7.3      Assumptions  

Distributor’s Gross Profit

The total sum of gross revenues the distributor receives from all financial sources worldwide, before recouping any of its expenses. Revenue disbursements are typically as follows: (i) the distribution fee; (ii) P&A (print and advertising) expenses; (iii) any additional distribution costs incurred by the distributor.  On average, the distribution fee a distributor charges for distributing a film internationally may be slightly higher than its domestic counterpart. We have assumed a 20% distribution fee. P&A expenses and sub-distribution expenses are generally handled by the specific buyer in the territory for which the rights to the picture are being licensed. The domestic distributor receives a royalty fee for the specific right being licensed to the buyer, plus a percentage of the net due to it after the buyer recovers its costs. 

Typical distribution expenses (calculated at 20%) are the expenses incurred by the distributor in taking a film to the many international markets for the sale or license of the rights to the picture to international buyers.  Producer’s Gross Profit. The net sum of money due to the producers and investors after the distribution company has deducted its fee and all costs incurred in the distribution and marketing of the film from gross revenues. Producer’s Gross Profit is sometimes called the Producer’s Net.  Production Cost (Budget). 

The Production Cost covers only those expenses incurred which leave the Company with a master print of the film. All marketing costs are included under P&A, and are the responsibility of the distributor.  Producer / Investor Return on Investment (ROI). This term represents projected revenue after the distributor’s fees and expenses have been deducted.  US Box Office Gross. Several films which have comparative values in any of the following categories: story, shooting style, budget, production values, distribution method, target audience, etc. were examined for purposes of the financial projections.  Pay Cable Revenue. Based on standard contractual patterns, which state that at performance levels of the box office, the first-run cable contract will provide fees calculated as step percentages of the rentals.  

Network TV Revenue. 

This model is typically limited for a Faith Based Film, but there are opportunities on Christian satellite channels.  Merchandising/Music Revenue. On films which do not have significant musical elements, such as a high-profile soundtrack, or established or rising music stars, or spin-off collectible characters, this market can be limited.  PPV/VOD/Non-theatrical Venues. A growing market among the limited distribution spectrum, and at higher performance levels, this market begins to have great value to the producers.  Online Sales. This projection is calculated conservatively in accordance with the figures for the films examined for purposes of these projections and taking into account the explosive growth in the online market, while also factoring in some downward pressure on pricing. The distribution / licensing fee is generally calculated at 15% - 20%. Home DVD video sales, online rental, and sales contracts are generally based on a royalty participation deal, with the royalty offered generally between 15 - 30%.