Director/sales agent Julian Richards on film finance, sales and making a profit.

Julian: “The tail doesn’t necessarily wag the dog”

In yesterday’s blog, Julian Richards – part film director, part film sales businessman – talked about the two horror films he made this year – Daddy’s Girl and Reborn.

In today’s blog, he puts on his sales agent hat…

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JOHN: You direct movies but you also work as a sales agent, through your company Jinga Films. Surely film-making and sales are two different mind-sets.

JULIAN: It’s full of contradictions: sales and production. But it does improve your skills in terms of film-making and the tail doesn’t necessarily wag the dog. Making decisions from a sales point of view can be creative.

JOHN: Directing is a vocation and sales is a profession.

JULIAN: But I enjoy it as well, maybe because I have achieved a certain level of success with it, which was kind of unexpected. Also it provides me with a regular income and quite a degree of autonomy.

JOHN: You have said that horror films are better money-makers than thrillers.

JULIAN: Absolutely. Horror has a very loyal fan base. People don’t go and see a horror film because of the cast. They go to see the core ingredients of the genre. Whereas a thriller needs a central cast member that is going to draw the audience in.

There are basically three niches in the mainstream movie market – there’s horror, Faith and sports documentaries.

JOHN: And sex.

JULIAN: And sex. Porn.

JOHN: Why Faith?

JULIAN: Because there’s an awful lot of Christians out there who will watch a film that is Faith based. And not just Christians. Other religions as well. A film like The Shack.

Prophets and profits are good bedfellows

JOHN: The Shack?

JULIAN: It is from a best-selling, Faith-based novel. I think it made something like $60 million in the US on something like a $20 million production.

JOHN: The rule-of-thumb used to be that the break-even point for a movie was 2½ times your negative cost.

JULIAN: Probably the same now. But another statistic is that it costs around $20 million to release a film theatrically in the US on 1,000 screens for the first week. So you can make a film for $100,000 but it is still going to cost $20 million to get it in theatres.

From a business and investment point of view, a lot of people talk about Box Office Gross… “Oh! I made a film for $100.000 and it made $25 million at the box office!” … But when you subtract $20 million for P&A – Prints and Advertising – then the whole idea of profit comes right down.

When somebody says to me: “The film made such-and-such, I am not interested in Box Office; I am interested in how much the film sold for to distributors via the sales agent. What really matters is the money that comes back to the sales agent from the distributor. That is the only money that ever comes back. The rest is consumed by marketing costs. What comes back is surprisingly small.

Right now, I think the sweet spot is around $300,000. That is what most horror films will sell for, outside of the studio system, no matter what the budget. So, if you make the film for $100,000, you are in profit. If you make it for $1 million, someone is losing a lot of money.

JOHN: There can be tax incentives.

JULIAN: Yes.. If you make a film in the UK, you make 25% back. If you shoot in Georgia in Eastern Europe, you get 25% back. But you can’t really make a film for $100,000 and expect it to compete in the market. What are you going to do? An anthology? A single location? It’s gonna look cheap and you are entering a very competitive market. There is too much product and the shelf space has shrunk enormously.

A few years ago, you might have been able to get a ‘found footage’ film or an anthology into that space. Now you maybe even need ‘cast’ because it’s become so competitive.

You need to find money that doesn’t need to be returned to the investor – which is usually some kind of tax deal or it’s…

JOHN: …money laundering.”

JULIAN: (LAUGHS) Well, there’s that and there’s a lot of that goes on.

JOHN: Can I print that?”

Julian Richards (right) directing

JULIAN: Yeah. I’ve been involved in a number of productions where that has been an issue. The question of it being ‘laundering’ or being ‘avoidance’ is another issue. There are a lot of grey areas with finance through the EIS and the SEIS and Sale & Leaseback. I have worked with producers who are now in prison, serving 9-year sentences for raising finance through tax incentive schemes that they thought were kosher but, retrospectively, ten years down the line, they have been the subject on an HMRC witch hunt. So it is scary.

JOHN: Elsewhere, you have said there is no real theatrical market for horror films in the UK, Germany and America. The market is really places like Vietnam.

