Case Study: Estimating Film ROI - Crash (2004)

We often use box office receipts as a metric when we consider how much ROI investors in a film can expect.  Clearly the entire box office receipts don't magically appear in the production company's bank account - but how much does?

There are some lousy distribution deals ... but imagine that you have a non-studio film that distributors really want.  Let's even imagine that the film is successful - it covers the distributor's P&A spend and returns money. What could you reasonably expect your income from the film to be?

There are a few estimates out there - I've always used the 'one third of box office' guideline - so if a film makes $30 million in box office we can expect about $10 million to eventually filter back to the production company.  Clearly this guess has limitations - it won't work for a film that was a hit on DVD but a flop in the theatres.  But it is a start to estimating how much money will be coming in to pay back the production budget - hopefully leaving something over for the investors

But how accurate is this estimate?

Firstly, not everyone uses my 'one third' rule.  For example, Martin Walsh uses an estimate of a 55%-60% exhibitor cut followed by a 30% distributor fee - which gives a figure ranging from 28% to 32% of box office.

That's close enough to my '33%' rule of thumb for me to be fairly comfortable about my estimate.

What we really need is for a production company to open up the accounts for one of their films and let us view them to compare.  Ideal - but most people would say that it is an impossible ask.

This is exactly why I monitor lawsuits - because the strife over Bob Yari's handling of the income from his film 'Crash' has resulted in some of the company accounts being released publicly in the court records.

So lets look through the court records to see how my rule of thumb adds up.  If I didn't have access to this new data and had to rely only on publicly available information ..what would my estimate have been?  And how does it compare to reality?

My Estimated Gross Receipts =$32,796,000 (= Global Box Office÷3  =  $98,387,109÷3)
Actual Gross Receipts =   $33,777,545  (From Court Records)

That's spookily close: 34% of reported box office instead of 33%.  Given the number of factors ignored it's an impressive demonstration of the power of Fermi Estimations  .

It's also a chance to see how accurate the reported numbers are.  Here is what I would normally rely on - the data from the website 'www.the-numbers.com' :
Crash (2005)  
Total US Gross $54,557,348
International Gross $43,829,761
Worldwide Gross $98,387,109
Reported Production Budget $6,500,000
Reported P&A Budget $21,000,000
It was interesting to see how the reported production budget wasn't quite accurate:

Reported Budget:  $6,500,000
The real Budget:     $7,303,082

I'm not sure if the budget changed or if the number revealed in the audit included some deferments that kicked in early.

Let's have a look at the court records closely:

Crash (2004)

Gross Receipts: $33,777,545  
Production Budget:-$ 7,303,082
Marketing/Advertising/Distribution:  -$   133,686
Foreign (Non-US) Sales Expenses:-$   150,319
Residuals:-$ 1,122,292
Deferments:-$   957,600
Interest:-$   269,175
Publicity:-$    43,386
Taxes & Licenses:-$    48,869
Legal & Misc. -$   286,517
Remaining: $23,462,619

Based on these accounts - how much could the investors expect to have returned to them?
I'm going to make a few assumptions here for simplicity:
  1. This film was funded entirely via equity investment
  2. They raised $7.5 million to cover the production budget and some initial expenses
  3. The equity investors had their original investment returned first (with no interest), then had a 50:50 split with the production company
  4. Any profit participation with the stars was taken entirely out of the production company's portion of the 50:50 split.
These assumptions are obviously not correct - but this is a 'ball-park' type estimation of what would be possible with a similar film. 

Let's look at what the production company should have left in their bank account for the film:


Net Receipts (Calculated above):$23,462,619  
Original Investment:$ 7,500,000

Total:$30,962,619


The first step is that the investors get their original investment back:

Total Amount: $30,962,619   
Return Original Investment:-$ 7,500,000

Remaining: $23,462,619



Then we'll assume that the remainder is split 50:50 with the production company:

50% of Remainder: 
$11,831k (50% of $23,462,619)

Therefore, over about 4-6 years the original investors could expect a ROI of about +158%
If we annualise this return for a fair comparison : it is equivalent to +21% return over 5 years.

Even if the bulk of the income occurred in 3 years, it is only +37% return over 3 years.

This is an eye-opener for those indie film business plans that somehow project massive returns for investors.

Yes, 21% p.a is great compared to the 7% available at the time for no risk ... but is it really worth the incredible risks - the likely outcome of having no return?

Even if you win 3 Oscars, have recognisable stars etc - is it ever possible for an indie style film to generate a reasonable ROI for equity investors ?
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