THE NEW WORLD ORDER THE PACKAGE-UNIT SYSTEM. THE PRODUCER-UNIT SYSTEM OF PRODUCTION (1931-55) With expansion following sound, producer-unit system became

THE NEW WORLD THE NEW WORLD ORDERORDER

THE PACKAGE-UNIT THE PACKAGE-UNIT SYSTEMSYSTEM

THE PRODUCER-UNIT SYSTEM THE PRODUCER-UNIT SYSTEM OF PRODUCTION (1931-55)OF PRODUCTION (1931-55)

With expansion following sound, With expansion following sound, producer-unit system became an producer-unit system became an optionoption

– Instead of central producer in charge of Instead of central producer in charge of all films, number of producers supervised all films, number of producers supervised film units within studiofilm units within studio

– Producers specialized in particular genresProducers specialized in particular genres Not followed to same degree by all Not followed to same degree by all

studiosstudios

THE PACKAGE-UNIT SYSTEMTHE PACKAGE-UNIT SYSTEM

Replaced earlier management systems in Replaced earlier management systems in late 40s, early 50slate 40s, early 50s

Reasons:Reasons:– Paramount CaseParamount Case– Tax laws favoring independent productionTax laws favoring independent production– Changing demographicsChanging demographics– Advent of TV, etc.Advent of TV, etc.

Production & distribution now more Production & distribution now more flexible & pragmatic, varying from film to flexible & pragmatic, varying from film to filmfilm


DECREASE IN PRODUCTIONDECREASE IN PRODUCTION– REASONSREASONS

Studios no longer had own theaters to supplyStudios no longer had own theaters to supply Attendance decreasingAttendance decreasing Studios wanted fewer, more expensive films, Studios wanted fewer, more expensive films,

making more money on each (through longer runs)making more money on each (through longer runs)

– THE DECREASETHE DECREASE # of films produced & distributed by majors fell # of films produced & distributed by majors fell

80% from late 1930s (50 films/year/studio) to 1970s 80% from late 1930s (50 films/year/studio) to 1970s (10/year/studio)(10/year/studio)

Increased in 80s to 18-25 films/year/studioIncreased in 80s to 18-25 films/year/studio


THE PRESENT STATUS OF THE MAJORSTHE PRESENT STATUS OF THE MAJORS– Majors have shrunk in both size & operationsMajors have shrunk in both size & operations

Have lost their independenceHave lost their independence All parts of much larger conglomeratesAll parts of much larger conglomerates

– Contract system no longer in practiceContract system no longer in practice– Films now the results of negotiations & Films now the results of negotiations &

packagingpackaging– Primary function of Majors today is Primary function of Majors today is

distribution, most profitable phase of industrydistribution, most profitable phase of industry

INDEPENDENT orINDEPENDENT or“PACKAGE-UNIT” PRODUCTION“PACKAGE-UNIT” PRODUCTION

““Independent production” does not refer to Independent production” does not refer to “personal” or avant-garde cinema“personal” or avant-garde cinema

Refers to productions made outside of Refers to productions made outside of major studiosmajor studios

Typical of film production todayTypical of film production today Independent producer works in association Independent producer works in association

with a studio, not under authority of studiowith a studio, not under authority of studio No longer a contract system; producers No longer a contract system; producers

can’t rely on profits from previous can’t rely on profits from previous productions, so both the film’s creation & productions, so both the film’s creation & financing must be “packaged” & financing must be “packaged” & negotiatednegotiated

THE CREATION OF THE THE CREATION OF THE PACKAGEPACKAGE

SCRIPTSCRIPT– Commissioned by producer from professional scriptwriterCommissioned by producer from professional scriptwriter– Or provided by free-lance, well-known authorOr provided by free-lance, well-known author

PERSONNELPERSONNEL– Contracts negotiated individually for cast & director Contracts negotiated individually for cast & director

(AGENTS)(AGENTS)– Contracts negotiated for technical crew (UNIONS)Contracts negotiated for technical crew (UNIONS)– Arrangements for feeding, transporting, etc.Arrangements for feeding, transporting, etc.

DISTRIBUTORDISTRIBUTOR– Usually, distributor must agree in advance to distribute Usually, distributor must agree in advance to distribute

filmfilm– Should be 1 of MajorsShould be 1 of Majors

FACILITIESFACILITIES– Sets, costumes, cameras, lights, etc. must be rentedSets, costumes, cameras, lights, etc. must be rented– Usually rented from studio that agrees to distribute filmUsually rented from studio that agrees to distribute film

FINANCING THE INDEPENDENT FINANCING THE INDEPENDENT PRODUCTIONPRODUCTION

Often, production corporation created for Often, production corporation created for 1 movie & then dissolved (tax reasons)1 movie & then dissolved (tax reasons)

Company must go into debt to finance its Company must go into debt to finance its filmfilm

SOURCES OF FINANCINGSOURCES OF FINANCING– 1ST MONEY1ST MONEY

60% of the budget60% of the budget High-finance banksHigh-finance banks Producer must pay back the principal plus interestProducer must pay back the principal plus interest Interest usually 8-10% above standard rates, or 20-Interest usually 8-10% above standard rates, or 20-

22%22%


2ND MONEY2ND MONEY– 40% of budget40% of budget– Sources:Sources:

Direct investment & sale of stock in the prod. co.Direct investment & sale of stock in the prod. co. Outside investorsOutside investors Producer, director, etc.Producer, director, etc. Distributing studioDistributing studio Deferred salaries of writers, actors, director, etc.; Deferred salaries of writers, actors, director, etc.;

for tax purposes, take POINTS of film’s gross for tax purposes, take POINTS of film’s gross incomeincome