JULIAN: Yeah. Latin America and South East Asia. The reason being that, in the past, these films never went to those territories, because the cost of a 35mm print was too expensive. Now that it has all been digitised, releasing a film theatrically in Vietnam or in Peru is achievable. It’s pretty cheap, apart from the licensing fee, which is a nightmare: they will charge a distributor $500 to use a digital projector which is really crushing for any independent film scenario.

JOHN: I’m surprised there is any theatrical distribution left. Surely everything gets pirated out of profit by Indonesian and Serbian and Western criminals?

JULIAN: Erm… You can buy yourself what they call a ‘black window’. In China, the Chinese distributors have to pay the pirates a sum of money to hold back the piracy of the film so they have a ‘black window’ to release their film.

JOHN: How long is the black window?

JULIAN: I don’t know. Probably about three months.

JOHN: I’m surprised the Chinese government tolerates piracy in such a sensitive cultural area as movies.

JULIAN: If you do it legitimately in China, you run into all sorts of problems: to do with censorship and the quota. You CAN get independent films through, but you are up against all the Hollywood studio films. If you are just doing transactional VOD, though, then all of those rules and regulations don’t apply in the same way, so it is possible to get a small, independent horror movie released in China.

The anti-hero of Julian’s latest film as director – Reborn

Cut out the music industry middle-men, think small and make big money

I got a Facebook message from Ben Peel in Bradford, saying:

“I would love you to go check out my home-made video from my debut single here. It will sure make you smile. I have currently just released my debut album – which can be previewed here. ”

I don’t know Ben Peel nor his band The Wool City Folk Club, but his video and songs are interesting.

Quite soon some unknown person is going to achieve worldwide fame and become a millionaire through YouTube clips and subsequent audio or video downloads. Maybe the Arctic Monkeys have already done it, but only on a limited scale.

Perhaps in a couple of years time, Ben Peel will be a multi-millionaire.

Or maybe not.

The world is changing fast but no-one knows what the fuck is going on or what they’re supposed to be doing.

Shortly before Apple announced their new iCloud service, I wrote a blog in which I mentioned the on-going death of the traditional record industry – by which I meant vinyl, tapes, CDs and DVDs sold in shops.

The blog resulted in some interesting feedback.

Hyphenate creative Bob Slayer (he’s a comedian-promoter-rock group manager) reacted:

“It is at worst a myth and at best very misleading to say that the record industry is dying – there is more demand for music then ever. What has happened over the last ten years is that the music industry has completely reinvented itself. The X-Factor has had an effect and a smaller number of pop artists are selling a high number of records. They still operate in a similar way to the traditional industry.

“But everywhere else has radically changed so that the artist (and their management) can play a much more hands-on role in controlling their own careers.”

Mr Methane, the world’s only professional farter, who knows a thing or two about self-promotion and has made his own music CDs produced by former Jethro Tull drummer Barrie Barlow, tells me:

“Large record labels no longer have the money to keep well-known acts on retainers or publishing contracts like they used to and have pressed the ejector seat. New and well-known acts are not as a rule getting huge piles of money thrown at them to go away and make an album. The Stone Roses’ great rock ’n’ roll heist, where they made one decent album then got a shed load of money advanced to make another and did sweet FA, just would not happen in today’s economic climate – or at least it would be highly unlikely.”

We have entered the entrance hall of an iTunes world of downloads with megastars and small self-producing, self-promoting unknowns where good middle-ranking performers and groups will potentially be squeezed out. It is much like comedy at the Edinburgh Fringe, where the big TV names and unknowns on the Free Fringe and Free Festival pull in crowds, but it is increasingly tough for very good, experienced middle-rankers with no TV exposure.

Ben Peel, just starting out in the music business, says:

“The digital realm does not have time for people who are solely musicians. You have to evolve into some type of super musician / marketing guru to be able make an impact amongst people. I have to be 50% musician, 50% marketing and branding. The digital realm is creating a new generation of musician: one-man machines cutting out the middle-men. The downside is that the middle-men had collateral – and contacts.”

Self-promotion ability is vital, though Ben thinks e-mails are outdated in publicity terms.

