One of the projects I am currently working on is a research proposal. It is something I have been working on for a while but recent trade news and commentary has pushed it into current conversations. Over the next few posts I will lay down some of the building blocks of my thinking and explain my approach. This is certainly a work in progress, but one I am very excitied about. I quick scroll through my Twitter feed should give away the project and it is unlikley to be an area escaping the attention of other scholars and practitioners. However it is an exceptionally attractive area to address from the perspective of market devices and valuation studies. Additionally it is exceptionally timely from the POV of the industry. As Mr Irons says, This is it (and its also a chance to rewatch that great Margin Call scene on repeat!)
Independent film financing relies upon evaluation of future revenues in order to guide investment and presales. The revenue streams upon which such calculations are made are in flux as windows continue to collapse. Increasing SVOD led innovation[i] and ultra/day-date TVOD mean that Box Office led projections for Home Entertainment revenues are undermined[ii]. Understanding and adapting to the changing environment for international and digital home entertainment rights exploitation is crucial to the future of film financing and distribution, and thus to filmmaking itself.
I am interested to investigate how VOD revenue estimates are calculated as part of a film’s value in the context of the contested collapsing of distribution channels, and in conjunction with the rise in importance of digital engagement metrics.
Licensing services and analytics companies such as Digital Film Cloud Network[iii], Way to Blue[iv] and ListenFirst[v] work on the digital “capture” of potential audiences to capitalise on ephemeral concepts like “buzz.” Digital social connections are developing a role as a currency and a combined marketing and distribution mechanism. Such metrics are taken into account at different stages of the film life cycle by various market actors. As chronological distribution norms dissolve[vi], traditional frameworks for evaluating films’ value such as the variables included in Slated’s weighted packaging scores[vii] (talent and company track records) are being supplemented with new information. Proxies for e.g. Netflix’s[viii] geographic and content specific databases must come to the fore in an environment of increasing day-and-date[ix] release, and when international and home entertainment rights are vital for profitability.
My aim for an output of the research is be an evidence-based calculation tool, similar in function and additive to established market devices such as recoupment charts, sales estimates sheets or portfolio P’n’Ls. Rather than pursue access to perfect information or sufficient data to make probabilistic decisions, this research recognises the inherently social (or inter-subjective) calculations performed by the industry. Using practitioners’ subjective associations and available objective data, the aim is to develop a model to help facilitate transactions at industry boundary points. Through formatting a common agreement over frameworks for negotiating “what counts” and when, clearer coordination and communication about how to evaluate and how to add value to films will be possible.
How VOD estimates are calculated (for the purposes of generating sales estimates, financing, acquisition, and presales decisions) is an opaque business. It is also a changing one, with issues of technology economics, regulation and industry structure impacting how companies evaluate information at different times in a film’s life cycle.
The potential dissolution of all Home Entertainment windows towards one SVOD space combined with the threat of an EU single market for digital content forces us to examine this issue with care. The question of how a distributor, sales agent, investor will evaluate a project without BO-led projections becomes incredibly important for all market actors given the rise of SVOD and ultra/day date TVOD? The best practice elements of the film business rely on agreed templates for calculation, such as the sales estimate sheet, such a device informs not only the work of agents themselves, banks, distributors providing MGs but also producers who want to develop a package with value in certain territories in order to complete their budget. Thus there is a need to grips with the new ways in which a film can be evaluated for the benefit of all market actors.
Endnotes / Links
[ii] Sr. V.P. of eOne Richard Rapkowski “For the independent space it is quite different (to the studios) because you are relying on revenue streams from all these different platforms to be able to justify what you’re spending to acquire a film, and when there’s changes and uncertainty it becomes a lot more difficult to justify certain acquisitions when you don’t see the downstream revenue as robust as it used to be to be able to cover that, so there is a lot of uncertainty in the market.” http://www.crafttruck.com/business-of-film/bof-47-distribution-acquisitions-eones-richard-rapkowski/