The Industry...

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ilmmaking is a constantly changing industry and although the film business, like any other, has had its share of ups and downs, most analysts (such as Louise Levison in her book Filmmakers and Financing) agree that theatrical motion pictures will never go out of style as a popular form of entertainment.

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his potentially lucrative industry is composed of many different segments, which function in a variety of manners. The Hollywood studio process of filmmaking, for example, is diametrically different from the independent production methods used by lower budget producers. However, everyone in filmmaking - from "indie" producers to international studios - function within the same industry. No single company operates in a vacuum - each is part of a collection of business, which provide similar products in the entertainment market.

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riton Entertainment has been formed for the purpose of producing modestly-budgeted independent feature films. Their feature films, approximately 90-110 minutes in length, will involve actors, crew and locations in and around north Texas. The projects comprise an effort to produce high quality movies outside of the "Hollywood" big-budget extravaganzas. Every film has its own financing, production and marketing challenges based upon genre, content and perceived audience.

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riton Entertainment feels that our projects may be free of certain restraints that traditional commercially driven studios often place on films. This will hopefully allow our filmmakers to create a product with an original feel and artistic value, as well as strong commercial appeal.

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Motion Picture Production

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here are two major facets of filmmaking, whether done through the studio system or by independent methods. The first facet involves all the writing, developing, financing, filming and the post-production (editing) of the motion picture. The second facet is the distribution of the motion picture. This encompasses the promotion, advertising, publicity and exhibition of the completed movie.

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he Hollywood studios (Warner Bros., Twentieth Century Fox, Paramount, Universal, MGM, Sony, Disney, etc.) usually produce films through their own production facilities after either commissioning a story from an inside writer or receiving one from an outside agent. The project is put into development, during which time the story is adapted into a screenplay, producers and directors are hired, and cast members are pursued. The contracts are finalized during the "pre-production" phase, after which principal photography begins. After eight to twelve weeks (on average) of filming, "post-production" commences. Here, the film is edited, the sound is laid down, music is recorded and special effects are added. This phase can last from a few months to nearly a year or more, depending on the extent of the project. Once a major studio-produced film goes into photography, it is rarely shut down. Even if the budget must be increased dramatically, the studio will usually compensate. Studio filmmaking is a time-tested (though very expensive) bureaucratic process.

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ndependent movie production is rather different in many regards. Though "indie" films are sometimes eventually distributed to the public by one of the major studios, an independent film company looks for companies such as Triton Entertainment to receive its funding (the "negative cost") outside of the studio system. In this process, the independent production company maintains complete creative control over the final project in return for allowing Triton Entertainment to distribute the completed film.

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y using both proven methods described above, the managers of Triton Entertainment are involved with the important financial and developmental aspects their film's development, production, and sale.

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Exhibition

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otion pictures earn the majority of their profits through worldwide exhibition in movie theaters and other ancillary markets (video, cable, etc.). The major studios have their own distribution arms, which control the licensing of their films to the various exhibitors. This is yet another internal expense for which the company is ultimately responsible, adding to the already complex accounting procedures practiced by the Hollywood studios.

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hen an audience member goes to the local theater and purchases a ticket, the exhibitor (in this case, the owner of the theater chain) must return a percentage of that ticket sale to the distributor. In general, a film that is produced and distributed by a studio returns 50% of the box office receipts to the distribution arm of the production studio. Foreign and non-theatrical exhibitions also play a major role in a film's profits. Today, the foreign market is larger than ever, with some films being produced for the sole purpose of overseas exhibition. Non-theatrical markets are increasing as well, with the cable and pay television industries experiencing the largest growth. Home video rentals are also a major source of income for any film.

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ost important for our purposes is the basic flow of income from these various revenue sources to the independent producer. As noted above, specialty films may be distributed either by independent distribution companies or possibly through the distribution arms of larger studios. The same distributor may receive additional revenue from television, video, and foreign receipts, usually over a two-year period following the film's initial U.S. theatrical release. These dollars, then, constitute the total revenue of the distributor.

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rom this total, the distributor normally subtracts the cost of printing, advertising, and marketing the motion picture, in addition to a general distribution fee and overhead. The cost the independent production company spends to actually shoot the picture is returned to the film's investors with the first money earned by the film. The remaining dollars constitute the total revenue to the production company, or the producers' net profit. It is out of this net profit that the investor and other participants in the film typically receive a percentage.

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learly the most advantageous position to be in is to control the largest degree of the above-described process as possible. To this end, Triton Entertainment will devote vast resources to our distribution branch to maximize the return to our company and investors.

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The Industry Today

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ortunately, we are working in what most analysts consider to be a healthy industry. According to Louise Levinson, the total number of theater screens in the US increased by 20% from the mid-eighties to the early nineties, and by over 50% since the mid-seventies. In fact, Paul Kagan Associates reported that in the year 1993 alone, over 1 billion people attended films in the U.S. (up 13% from five years earlier), generating a box office gross of $4.995 billion (up 18% from five years earlier). And, despite the technological advances that have introduced new, home-based entertainment markets, U.S. box-office admissions are predicted to continue increasing through the beginning of the millennium, along with a hefty rise in ticket prices. This, coupled with a predicted 50%+ increase in foreign box office rentals between the early nineties and the year 2000, gives added confidence that theatrical features will continue to be a lucrative source of income. In 2003, rentals, television contracts and theater receipts totaled over $44.8 billion world-wide.

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