THE NEW WORLD ORDER THE PACKAGE-UNIT SYSTEM

THE PRODUCER-UNIT SYSTEM OF PRODUCTION ( ) With expansion following sound, producer-unit system became an option With expansion following sound, producer-unit system became an option –Instead of central producer in charge of all films, number of producers supervised film units within studio –Producers specialized in particular genres Not followed to same degree by all studios Not followed to same degree by all studios

THE PACKAGE-UNIT SYSTEM Replaced earlier management systems in late 40s, early 50s Replaced earlier management systems in late 40s, early 50s Reasons: Reasons: –Paramount Case –Tax laws favoring independent production –Changing demographics –Advent of TV, etc. Production & distribution now more flexible & pragmatic, varying from film to film Production & distribution now more flexible & pragmatic, varying from film to film

THE PACKAGE-UNIT SYSTEM DECREASE IN PRODUCTION DECREASE IN PRODUCTION –REASONS  Studios no longer had own theaters to supply  Attendance decreasing  Studios wanted fewer, more expensive films, making more money on each (through longer runs) –THE DECREASE  # of films produced & distributed by majors fell 80% from late 1930s (50 films/year/studio) to 1970s (10/year/studio)  Increased in 80s to films/year/studio

THE PACKAGE-UNIT SYSTEM THE PRESENT STATUS OF THE MAJORS THE PRESENT STATUS OF THE MAJORS –Majors have shrunk in both size & operations  Have lost their independence  All parts of much larger conglomerates –Contract system no longer in practice –Films now the results of negotiations & packaging –Primary function of Majors today is distribution, most profitable phase of industry

INDEPENDENT or “PACKAGE-UNIT” PRODUCTION “Independent production” does not refer to “personal” or avant-garde cinema “Independent production” does not refer to “personal” or avant-garde cinema Refers to productions made outside of major studios Refers to productions made outside of major studios Typical of film production today Typical of film production today Independent producer works in association with a studio, not under authority of studio Independent producer works in association with a studio, not under authority of studio No longer a contract system; producers can’t rely on profits from previous productions, so both the film’s creation & financing must be “packaged” & negotiated No longer a contract system; producers can’t rely on profits from previous productions, so both the film’s creation & financing must be “packaged” & negotiated

THE CREATION OF THE PACKAGE SCRIPT SCRIPT –Commissioned by producer from professional scriptwriter –Or provided by free-lance, well-known author PERSONNEL PERSONNEL –Contracts negotiated individually for cast & director (AGENTS) –Contracts negotiated for technical crew (UNIONS) –Arrangements for feeding, transporting, etc. DISTRIBUTOR DISTRIBUTOR –Usually, distributor must agree in advance to distribute film –Should be 1 of Majors FACILITIES FACILITIES –Sets, costumes, cameras, lights, etc. must be rented –Usually rented from studio that agrees to distribute film

FINANCING THE INDEPENDENT PRODUCTION Often, production corporation created for 1 movie & then dissolved (tax reasons) Often, production corporation created for 1 movie & then dissolved (tax reasons) Company must go into debt to finance its film Company must go into debt to finance its film SOURCES OF FINANCING SOURCES OF FINANCING –1ST MONEY  60% of the budget  High-finance banks  Producer must pay back the principal plus interest  Interest usually 8-10% above standard rates, or 20-22%

FINANCING THE INDEPENDENT PRODUCTION 2ND MONEY 2ND MONEY –40% of budget –Sources:  Direct investment & sale of stock in the prod. co.  Outside investors  Producer, director, etc.  Distributing studio  Deferred salaries of writers, actors, director, etc.; for tax purposes, take POINTS of film’s gross income –Unlike 1st money, 2nd money earns a share of the profits

American Graffiti (1973) American Graffiti (1973) –Scriptwriters paid $5,200 for script –Made $600,000 in points

Twins (Universal, 1988) Twins (Universal, 1988) –Made for $15 million –Instead of salary, director & stars took points  Arnold Schwartzenegger, 15%  Danny DeVito, 7½%  Ivan Reitman, 7½% –$112+ million in domestic sales

FINANCING THE INDEPENDENT PRODUCTION 3RD MONEY 3RD MONEY –Completion guarantee: covers costs over projected budget –Provided by an insurance company, completion bond company, or producer himself –Like 2nd money, 3rd money earns share of profits REMEMBER: Terms 1st, 2nd, & 3rd money refer to order in which money is PAID BACK, not order it is obtained! REMEMBER: Terms 1st, 2nd, & 3rd money refer to order in which money is PAID BACK, not order it is obtained!

GROSS (BOX OFFICE) FIRST MONEY (BANK) SECOND MONEY (INVESTORS) THIRD MONEY (COMPLETION BOND) PRODUCER

THIRD MONEY?? FIRST MONEY?? SECOND MONEY??

COMMERCIAL RELEASE Most movies must make back 2½-4 times initial investment to be profitable to producer Most movies must make back 2½-4 times initial investment to be profitable to producer

DISTRIBUTION OF THE BOX- OFFICE DOLLAR

GROSS (BOX OFFICE) AFTER EXHIBITOR & DISTRIBUTOR FIRST MONEY (BANK) SECOND MONEY (INVESTORS) THIRD MONEY (COMPLETION BOND) PRODUCER

COMMERCIAL RELEASE 70% of all films lose money in theatrical release 70% of all films lose money in theatrical release May make money from TV, videocassettes, etc. May make money from TV, videocassettes, etc. Blockbusters may make up for losses on losers Blockbusters may make up for losses on losers

THE ROLE OF THE MAJORS FINANCE (2nd money) FINANCE (2nd money) TECHNICAL FACILITIES TECHNICAL FACILITIES DISTRIBUTION DISTRIBUTION –DISTRIBUTION SYSTEM –ADMISSION CHECKS –ADVERTISING CAMPAIGN –DISTRIBUTION SCHEDULE

DISTRIBUTION SCHEDULE SLEEPERS SLEEPERS –Booked in a few strategic theaters, later booked in more theaters as word-of-mouth spreads

The Full Monty (1997) The Full Monty (1997) –Co-production of Channel Four Films (UK) & Fox Searchlight Pictures (US); distributed by 20th Century Fox –Budget: $3.5 million –Opening Weekend: $244,375 (17 August 1997, 6 screens) –Wide release: $2.9 million (14 September 1997, 387 screens) –Eventually grossed $46 million in US, $198 million outside

DISTRIBUTION SCHEDULE TURKEYS TURKEYS –Booked into as many theaters as possible with much advance publicity in order to cash in before word-of-mouth spreads

Cutthroat Island (1995) Cutthroat Island (1995) –Co-production of 10 companies, including Carolco Pictures, Le Studio Canal+ & MGM –Distributed by MGM –Cost $92 million –Grossed $11 million

Town and Country (2001) Town and Country (2001) –Produced by 5 companies, including New Line Cinema; distributed by New Line –Cost $90 million –Opening Weekend: $3 million (29 April 2001, 2222 screens) –Gross: $6.7 million