7 Ways To Screw Up Your Film’s Budget-#2: Inaccurate Estimate

Writers Need To Become Producers

In numerous cases, I have had a producer or executive hand me a script, point to it and say, “You can do this film for $5 million.”  In reality, the math says almost $6.6 million.  “That script is $15 million.”  Wrong.  Closer to $22 Million.   “Not a hair over $8 million.” Actually, closer to $11 million.

 

Getting an Estimate – Ask Questions

Now, I’m talking about scripts that I was hired to do a schedule and budget for in the last year or so.  These projects are not excessive in their departmental needs in many ways and genres.  Every film is absolutely unique.  Even franchises have new storylines.

When I am asked to do a schedule and a budget, then I’ll have the Producer(s) fill out one of these questionnaires.    In the near future (once I figure it out) you will be able to download a pdf file of it on my website.

 

Figure 1 – Producer Production Cost Estimate

Time Equals Money – The Schedule

To get a preliminary handle on the initial intent of a Schedule, I will also get this information:

  • Shooting Days – always a tough one to initially estimate, but most Independent films fall into the 20-30-40 day range. Most people overestimate the days. They estimate that their production will give them thirty or forty days when the actual numbers are twenty-five or thirty.    Feature films which are partially supported by a major studio’s speciality division i.e., Fox Searchlight, etc. might have fifty or sixty day schedule.

 

Principal Cast and Sales

  • Cast – Principals are key components for selling the project through the financing process. The principal actors are ones who triggers sales in both Domestic (North America) and the International markets. A complex equation arises here:
  1. How much does an actor cost?
  2. How much do they generate in sales both Domestic and International?
  3. After monetizing the sales, how much remains to actually produce the film?

In many cases, prominent actors generate modest, lukewarm or non-existent financial interest. These actors are not the “A” List actors that everyone is chasing down for their film.  These actors will pretty much trigger an immediate financing of the project.  But well-known “A-“ or “B+” actors with excellent performance history and a following may or may not trigger enough sales.  The process is baffling to many in the industry too. Many times, I am asked about actors and their ‘saleability’.  My standard answer is that their value in the marketplace shifts constantly.  Even the same actor in the same script might have different values from one sales agent or distributor (for example, Voltage) to another competing sales agent or distributor.   The world of international film sales is fluid to say the least.  I have seen the number of actors who genuinely trigger sales diminish over the last five years.

Some prominent actors are good to ‘flesh out the ensemble’ feel of a movie.  They give creative credibility to the project with so many actors wanting to participate in the film.  But they don’t trigger the necessary sales to make the project.

In the case of Principals and Supporting talent, producers sometimes forget that the offer of $100,000 to the actors could actually mean $138,000 once you include the SAG/AFTRA fringe payments.  That adds up.

In the budgeting process, I am more concerned with the bottom line cost (really just offers at this point) to the principal and supporting actors.

Other questions abound:  Are there any particular roles other than the Principals where you see a special actor who might work for a few days or a week?  Do you want to compress a certain actors schedule to reduce their cost?  A common tactic.    That role would have to be ‘compressed’ for the shortest period of time, even if it costs more in other areas like location costs, transportation, etc.,

 

Location, Location, Location

  • Location – This is a key choice, ultimately dictated by the script and its adaptability. If the project is set in Alaska, then it’s probably not shooting in Colombia. Of course, how many interiors and exteriors are there?  Second unit?  Use of VFX and SFX for exteriors?  Hollywood has always accomplished incredible Movie Magic with its ingenuity and its technology.  The audience willingly embraces a Suspension of Disbelief to enjoy a cinematic adventure, but today’s audiences are highly sophisticated and the competition for eyeballs is fierce.

Location is critical to determine what specific union contracts and rates are used in the budget.  Los Angeles, Atlanta, Colombia, Australia, etc.,  In most cases, the incentive drives the location choice.  Who can pass up a 20-30% piece of your financing or recoupment?  Almost nobody.  But in the above case, they picked Los Angeles for its architecture, crew depth and highly competitive equipment rentals.

 

Initial Math Numbers

In the above example, when we add up the amounts above on the Producer Production Estimate Cost, we get a total of $3,715,000.  All projects – with few exceptions – that require a Completion Bond must have a ten percent (10%) contingency.   So we have to take out about $650k based upon a target budget of $6.5M.

Let’s figure the math right here.