“I do a gig… and send an email out… I get ten people there…. I do a gig and throw out a 30 second YouTube short… one a week on the run-up to a gig…. I get two hundred people to attend and the exposure of the viral promoting and people re posting is priceless…. You cannot buy ‘word of mouth’ promoting …. you can only inspire it through something quirky/ original/ funny/ catchy etc.”

Bob Slayer manages not only the wonderful Japanese rock group Electric Eel Shock but also internet phenomenon Devvo and tells me:

“At his height, Devvo was achieving over a million hits on every YouTube clip we put online. We had no control over who was viewing them but, as they were mostly passed around between friends, he found his natural audience. Devvo is not really understood outside the UK, so that massive following came largely from the UK and predominantly in the north. It meant that, he could easily sell-out medium sized venues anywhere north of Birmingham and strangely also in Wales but, for example, we struggled to sell tickets in Brighton.”

Financially-shrewd Mr Methane has so far failed to dramatically ‘monetise’ the more than ten million worldwide hits on just one of several YouTube clips of his Britain’s Got Talent TV appearance. but he sold shedloads of CDs and DVDs via his website after appearances on shock jock Howard Stern’s American radio and TV shows because small local radio stations across the US then started playing his tracks. They were small local stations, but there were a lot of them.

Only Bo Burnham, winner of the 2010 Malcolm Hardee ‘Act Most Likely to Make a Million Quid’ Award, who straddles music and comedy like Mr Methane and started as an online phenomenon, seems to have got close to turning YouTube clips into more mainstream success and music downloads.

The fact Mr Methane made a lot of money online, sitting at home in Britain, after very specifically local US radio exposure is interesting, though.

At the bottom of his e-mails, Ben Peel has a signature:

“Dwarves are like tents… a lot easier to get out of the bag than they are to put back in.”

Yes indeed. And that is very true with new technology. But it made me remember something else.

Years ago, I attended a Writers’ Guild of Great Britain meeting where the speaker’s message was “The way to make money is not to think big but to think small.”

He suggested that one way to make money was to create a weekly five or ten minute audio insert which could be run within local US radio shows. If anyone could come up with an idea, made in Britain, which would be of interest to Americans on a weekly basis, you could sell it to local US stations at a very low price.

If you tried to sell the mighty PBS network a weekly half hour show for £2,000 it was unlikely they would buy it.

But any small local US radio station could afford to pay £5 for a weekly five or ten minute insert. If you could sell that same insert to 499 other small local US radio stations (not competing against each other because they are small purely local stations), you would be grossing £2,500 per week for creating a five or ten minute item. And you could distribute it down a telephone line.

If you could persuade the stations to buy it for £10 – around $15 – still throwaway money – then, of course, you would be making £5,000 per week.

The trick was to price low and sell in volume.

That was before iTunes, which became successful by that very same model of micro-pricing. It was worth buying a single music track if it only cost 79c in the US or 79p in the UK. If iTunes had priced a single music track at £1.60 in the UK, they would almost certainly have sold less than half as many units, so would have grossed less money.

Think small. Think cheap. Think volume.

Modern technology allows ordinary bands to record, mix, cut and put their own tracks on iTunes alongside music industry giants. It also allows people in New Zealand to listen to and watch Ben Pool on YouTube just as easily as people in Bradford can see him play a live gig.

Think small. Think cheap. Think volume. Think worldwide.

Just as some comedians are looking into e-publishing, bypassing traditional publishers, Ben Pool in Bradford and local bands in South East London can now expand beyond selling their own CDs after gigs and could reach a worldwide paying audience of millions with no music industry middle-men.

Last year, I wrote a blog titled Britain’s Got Talent in Pubs about an astonishing regular pub gig I saw in South East London featuring Bobby Valentino and Paul Astles.

A week ago, I saw Paul Astles perform again, this time with his seven-man band Shedload of Love in their monthly gig at The Duke pub on Creek Road, Deptford, not far from Malcolm Hardee’s old Up The Creek comedy club. They also play the Wickham Arms in Brockley every month. They are astonishingly good. Formed in 2004, they recently recorded an album at Jools Holland’s studio in Greenwich.

Both the Paul Astles bands are world-class, playing mostly locally but, if promoted on the internet, they could garner a worldwide following with no music industry middle-men.

There are, of course, as with anything involving creativity and cyberspace, those big words IF and COULD.