– Unlike 1st money, 2nd money earns a share Unlike 1st money, 2nd money earns a share of the profitsof the profits

American GraffitiAmerican Graffiti (1973)(1973)

– Scriptwriters paid Scriptwriters paid $5,200 for script$5,200 for script

– Made $600,000 in Made $600,000 in pointspoints

TwinsTwins (Universal, (Universal, 1988)1988)

– Made for $15 millionMade for $15 million– Instead of salary, Instead of salary,

director & stars took director & stars took pointspoints Arnold Arnold

Schwartzenegger, Schwartzenegger, 15%15%

Danny DeVito, 7½%Danny DeVito, 7½% Ivan Reitman, 7½%Ivan Reitman, 7½%

– $112+ million in $112+ million in domestic salesdomestic sales


3RD MONEY3RD MONEY– Completion guarantee: covers costs over Completion guarantee: covers costs over

projected budgetprojected budget– Provided by an insurance company, Provided by an insurance company,

completion bond company, or producer completion bond company, or producer himselfhimself

– Like 2nd money, 3rd money earns share of Like 2nd money, 3rd money earns share of profitsprofits

REMEMBER: Terms 1st, 2nd, & 3rd REMEMBER: Terms 1st, 2nd, & 3rd money refer to order in which money is money refer to order in which money is PAID BACK, not order it is obtained!PAID BACK, not order it is obtained!

GROSS (BOX OFFICE)

FIRST MONEY (BANK)

SECOND MONEY (INVESTORS)

THIRD MONEY (COMPLETION BOND)

PRODUCER

PRODUCER

THIRDMONEY??

FIRSTMONEY??

SECONDMONEY??

COMMERCIAL RELEASECOMMERCIAL RELEASE

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

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

1980 1998

NEGATIVECOST inmillions

ADVERTISING& PRINTS

DISTRIBUTION OF THE BOX-DISTRIBUTION OF THE BOX-OFFICE DOLLAROFFICE DOLLAR

$0.50

$0.25

$0.25

EXHIBITOR

DISTRIBUTOR

PRODUCER

GROSS (BOX OFFICE) AFTER EXHIBITOR & DISTRIBUTOR

FIRST MONEY (BANK)

SECOND MONEY (INVESTORS)

THIRD MONEY (COMPLETION BOND)

PRODUCER

COMMERCIAL RELEASECOMMERCIAL RELEASE

70% of all films lose money in theatrical release70% 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 losersBlockbusters may make up for losses on losers

$0.00$2.00$4.00$6.00$8.00

$10.00$12.00$14.00$16.00$18.00

1987 1996

BOX-OFFICE(in billions)

VIDEO

THE ROLE OF THE MAJORSTHE ROLE OF THE MAJORS

FINANCE (2nd money)FINANCE (2nd money) TECHNICAL FACILITIESTECHNICAL FACILITIES DISTRIBUTIONDISTRIBUTION

– DISTRIBUTION SYSTEMDISTRIBUTION SYSTEM– ADMISSION CHECKSADMISSION CHECKS– ADVERTISING CAMPAIGNADVERTISING CAMPAIGN– DISTRIBUTION SCHEDULEDISTRIBUTION SCHEDULE

DISTRIBUTION SCHEDULEDISTRIBUTION SCHEDULE

SLEEPERSSLEEPERS– Booked in a few strategic theaters, Booked in a few strategic theaters,

later booked in more theaters as word-later booked in more theaters as word-of-mouth spreadsof-mouth spreads

The Full Monty The Full Monty (1997)(1997)– Co-production of Channel Co-production of Channel

Four Films (UK) & Fox Four Films (UK) & Fox Searchlight Pictures (US); Searchlight Pictures (US); distributed by 20th distributed by 20th Century FoxCentury Fox

– Budget: $3.5 millionBudget: $3.5 million– Opening Weekend: Opening Weekend:

$244,375 (17 August $244,375 (17 August 1997, 6 screens)1997, 6 screens)

– Wide release: $2.9 million Wide release: $2.9 million (14 September 1997, 387 (14 September 1997, 387 screens)screens)

– Eventually grossed $46 Eventually grossed $46 million in US, $198 million million in US, $198 million outsideoutside

DISTRIBUTION SCHEDULEDISTRIBUTION SCHEDULE

TURKEYSTURKEYS– Booked into as many theaters as Booked into as many theaters as

possible with much advance publicity possible with much advance publicity in order to cash in in order to cash in beforebefore word-of- word-of-mouth spreadsmouth spreads

Cutthroat IslandCutthroat Island (1995)(1995)

– Co-production of 10 Co-production of 10 companies, including companies, including Carolco Pictures, Le Carolco Pictures, Le Studio Canal+ & Studio Canal+ & MGMMGM

– Distributed by MGMDistributed by MGM– Cost $92 millionCost $92 million– Grossed $11 millionGrossed $11 million

Town and CountryTown and Country (2001)(2001)

– Produced by 5 Produced by 5 companies, including companies, including New Line Cinema; New Line Cinema; distributed by New distributed by New LineLine

– Cost $90 millionCost $90 million– Opening Weekend: Opening Weekend:

$3 million (29 April $3 million (29 April 2001, 2222 screens)2001, 2222 screens)

– Gross: $6.7 millionGross: $6.7 million

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THE NEW WORLD ORDER THE PACKAGE-UNIT SYSTEM. THE PRODUCER-UNIT SYSTEM OF PRODUCTION (1931-55) With expansion following sound, producer-unit system became