Reading my daily digital newspaper (Google Reader) I found this article on foreign sales on Truly Free Film. Ted asks a colleague to explain how do foreign sales come up with the numbers. In short, based on a budget percentage, but it doesn’t end there by any means.

After this interesting read I was lead to Wall Street Journal for another article on the dismal state of foreign sales at the moment. It discusses the lack of interest in American cinema and the boost of local content world wide. I thought this was great news because SA now just has to catch up with the trend.

Enjoy the read!

*Glen Basner on Truly Free Film*

There are many factors in determining what a territorial license fee should be, a percentage of the budget is only one. These are standard amounts that are “typical” for an individual territory based on what distributors have paid historically (Yes, the world has changed quite a bit recently!). I don’t believe that they apply in singular fashion unless you are contemplating some form of output deal.

On a single picture license, a distributor will want to know what the budget level is so that: a) they understand what the production value will be; and b) they can feel comfortable that they are not paying an excessive amount in relation to the cost of the film. These are valid points but what people forget is that ultimately the budget of the film does not necessarily have a correlation with its success at the box office (Blair Witch etc).

Our approach is to think like a distributor and run estimates, both revenue and expense, for a film in all media to determine a low, base and high value a film is likely to have in any given territory. With these estimates we can back into a license fee figure that would allow for a distributor to make money should the film turn out well. The budget comes into play if the sum total of our international estimates do not raise enough money to finance a film.

Excerpt Wall Street Journal

Indie Films Suffer Drop-Off in Rights Sales
* APRIL 20, 2009

In the latest challenge to the American movie business, a crucial source of funding for independent films; sales of foreign-distribution rights, is rapidly drying up.

For decades, independent movie producers in the U.S. have routinely been able to fund their films by selling the rights to distribute them abroad. If the production featured a big-name actor or director, the rights were often sold before the movie was finished, providing producers with 50% or more of their production budget.

In addition, shifting tastes in many markets have favored local films over American fare. The breakout success in France of “Welcome to the Sticks” last year and, more recently, “LOL (Laughing Out Loud),” has persuaded some distributors to stick with products made on their native ground.

The success of local movies has diminished the demand for U.S. movies that don’t have a cross-territorial appeal,” says Bill Block, a veteran film financier who bought “The Blair Witch Project” a decade ago and went on to found QED International, a film production and foreign-sales company.

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