Perhaps my most important "tip for the day" ever. Financial projections, what are they & how are they utilized?
Financial projections show all the revenue streams a film has, plus all the costs/deductions and eventually shows the worldwide NET profits which allows investors to see their ROI (return on investment).
Box office, premium & basic cable, streamers, airlines are just some of the revenue streams utilized. Financial projections are not pre-sale territory sales projections, but much more accurate and real as those sales projections rarely show costs/deductions which include marketing & distribution.
Financial projections show all rights domestic & all rights foreign. SEC requirements include showing minimum returns (worst case), medium (average) and maximum returns (best case). While comps are a main source of information, there's much more to the calculations.
Regarding comps, many of you out there that use pitch decks (which you should be using film financing business plans, not pitch decks as biz plans are required by all investors, pitch decks are not), don't fully understand the legalities of comps. Just because your $2 million thriller is similar to Mission Impossible, doesn't mean you can use MI as a comp. Many of you know this, but many do not. I've seen some ridiculous comps found, mostly in pitch decks, which seem to not use any accurate info about anything.
For the record, comps have to follow the SEC Guidelines which is they can only be a maximum of 20% higher then your actual budget (there is no limit to lower amounts) and they can't be more then 7 years old. That's it. For many of you, that info is going to require a lot of edits to your pitch decks lol.
Financial projections utilize standard, yet complex formulas for the calculations. Some comps don't apply to all the ancillary rights and some do. Comps are applied to various revenue streams that are similar to the main film, such as marketing style, box office limited releases, cast, genre, budget & many other items. This all helps in determining as accurate as possible, the complete revenue for each revenue stream. This is not an easy task and I've rarely seen properly done projections in any proposal and/or pitch deck. Financial Projections are included and required in all business plans.
Another small nugget of info for you all, is financial projections are required by law to use, if available, an equal amount of poor, average and great comps. In other words, you can't pick and choose and only use the comps that made a gazillion dollars when doing projections.
Studios are notorious for showing "gross" revenues and not "net". There's a huge difference. An example is a movie that makes $100 million at the box office. Sounds great, however, it's not reality. Roughly 50% of that goes to the exhibitors (theater chains). Now you're down to $50 million. However, distribution costs (roughly 30% domestically) and marketing costs come out of that. Depending on the marketing budget, that alone can take that $50 million to $0 and distribution fees also come into play. So that $100 million box office take is likely less then $10 to $15 million or less, after costs. Much of studio revenues are made up in the ancillary revenues, some of which were previously mentioned. Distribution fees apply to every revenue stream.
And that people, is a perfect example of only a small part of what financial projections do. Investors don't care about "gross", they care about "net".
If you don't have a large amount of production and financing experience, I don't recommend you do your own financial projections because if you do and they are incredibly misleading, it can land you in jail. The feds call it "the misrepresentation for the solicitation of funds", and yeah, it's a felony.
Financial Projections happen to be one of my specialties.
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Insight post, Patrick McIntire! I learned a lot. Thanks for sharing these things.
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Great post! Thank you!
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Patrick McIntire Not to question your years of experience, Patrick, but shouldn't film investors already know the projections? Obviously with all the box office failures happening in 2025, all of those financial projections were off. With creative accounting, a $5M budget film that grosses $150M gross revenue can still lose money for the investors depending upon the distribution deal especially if the distribution deal is part of the studio producing the movie or the production company is a dummy studio of a bigger entity.
So what are these these investors looking for anyway? I can throw whatever numbers into whatever equation they want to get the desired results, but how can any equation calculate the corruption and greed of any number of paths a film has to go to get into streaming services or at best some kind of theatrical release. No amount of addition or subtraction is going to total out a favorable result if audiences stay home to wait for it to come to streaming and there's definitely no equation that accounts for any numbers of actors in the film flapping their big mouths and turning the entire population against them also hurting a film revenue stream.
If these investors either new or veteran need projections based on fantasy numbers, I can give them scenarios all day and if the film or film company isn't on the stock exchange, the SEC really doesn't give a damn. I know. I asked them unless they are prone to giving out false information. Granted you can't go out and commit open fraud, but investors should know what the risks are. How else would they have accumulated so much money in the first place to invest in something as risky as a film?
Film investors should know the ropes. If they want to risk a smaller amount of money on an independent film then the independent filmmaker should have a secure plan in place and hope that they can create a buzz about their film that builds a hunger in a large enough audience to force a distribution company to try and compete for the best deal without wasteful costs to promote the film. If investors want to risk big and go with the flashy studio and big name talent, they should know the risks as well. Investors should have a firm grasp of the market shares of film according to every category from genre, to rating, to source material and they should know not who's hot talent wise, but who can keep their mouth shut.
Whatever sales projections they're feeding to investors lately are crap and if Hollywood doesn't stop blaming the audience for their bombs, they're not going to have an industry left for investors to lose money on.
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Philip Lee-Again, words of EXPERIENCE FROM A FILM MAKER THAT HAS MADE MONEY!
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Patrick McIntire This is interesting.