During my time in international distribution, I’ve seen several $1,000,000 documentaries that should have been made for ten times less, and a few $100,000 features that should have been made for ten times more. In both scenarios, the producers always try to use their film’s budget as leverage in negotiating sales. The problem is most producers never realize that unless their film is laced with a star-studded cast, their budget has little to do with the value of their film to distributors. For example, if a producer spends north of $1,000,000 on a documentary while other like-minded documentaries are being made for under $100,000, then the distribution value of the million-dollar documentary is no more than the value of the docs made under $100,000. This is an incredibly painful pill to swallow for filmmakers and producers. Thus, in order to avoid such a sour pill being lodged down their throats, filmmakers and producers should remember that distributors will never reward overspending. The other fact to absorb is since the value of documentaries has severely crashed, they are now only worth one tenth to one twentieth of what they were worth as recently as three years ago.

Conversely, if a producer makes a $100,000 feature film that looks like a $300,000 film, then the distribution value of that film will be based on $300,000. Obviously, this is a much better position to be in because the budget can be recouped and the producers and filmmakers may even get to plant a few extra dollars into their hungry pockets. However, if that same producer lies to distributors about his or her $100,000 film costing $1,000,000, then their project will be seen as a failure if it only generates $300,000 – even though it really only cost $100,000 and enjoyed a profit. This is a scenario to be avoided at all costs. Since perception is everything in Hollywood, it’s important to always be seen as a success. Simply put, having the perception of being a person who made a micro-budgeted film that turned a profit is far more impressive than being seen as a person who made a healthy budgeted indie film that tanked.

One thing that’s consistently true about playing the “budget game” is everyone lies about his or her budgets. Filmmakers and producers lie to their distributors and distributors turn around and lie to their buyers. However, in the midst of the maze of smoke and mirrors, here are some vital truths about the “budget game” that will help filmmakers and producers understand how distributors play the game.

International Distributors/Sales Agents Will Slice Most Budgets In Half
Unless filmmakers and producers have proof of their budget, via a strong cast with stunts and or action sequences that clearly show where the money was spent, the budget filmmakers give their international distributors is divided in half in the minds of the distributors. So, if a filmmaker tells his or her international distributor their budget is “slightly under one million,” the distributor will immediately assume the actual budget is far less than half of a million. This is because the international distributor knows that all filmmakers lie about their budgets, and that he or she has to take those lies into account when they calculate the minimum sales potential of a film. But, knowing the budget will be sliced in half, doesn’t give filmmakers a license to inflate their film cost twenty times more than it is. Remember, not only do distributors usually know what a film costs just by looking at it, they also always know what a film is worth just by looking at it.

Bragging Upwards About Your Budget is Smarter Than Bragging Downwards
We once dealt with an amazingly well made micro-budgeted action picture that cost $6,000, but looked like it cost $150,000 (thanks to the legitimate $140,000 + of freebies given to the filmmakers). Several buyers were so impressed by the tight little film, that the initial offer for the first territory was $30,000 – five times the film’s budget. But, on the eve of signing the deal, our buyer researched the film IMDB and realized that our filmmaker was bragging about having made the film for $6,000. By the next morning, the film’s $30,000 offer turned into an $7,000 offer that we had to pull teeth to get up to $10,000. The buyer canceled their $30,000 offer, because they just couldn’t stomach paying five times more than the budget. Of course, when the buyer thought their $30,000 offer was only paying one fifth of the $150,000 budget, they thought they were getting a good deal. But, knowing the film cost $6,000 killed the buyer’s financial appetite for the film. The lesson learned here is that filmmakers should never brag about what they can do with little money, because the powers that be will assume they can only handle little money. Thus, the notion, “see what I can do with $6,000 so imagine what I can do with $6,000,000,” never works. This is because distributors usually don’t trust six thousand dollar filmmakers with six million dollar budgets, unless those six thousand dollar films make six million dollars.

The International Distributor Should Know The Actual Budget
Assuming the international distributor is well meaning toward the success of the film, he or she should be aware how much money needs to be recouped to break even. Too often filmmakers will play games and refuse to reveal their actual budget to their international distributor, but such a practice only hurts the filmmaker and the film. If an international distributor is kept in the dark of how much needs to be recouped, they will simply accept every offer, regardless of how small it may be.

Recouping The Budget Is Not A True Concern of An International Distributor
Technically speaking, international distributors don’t have to worry about a film breaking even because they will get paid on what they sell, even if those sales are far less than the budget of the film. Thus, it’s important to find an international distributor who truly believes in the film, because they’re going to get paid whether the film does well or not.

The Portion Of A Film’s Budget That’s Recouped By International Sales
In a perfect world (which we are clearly not in), a film should recoup 40%-60% of its perceived budget through international sales before the international distributor takes out his or her fees. However, in the current marketplace for independent films, getting even 40% of the budget from international sales would be a dream. More realistically, filmmakers should expect international sales to come in around 20%-25% of their perceived budget with an outside shot of wrangling 40%.

Tell Tale Signs A Film’s Budget is Far Smaller Than A Filmmaker Claims
Too many close-up shots, too few (or no) extras walking around in the background and limited locations are all obvious signs that a film didn’t cost much to make. Furthermore, small films tend to feel claustrophobic, because there are no overhead shots or wide shots. So, even if filmmakers need to go small with their budgets, they need to think big with the scope of how they execute it.

Know What You Have And What You Don’t Have
Producers and filmmakers alike should be well aware of the fact that a $100,000 film will probably not look like more than a $300,000 film – and will never look like a $1,000,000 film. In fact, if I had a quarter for every time I heard a filmmaker or producer tell me that their $100,000 film looks like a $1,000,000 film, I’d have more than a million dollars. The truth is, all distributors care about is that your film was a successful financial investment, regardless of how small that investment was.

At the end of the day, playing the “budget game” is a necessary part of every filmmaker’s journey. All of us, like our films, want to be perceived to be bigger than we are. Such a belief is what drives us to create bigger and better projects, and is also how such wonderfully poignant statements like “fake it ‘till you make it” and “he who can make one thousand dollars look like one million dollars will soon have one million dollars,” have become our battle cries. Thus, winning at the “budget game” doesn’t depend on how you play, it depends on knowing how the other side plays. Now play nice….

I hope everyone had a wonderful holiday weekend. 

Thank you for lending me your eyes, and I’ll see you next Tuesday!