Target Budget: 6,500,000
Major Category Projections: 3,715,000
 
Post-Production Est: 350,000
Completion Bond Cost-2% 130,000
Contingency: (10%) 650,000
Production Funding: 1,655,000

In the above figures, we have:

Target Budget – the preliminary figure that the Producers believe could attract funding, sales, equity, pre-sales, etc., for the project

Major Category Projections – the rough estimates for the various categories like Producer, Director, Writer Talent, etc.,  These numbers do not include the state and federal required fringe payments for Medicare, FUI, SUI, etc.,  Again, it’s an estimate.

Post-Production Estimate – This estimate includes editorial (editors, assistant editor, editing rooms and editing eqiupment), post-sound (mixing, foley, ADR, etc., ) as well as delivery.

Completion Bond – 2% fee here.  It can vary but that’s generally the cost.

Contingency – 10% for Standard contingency required by the Bond company.

Financing Costs – Varies but can be about 2% of the film’s budget, depending on interest payments, financing charges, legal fees, etc., In this case, there are no financing costs.

Production Funding – This amount remains after all these deductions and includes production and “Other” which is a category reserved for legal, other expenses, publicity, etc.,

 

MEDIA MATH ANALYSIS

Let’s review our process once again.

The Producer said that they could get $6.5 Million in funding to make their film.  The film is set in Los Angeles.  Since California can’t seem to create an incentive for all-filmmaking like in Georgia (more on stupid politicians later), they probably won’t get an Indie incentive here in California.  No matter, they are reconciled with that unlikelihood in exchange for other favorable conditions – vast crew depth, architecture, highly competitive equipment deals and actors who don’t want to leave their Hollywood Hills homes to go off on location.

In our very rough math calculation, we have $1,655,000 remaining to actually make the film.  Now what does that amount of money actually mean?

Here is a Daily Production Cost from an actual Schedule and Budget.  Yes, it’s slightly higher than the estimate of $6.5 Million. This is not our theoretical project but an actual summary of Daily Production Cost.  And I told you so.

In this case, let’s look at the table below.   This is NOT from our estimated costs noted above.  This table is broken down for another project that came in exactly at $6,811,719 which we will call “Los Angeles Shoot”   But it’s still useful to give you some perspective on Daily shooting cost.

IMPORTANT:   The Daily Costs that I am using in this chart are NOT related to the project that I was doing a schedule and budget for.  I picked this daily cost summary (of another project) because the producer was estimating his film was in this ballpark.

 

Figure 2 – Daily Production Cost Real World Example

Look back up at the Table in Figure 1.   After getting estimates from the Producer on the project’s general financial outline and intent, we are left with $1,655,000 for production.

Look at the three (3) arrows.  We have the RED arrow which shows the Production Cost.  Remember, that we already Estimated Above-The-Line, Post, Other Charges and Contractual Charges.  So we’re not using those numbers to make our comparison.

We see that the Total production cost for the Production period is $3,392,838.  We are estimating 25 days of shooting.  So when we divided that Production period cost of $3,392,838 by twenty-five (25) days of shooting (GREEN ARROW), we get a DAILY cost of $135,714 (BLUE ARROW).  Recall that we are making a Daily Cost comparison of the “Los Angeles Shoot” with another completely different but financially similar film.  We are not comparing Apples and oranges.  But we might be comparing Oranges and Tangerines.  Close but not exact.  Still, the Daily cost gives us a range.

Remember that we have $1,655,000 remaining for production based upon the producers initial estimates.  This means that we have to:

Shoot the film in 12.19 days.  Or 12 days.  That’s dividing $1,655,000  by the cost of $135,714.  Now in the  $1,655,000 / $135,714 = 12.19 days.  Unless we’re shooting in a phone booth, that is not likely at all.  Most films are in the 20-25-30 day shooting schedule.  Even on the low end, we’re short.

Summary

What is our conclusion?  The producer(s) have underestimated the probable cost of shooting in Los Angeles at this time.  In fact, if the film requires 25 days of shooting, then the Production period requires twice as much money for the production period.

25 days x $135,714 = $3,379,350

And that’s not the end of it all.  The Daily cost estimate of $135,714 is on the low modest end.  If it’s an action, adventure or period piece film, then the estimate on a daily cost could be much higher.  The Daily cost could be $200,000 per day of Production.   Based upon this variance, the initial estimate which the producer was using for a target production budget is quite a ways off.  Better to do the Media Math first.

A very, very slim number to make this film – depending!  Are we shooting inside a Jury room like the great film “Twelve Angry Men”?  Or are we shooting battlefield scenes?  These are very rough figures to be sure – but the layout does give us pause to reconsider some initial assumptions and participants.

  • Do we not hire a few more people in various producer capacities?
  • Negotiate the script for a lower rate, perhaps with a significant amount deferred?
  • Consider putting more money into a single Star principal and then hire locals at scale for other roles?

More Math is our Future…