Film Investment Index Futility

Colin Whitlow of the Cinema Research Institute has an interesting article, The Clarity and Color of Film Finance¹), on how to devise an investment index for films. Great idea, except the typical business indicators he speaks of amount to only 5% of what might make a film successful. The other 95% is the script and cast, as any filmmaker knows.

Regardless of all these indicators, even if you came up with a useful index, it would indicate that less than 50% of mainstream films ever break even, and less than 1% of indie films ever see any return at all, let alone a profit (Leipzig, Sundance Infographic 2014: Are Indies the “8th Studio”? ²). Such an index would turn investors way and probably make things worse than ever. It is a known fact in the industry that films are highly risky investments and that most investors are there for the glory and glamor, not for profit.

On the other hand, an index that exposes the poor performance in the industry, might incentivize and pressure the business minded MBA ridden industry execs to make films with great scripts and great cast, instead of following the piss poor business market indicators that they use now. Filmmakers know that cast and script are the two main elements that account for 95% of what makes a film successful, and that industry execs have no clue as to what a good film is. So if you did ever want to turn around the poor performance of the industry, you'd have to remove all business minded execs and replace them with well experienced filmmakers (producers and directors). As Steven Soderbergh said at the SF Film Society ³:

....I think there are too many layers of executives, I don’t know why you should be having a lot of phone calls with people that can’t actually make decisions. They’ll violate their own rules, on a whim, while making you adhere to them. They get simple things wrong sometimes, like remakes. I mean, why are you always remaking the famous movies? Why aren’t you looking back into your catalog and finding some sort of programmer that was made 50 years ago that has a really good idea in it, that if you put some fresh talent on it, it could be really great. Of course, in order to do that you need to have someone at the studio that actually knows those movies. Even if you don’t have that person you could hire one. The sort of “executive ecosystem” is distorted, because executives don’t get punished for making bombs the way that filmmakers do, and the result is there’s no turnover of new ideas—there’s no new ideas about how to approach the business or how to deal with talent or material. But, again, economically, it’s a pretty straightforward business; it’s the third-biggest export that we have. It’s one of the few things that we do that the world actually likes...

Case in point, The Grand Budapest Hotel written and directed by Wes Anderson, with Ralph Fiennes, Adrian Brody, Willem Defoe, Jeff Goldblum, Harvey Keitel, Jude Law, Bill Murray, Edward Norton, Saoirse Ronan, Tilda Swinton, Tom Wilkinson, and Owen Wilson; to name just a few of the stellar cast. But marketing powers opened this film in only four theaters. Yet it grossed over a million dollars on it’s opening night, putting it eighth on the charts beating out many films playing in 1000 theaters⁴. How is it that industry business marketing geniuses couldn’t figure this one out ahead of time?

In the meantime it makes the most sense for filmmaker business plans and investor due diligence to rely on the right objective script readers and cast experts to evaluate projects based on script and cast. But they would have to base evaluations based upon what is considered artistically great, not what the current industry erroneously considers marketable. Art precedes business. You have to have the art before you can sell it.

References  
¹ Colin Whitlow. (March 2014). The Clarity and Color of Film Finance. Cinema Research Institute, Retrieved 3/14.2014, from http://cri.nyu.edu/?p=3597#comment-1448
²Adam Leipzig. (January 2014).Sundance Infographic 2014: Are Indies the “8th Studio”?. Cultural Weekly, Retrieved 2/14/2014, from http://www.culturalweekly.com/sundance-infographic-2014/
³ Steven Soderbergh. (April 2013).Steven Soderbergh – The State of Cinema Video & Transcript. SF Film Society Blog, Retrieved 3/14/2014, from http://blog.sffs.org/home/2013/4/steven-soderbergh-the-state-of-cinema-video-transcripthtml
⁴ Peter Knegt. (March 2014). Friday Box Office: ‘Budapest Hotel’ Jumps Into Top 10 In Just 66 Theaters (And Beats ‘Veronica Mars’). IndieWire, Retrieved 3/15/2014, from http://www.indiewire.com/article/friday-box-office-budapest-hotel-jumps-into-top-10-in-just-66-theaters-and-beats-veronica-mars?utm_source=feedburner&utm_medium=feed