EVALUATING A PROJECT
The global value of a film or television project is established by the project elements, which include the script / show concept, the genre, talent (cast, director, showrunner, producer), and the budget range, all of which lead to projected distribution revenues. The projected distribution revenues dictate the value of the project.
Distribution revenue projections are ideally established by bankable sales agents, who sell the distribution rights for a film throughout the international marketplace. Presale distribution agreements, which are established by the sales agent before a film goes into production, indicate the validity of the distribution projections and the market acceptance for the film to be produced.
In many cases, a film's budget is too high and is not adjusted to match up with the projections. This can cause the film to generate a loss. If presale distribution agreements are not established, it often means there is limited demand in the current marketplace for this film. Films that are produced without presales in place are often seen to lose money for investors.
Of course, there are exceptions to the rule, and films get picked up for large acquisition payments by streamers or create revenues through the US box office. However, these exceptions are not the rule.
While a script and the related story may demand a certain budget to be realized as a top-quality production - which is essential for buyers and distributors to acquire a film - the budget must also correspond with what these buyers and distributors can afford to pay today.
The times when networks, streamers, and studios spent billions in content acquisitions have changed. Today, the recoupment of such costs is important for most of these buyers and distributors. This means that content creators and producers are tasked with establishing a budget that can generate enough distribution revenues to be recouped and also allows for profit.
The steps to creating a profitable film include:
Bankable distribution projections covering a large portion of the budget
Presales distribution agreements that are established before the films are financed and produced to verify the market demand and reduce risk
Adjust the budget to the projections
Adjust projections to meet presale levels
Adjust loans and investments to match available collateral
Investors would ideally confirm the bankability of a sales agent and their projections and would insist on presales to verify the market demand for the project and solidify the projections.