APPRAISING THE FEASIBILITY OF A FILM PROJECT

QUESTION

Hello Mr. Old Man,

After nearly two decades in the industry, I recognize there’s still much for me to learn about project financing. To educate myself more, I’ve been reading up for days and tonight I found your blog. Your expertise in this area is incredible, and I’m reaching out in hopes that you might be willing to share some of your insights with me.

Since I am still very much so in the hustle of life, and you seem to be living the collective dreams of everyone I know; perhaps, you’d be willing to hear me out? I’m having difficulty funding a film project and in need of honest and sound wisdom. Many traditional avenues in the entertainment sector are quickly drying up forcing me to explore more creative financing options like instruments.

If you have the time and inclination, I would greatly appreciate the opportunity to consult with you.

Thank you for your consideration. I wish you continued success and enjoyment in your retirement.

—
Best,

D. Harrison

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ANSWER

Hi,

To be honest, when I worked at the bank, I had never appraised any film project. However, the appraisal process to decide whether to finance a film project or not is very similar to other projects. I would like to share some of my experiences to the extent of my knowledge about appraising a film project proposal in the hope that they will help you appraise the film project you are pursuing and make the right decision.

As a financier with a wealth of experience in the entertainment industry, you may agree with me that a film that can help recover capital and generate profits must be a good film that attracts many people to pay for tickets.

There are many factors that make a good film, including an attractive script, talented director, famous actors, adequate investment, wide and timely release and distribution, target audience and of course avoiding risk-related factors. Here’s a breakdown of the key ones:

1. Script & Story

• Originality & Appeal: Is the concept fresh or does it have proven commercial appeal (e.g., genre films like horror/thriller)?
• Target Audience: Does the film have a clear audience, and is that audience sizable?
• Genre: Certain genres are easier to sell internationally (action, horror) than others (dramas, comedies).

2. Talent Attached

• Director & Producer Track Record: Have they delivered commercially or critically successful films before?
• Cast: Are recognizable or bankable actors involved? Their name value can drive pre-sales, distribution, and marketing.
• Screenwriter: A strong writer with a good track record adds value to the project.

3. Budget & Financial Structure

• Budget Size vs. Potential Returns: Is the budget reasonable for the genre and projected revenue?
• Break-even Point: How much does the film need to make to recoup costs?
• Incentives & Subsidies: Are there government rebates, tax credits, or co-production treaties involved?
• Gap Financing Needs: How much of the budget is already committed vs. how much is being sought?

4. Sales & Distribution

• Pre-sales & Distribution Agreements: Are there already deals in place? Are sales agents involved?
• Territorial Sales Potential: How well will this film travel globally?
• Platform Interest: Is there any interest from streaming services (Netflix, Amazon, etc.)?
• Marketing Plan: Is there a strategy to reach the audience?

5. Legal & Rights

• Chain of Title: Are all rights (script, music, etc.) properly secured?
• Clearances & Insurance: Is there Errors & Omissions insurance, production insurance, etc.?

6. Return on Investment (ROI)

• Profit Participation: Are you getting equity, interest on a loan, or backend profit share?
• Track Record of the Team: Have similar projects they did recouped their budget or made profits?
• Exit Strategy: Is there a clear path to recoupment through sales, festivals, streaming, etc.?

7. Risk Assessment

• Production Risk: Are there issues with schedule, locations, or logistics?
• Talent Risk: Are any key cast/crew high-risk in terms of delivery or reputation?
• Market Trends: Is the project in sync with what buyers or audiences currently want?

Conclusion:

We have the formula for the profit of a profitable film:

Profitable film = good film (Attractive script + good director + popular actors + reasonable budget) + timely sales & distribution + large promotion + eliminating related risks.

You should consult more people who have experience in financing film projects.

Last but not least

As a bonus, I am giving you one of the case studies related to the risks that lead to film failure and financial loss:

It happened in Vietnam. The film promises to be attractive and will be a big hit because it is made by a talented director with two famous main actors. The film is expected to be shown in theaters nationwide in the next two months. But recently both main actors got into trouble related to their participation in many fake product advertising clips that affect the community, and both are being investigated by the police, they may be sentenced to prison. This unexpected incident may turn the audience away from the film even though it is good. On the online community, many people declared that they will not go to see films with these two actors in the lead. This unexpected incident may turn the audience away from the movie. If so, the financer will definitely not be able to recover their investment.

Do not finance if the appraisal results show that the film project is not feasible, meaning it is not possible to recover capital and make a profit.

Hope you make the right decision.

Best regards,

Mr. Old Man