they may have to pay on completion, if the film turns out brilliantly. They have to say: ‘This film is going to be so good I can’t risk another company buying it now or waiting until completion when there may be a bidding war. For it to reach this hurdle, it needs to be a muscular story that people will be immediately attracted to. Cast is important, the director is looked at very carefully, the producer has to be trusted.

“There is a lot of competition among distributors for these titles and not a lot of must-have product. The distributor also has to believe that if the film (on completion) is not solid, if it’s just an okay version of itself, it will still sell and they will still be able to monetize it and make most of their money back in ancillary markets.

“At the other end of the continuum are films that are execution dependent, films that distributors won’t buy upfront. They might be risky, bold in subject matter, often from first-time directors, or an experienced director wanting to do something bold. The sales agent might put up a small advance but no one wants to buy them ahead of time … They can be the most rewarding films to produce.”

There will always be exceptions, films that no one believed in that go on to become very visible success stories, but he believes there are less and less of them.

“Films fall along the continuum of these two categories: theatrically viable and able to be presold; or those that people wait to see on execution. Tracks was somewhere in the middle: it had enough good bones to attract a number of presales and it worked out in the execution to the extent that it was then picked up by all the unsold territories including the US.”

Emile says producers have to be able to accurately position films in the marketplace.

“You have to know which dartboard you’re aiming for or a film is never going to find its audience even if it’s good. We knew The King’s Speech was what one would call a quality cross-over title. If it didn’t end up being the best version of itself, it could still have found a place as a limited release for distributors. But as a cross-over film, if it ends up being the best version of itself, it can broaden to a wide release. You can’t know which films will hit the bullseye and be financially successful, but you can definitely ensure you know which dartboard you’re aiming for. Where you don’t want to land is between dartboards.

“You start to hone your taste buds once you have a good understanding of the marketplace from going to markets and festivals, seeing which films work and which don’t. It is easy to get excited about a project you’re developing. You can fall in love with it and then it can become difficult to have the objectivity to decide whether the story really has the legs to cut it in the theatrical market. It does come down to instinct and whether a film vibrates inside you.”

On being told that films made for between $3 million and $5 million were the weakest financial performers (see here), Emile said that films of this budget size were often execution dependent and often those that launched new directors. Launching exciting new talent can be reason enough to support these films.

“Remember that these films are competing globally for cinema space and for a spot in distributors’ schedules. That includes competing with indie films from the US, some of which have very strong cast. Cast, and the publicity they generate, is a key way for distributors all around the world to champion small movies.

“Films very rarely make net profits but there are many different reasons for people to invest. You have to learn how cultural incentives, government investors, investors who want to be part of the industry, distributors, banks, can all sit together. And how success looks to each of them is very different: there’s Australian box office, international box office, critical success, awards, festivals, success on home entertainment and SVOD. The model of success is changing all the time. Look at how Netflix is disrupting the market.”

Producers Emile Sherman, Iain Canning
Director John Curran
Writer Marion Nelson
Cast Mia Wasikowska
Sales agent HanWay
Aust/NZ distributor Paramount/Transmission