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Part 5: Impact of budget, advances, presales

Weighing up risk is fundamental to the film business.

For a film to secure what’s regarded in Australia as a big production budget – usually with the help of large advances and/or significant presales – it mostly has to have an appealing concept, cast and/or creative team. Most times the film is also better set up to succeed than a low budget film because distribution partners with a lot of belief in it and a lot of grunt behind them have signed on.

But a big budget doesn’t guarantee financial success – nothing does in the film business! – and when a film fails on all fronts there are more costs to repay and more money to be lost.

  • This final section of the 94-film analysis finds that, on average, the commercial confidence that swirls around big budget films is justified – with qualifications.
  • Another finding is that Australian films made for $3 million to $5 million are the weakest financial performers.
  • Another is that films with presales punch above their weight.

This final section uses aggregated financial data to explore the impact on the bottom line of budget size and other components of the finance plan. With films being so different from each other on every level, few generalizations are possible but hopefully it is of interest to numbers junkies and practitioners facing the challenge of financing films.

The 94 films are named here and more about the sample is here. The figures are as of 14 March 2017 and represent a moment in time. All the films continue to accrue revenue.

A reminder: how recoupment flows depends on arrangements decided at the time of contracting. Lenders, for example, may have priority over producers, other private investors, government agencies and others with an equity interest.

The impact of budget

The 94 films in the sample were broken down into five budget groups in order to examine the impact of budget on recoupment. Seventy-two of the films have so far recouped some of their production costs. This means the gross revenue earned to date from the other 22 films is still going towards the repayment of distribution and marketing costs.

Overview information/observations

  • In general, the data shows that the higher a film’s production costs the higher the percentage recoupment to budget is likely to be. That said, for each of the budget groups, average recoupment is between 11 and 24 per cent for the films that have recouped something. Obviously, to recoup 25 per cent, a high budget film has to earn significantly more than a low budget film. (It is not visible in the statistics presented here, but the three films that have performed best financially in the biggest budget category have so far returned very little back to their equity investors. Instead, net revenue has been used to repay large loans and other parties higher up the recoupment waterfall.)
  • Using the percentage recoupment to budget measure, the weakest financial performers are films made for between $3 million and $5 million. Sixty per cent of these films have not yet recouped any of their costs and that’s more than any other budget group; and average recoupment is 11 per cent for those that have and that’s less than any other group. Also, none of the top 10 best financial performers are from this group.
Budget size Breakdown of films by budget Films with some level of recoupment
(% of total films)
Average recoupment to films
with some recoupment
$500K–$3m 28 20 (70%) 16%
$3m–$5m 20 12 (60%) 11%
$5m–$10m 26 24 (92%) 20%
$10m–$15m 10 7 (70%) 19%
> $15m 10 9 (90%) 24%

Wolf Creek 2

The impact of ANZ and ROW advances

Eighty-two films in the 94-film sample are used to explore the relationship between recoupment and the size of the advance promised by the distributor with Australian and New Zealand (ANZ) rights. Seven of the 12 “missing” films did not secure advances, four are excluded because the rights were crossed – ie a single advance covered both the ANZ and rest of world (ROW) – and one film is excluded because it would have significantly skewed the results (Note that this film is not excluded in the data provided at the end of Part 3.)

The average ANZ advance across the 82 films is $316K and the median is $250K.

Fifty-five films are used to explore the impact of the size of the ROW advances promised by sales agents – or associated entities of the sales agent or the producers. Five additional films secured ROW advances but were excluded because the rights were crossed on four films and one film was an outlier.

The average ROW advance across the 55 films is $665K and the median is $300K.

The average recoupment to all 55 films with ROW advances is about 16 per cent compared to 10 per cent for films without. For films with ANZ advances, recoupment is 13 per cent compared to 19 per cent for the few films without. Red Hill, the best financial performer of all 94 films, did not have an advance.

The promised revenue from advances is borrowed against and used to make up the budget. Advances are the same as distribution guarantees and minimum guarantees.

Overview information/observations

  • In general, for both ANZ and ROW advances, the higher the advance, the higher the budget and the higher the percentage recoupment to budget – at least according to the way films have been grouped here by size of advance. Films with the highest ROW advances are the exception.
  • The way the data has been presented illustrates how, on average, recoupment from international sources is higher than from local sources, often very significantly so. Films with ANZ advances of $101K to $249K are the exception.
Size of ANZ advances Number of films* Average budget (median)
Average total recoupment to budget % of total recoupment from ANZ % of total recoupment ROW
$20–$100k 24 $2.88m
6% 16.5% 83.5%
$101–$249k 20 $5.18m
7.5% 58% 42%
$250–$499k 22 $9.16m
19% 9.5% 90.5%
$500k–$2m 16 $11.38m
24.5% 34% 66%

*82 films have ANZ advances.

Size of ROW advances Number of films* Average budget (median)
Total recoupment to budget % of total recoupment from ANZ % of total recoupment ROW
$30–$149k 15 $3.34m
8% 47.5% 52.5%
$150–$300k 14 $4.51m
18% 44.5% 55.5%
$301–$999k 13 $7.18m
22% 13% 87%
$1m–6.22m 13 $12.67m
17% 28% 72%

*55 films have ROW advances.


The impact of presales

Thirty-two films, or about a third of the 94-film sample, attracted international presales, that is, sales made before cameras rolled that were cash flowed into the budget.

Presale revenue ranged from about $25K to $7 million with the average being about a $1 million and the median being $400K.

The average recoupment to budget of films with presales was 21.5 per cent compared to 16 per cent across all 94 films. The figure for films without presales is nine per cent.

The two films with the highest presale revenue did not have ROW advances. Across all 32 films about two-thirds had ROW advances in addition to securing presale revenue.

Overview information/observations

  • Films with presales get a helping hand because the revenue cash flowed into the budget is guaranteed to be returned no matter what.
  • Obviously a film without any presales has more markets across the world open to it. But, on average, films that go into production with presales attract more sales revenue during production or after completion. Making sales attracts more sales. The 32 films with presales have to date attracted an average of about $2 million in post-financing sales compared to about $1.2 million for those without.
Amount of presale revenue1
(Presale as a % of budget)
Number of films2 Average budget (median)
Average ANZ advance3
Average ROW advance4
(# of films)
Average ROW overages5
(# of films)
Average post-financing sales revenue6
(# of films)
Average recoupment7
(# of films)
10 $5.20m
(7 films)
(4 films)
(9 films)
(8 films)
11 $6.87m
(8 films)
(4 films)
(11 films)
(11 films)
11 $14.33m
(6 films)
(4 films)
(11 films)
(11 films)

1 Presale as a percentage of budget.
2 32 fims have presales.
3 All 32 films have an ANZ advance.
4 21 films have a ROW advance.
5 12 films received overages
6 31 films secured sales.
7 30 films have recouped some of their production budget.

A Month of Sundays

A final note on recoupment to Screen Australia

As noted earlier, on average, the recoupment to budget across all 94 films is 16 per cent. This includes the 20 or so films that have not returned anything.

It’s already been noted that percentage recoupment to budget does not necessarily reflect how much is going back to equity investors, that is, government agencies, producers, and other private investors.

The percentage recoupment to equity investors is more likely to be similar to Screen Australia’s percentage recoupment than it is to the measure of recoupment to budget used throughout this analysis. Across all 94 films Screen Australia’s average percentage recoupment is 10 per cent, about half the recoupment to budget average. Also, there are 50 films, or more than half, that have not returned anything to Screen Australia.