The importance of financial research in the film industry
Financial research is essential for the production of a film, particularly one intended for the mainstream market. So much money is often invested to fuel these projects that a detailed budget plan must first be developed. This will also ensure that the right fraction of money is designated to each field of production and that each field’s individual budget is proportionate to the rest. The budget provides a framework that, whilst susceptible to change, influences every stage of production. For example, if the film relies on special effects or a specific star, the overall budget of the film will be structured in proportion to the film’s key financial requirement.
The production budget doesn’t include the money required to cover the exhibition and distribution costs, which, in the mainstream market, often match the overall costs of production. Nevertheless, the production budget is still dealt with in two parts. The first part includes the “above the line” costs which involves the key prices that set the overall tone of the budget, and therefore, the overall tone of the film. These key costs are the fees of the leading stars, the director, the writer, and producer. The stars’ salaries are usually proportionate with one another whilst the Director is given a similar percentage to the writer and producer.
The second part of the budget, the “below the line” costs, affect the other cast members, sets, costumes, equipment, rentals, permits, catering and any other expenses. It also affects the postproduction processes of editing, sound, special effects and title sequences. These costs are often unaffected by the production’s star power, however, blockbusters require each of these fields to have very high budgets to fulfill the increasing audience demand for bigger spectacles. To give an idea of the detail required in each field of the budget, each piece of equipment, prop or mass storage device must be budgeted and receipted.
During the budgeting process, which lasts from the very inception to the final edit of the project, obstacles can easily appear which require changes to the budget. For example, an actor may pass away or become seriously ill, requiring a quick replacement or special effects alternatives to hide their absence, a prime example of this being Oliver Reed’s death during the production of Gladiator. Certain locations may also become unavailable or CGI alternatives may suddenly be opted for instead of physical sets/props. However, the initial budgeting plans always allow certain areas of the budget to be changed, and others not. Significant changes can only be made with consent by the film’s investors and lenders, as well as any unions involved.