Budgeting For Profitability With Your Indie Films

Great question came through on LinkedIn:

How do you budget your movie for the realistic price-point which will help the movie earn back its budget plus profits.

Let's get into it!

I love this question because it shows that there is a direct connection between how you budget and finance your movie and the potential profits down the line. Smart thinking!

How Much "Should" You Spend On Your Film?

If you overspend on the budget, then it makes it harder to recoup your investment and get into profitability. Pretty straightforward. So why does it happen?

Most people working on a film get paid more if the budget is higher. For example, unions SAG, DGA, IATSE, and WGA all have rate cards that indicate how much the minimum pay should be at different budget levels.

Likewise, producers often calculate their rates as a percentage of the total budget. 2% of a $4,000,000 movie is four times as much as a $1,000,000 movie. In the former budget you'll get $80k, while in the latter you'd only get $20k.

The incentives for everyone involved in the production is to get as high a budget as possible so that you make more for the same amount of work.

However, as the investor and/or producer of the film, you also have to consider the ability for the project to turn a profit, which means spending as little as possible.

As a line producer–whose job is to create and manage the film's production budget–you can often read a script and get a sense for how much the movie wants to cost:

• Are there visual or special effects?
• Are there lots of (expensive) locations?
• How many speaking roles are there?
• Is it a period piece?
• Are there lots of crowds or extras?
• Where will it be filmed?

All these considerations and more lead you to a sensible budget, which rarely aligns with how much money you have to make the film.

Finding a trusted line producer is key, and then getting the money to make the movie that way is equally as important.

Now that we've discussed the amount you spend on the movie, we need to look at how the money is recouped–through marketing and distribution.

How Much Money Can Your Film Make?

I run into this question often, as filmmakers come to me with very niche projects that they hope will someday see in a theater with a full room of people.

There are two considerations here:

1. How large is the audience for this movie?
2. How effectively can you reach them and get them to buy a ticket?

Over the last year I've seen first hand how just having a certain amount of theaters (distribution) doesn't mean you'll see a large box office.

We released two movies in the fall, and our distributor released three other films in 2024. None of them turned a profit during the theatrical window because, despite having enough theaters, we couldn't get enough people to know the film existed, want to see the film, and/or to buy a ticket to see it in theaters.

So it's not just about getting a theatrical release.

Jason Blum - founder of Blumhouse - is on the record saying that 50% or more of the success of your film is the marketing.

So we need to address these two considerations with that framing.

How large is the audience?

You need to look at other comparable movies and see how large the audience is for these types of films. If you take Faith of Angels as an example, you can look at other faith-based films made in Utah, like Escape from Germany and Saratov Approach.

Both of these films sold around 200,000-250,000 tickets. At an average ticket price of $10.78 in 2024, that means if we hit the entire market that has shown up for films like this before, we could make around $2.5 million in the box office. If it expanded and reached more than the existing audience, all the better, but we should still set our target theatrical for that amount.

Given those numbers, it wouldn't be smart to spend $2m+ on the film. Ideally it's more like a $1m budget. That way you're spending responsibly given the size of the audience.

But, as we showed, just making a movie and playing it in 400+ theaters isn't enough. You have to get those 250,000 people to the cinemas!

How effectively can you reach the audience?

The way to look at this is, again, historically. When working with a marketing agency, you should ask them about their previous successes. How much money did they spend, and how many people bought a ticket?

For example, one of the largest successes in 2024 was the movie Terrifier 3. They reportedly spent $2million on the production of the movie, and only $500,000 on the marketing.

They ended up making just under $54 million in the domestic box office, so lets use that number for our example.

$53,981,071 / $10.78 average ticket price = 5,007,520 tickets.

5 million tickets, divided by $500,000 marketing budget, means they were able to get people to buy a ticket for $0.10 per ticket. TEN CENTS!

That's the "customer acquisition cost" for their movie, which is incredibly low.

Here's the rest of the math at play here:

Of that $10 ticket, the theaters take 50-60%. Let's say 50% for easy math.

Then your distributor takes a 20-35% fee. Let's use 30%.

$10 x .5 = $5

$5 - 30% = $3.50

For every ticket sold, you get about $3.50 returned back to you to pay back your investors and turn a profit.

If it costs you $3 to "acquire a customer", your marketing is ineffective, and you have to sell a LOT of tickets to recoup. In that scenario, to recoup $1million, you'd have to sell 2 million tickets!

However, if your marketing was as effective as Terrifier 3, at a $0.10 cost per ticket sold, you'd only have to sell 300,000 tickets. That's almost 7x fewer than the other example!

The magic combo of a profitable movie is this:

Responsible budget + effective distribution + effective marketing

You need all three, and inherent in the "effective marketing" piece is you also have to make a good movie that people want to see and tell their friends about - literally a "remarkable" movie.

Is it possible? Absolutely.

Is it easy? No! If it was then every movie would be insanely profitable.

But for movie ask yourself the following questions, ideally before you invest:

1. How big is the existing audience for this film? (How many people have bought tickets to similar movies in the past?)
2. Is the budget less than what you could make in theaters given that audience size? (An audience of 250,000 people is around a $2.5m box office, of which you get about 1/3 of that returned to you, so ~$715,000)
3. Do you have a distributor that can get you into enough screens to make that much in theaters? (If an average theater generates $5,000 for your movie, you'll need 500+ theaters to make $2,500,000)
4. Is your marketing agency or partner able to acquire customers for an amount that works for your budget?
5. Do you have a marketing budget that can acquire the amount of customers you need in a profitable manner?

There are plenty of other considerations as you start expanding the conversation to include genre, time of year, the filmmakers involved, the partners you have working on the movie, and more.

But these are the bare minimum, and the conversation should be part of the early discussions when considering investing in a film. If the filmmakers don't know the answers to these questions, you either need to educate them (send them a link to this article!), bring in additional partners who understand and can be good stewards of your money, or find another project.

This may seem harsh, but I'd much rather see filmmakers not get their films made, than to make them and burn the investors because the project was doomed to lose money from the start. If we want to make movies for a long time, we need to make them profitably, which means we need to understand the economics at play.

I'd love to hear your thoughts and questions now that you've read this far. Let me know in the comments.

Let's go and make profitable movies, so we have a future filled with amazing indie films!

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