Investor, & Distribution advice for a newbie

I just want to first say I'm glad to find this board I'm hoping some of you may be able to help me out.

I'm a new filmmaker but I've been acting professionally for 22 years & doing professional design work for about 10.

I'm doing an educational series in the health field for a subject that likely will sell. I have 2 questions.

1. I possibly have an Angel investor(s) for some of the money I need to start this project... I just don't understand WHAT to give in return. I plan on making 8 DVDs in the series the profits from the first one will pay for the rest of the series. So realistically I need the money just to help out with the first one.

2. I have found some wholesalers that are in the same market exclusively. For example if my DVD was $29.95 what should I sell it to them at? I know it should be based on bulk but I'm not sure at what percentages. I want to do this myself at first to cut cost but I want enough of a margin to hire someone for sales later.

My production costs realistically are low because of me actually doing a lot of the work... I have lots of experience marketing things for other companies but I'm very weak when it comes to the investment thing.

Sorry I thought of a one more...
I have a company that has the same target market. They produce videos too but it's NOT a competitor. Anyone have a resource or idea for target prices. I think at first most I can manufacture is 10,000. I want to sell the trailor space to also help initial production cost.
 
Two routes

OK. I think you can take one of two routes with this venture.

You've potentially solved two of the biggest problems any filmaker faces, funding and distribution. Or, at least you have a plan.

The two routes you can follow are:

1) Ask lots of questions, study real hard and learn how to pull a production together yourself. (A long hard route, but a good learning experience)
or
2) Hire in a more experienced producer/production company to manage the project for you. (Could be a better learning experience)

My own gut reaction would be to find someone more experienced. There are so many pitfalls in any video production project. It's easy to make a project crippling mistakes, especially if you are new to the territory.

On a short drama film, this doesn't matter to much, it's all part of the learning process. On a commercial project, it's too big a risk. I would expect that one of the things your investor will want to know, is have you got any on the project will the experience to get this done?

If you've found someone who isn't asking those questions, pass him/her on to all the guys here, we could all do with investors like that.
 
I understand your point but do you have any advice for the questions I asked?
I appreciate you replying but it doesn't apply to my situation. I never said I couldn't produce this project or I didn't have a team. We've already done a sample video. I didn't write that because it doesn't have anything to do with my questions.
 
A producer doesn't "produce" the actual video, they handle the business side, they make the deals happen.

A good producer, with experience in this field, will cut you better, more profitable deals because they don't need to ask the questions that you did. Plus because they already understand the business, they may well have other contacts and other ways of turning a profit from your production.

If, however, you decide you don't need that kind of help, retail mark ups are always at least 100%, if you're not known and this is your first attempt to business with a retailer, they hold all the power. They can pretty much set the price, because unless you've got a "must have," "can not get anywhere else" product you've got very little leverage. If you are dealing with a wholesaler rather than a retailer, then they will have a massive mark up as well. The more people there are between you and the retailer, the less money there is for you.

Oh, and always cut the distribution end of the deal before the investment end.
 
It sounds like you're planning to prove the validity of the concept with the first video and then build market with subsequent videos. From your reply above it seems you're confident that you can get the product developed, shot, edited, and ready to go out the door. The gray area comes at the point of negotiating an investment deal at one end and a distribution deal at the other end that will result, ultimately, in you having enough money to produce the other videos in the series with profits from the first.

You need to model this and work out the numbers to see if it's viable. Call the wholesalers and ask for a copy of their boilerplate contracts. With some relationship-building and some sales skill you can usually get a breakdown. Talk to your investor and get an honest perception of how s/he defines a reasonable ROI. Then figure out how many units have to sell in order for the return to equal:

1. Production Costs
2. Investor's expected profit
3. Production costs for second video
4. Your fees, if applicable.

If you can hit that number with realistic sales, then you're in a safe zone. You're not pulling the wool over the investor's eyes. You're not in a position where you have to cut the wholesaler's expectations. From that safe zone, you can start negotiating. You ought to be able to push a little on both ends in order to sweeten the middle.
 
Need to conduct market analysis

You are at a disadvantage negotiating with the wholesaler. They know more about what your product is worth than you do. (Based on the volume of business that they do on similar products).

I suggest that you analyze your market potential more completely. How many units have similar titles sold? What are the prices at retail? Who are the largest retailers? You should try to learn more about these dynamics.

There are wholesale distributors that sell to independent video stores. What do they charge their customers for product? If the wholesaler charges the retailer $10, then clearly your price to the wholesaler would need to be less.

Good luck with your project!

Regards,

Steve

Sharp Angle
http://www.sharpangle.com
http://www.filmbusinessplans.com
Film Business Plans, Film Financing, Marketing & Distribution
 
$30 per DVD is a really high cost per unit fee. How many are you looking to sell? If you’re going to a wholesaler you’re talking about thousands of units. Go to http://www.megalodon.com, they have the best prices I’ve seen, plus they have screenprinted DVD faces, full color packaging, and glass mastering for pressed DVDs, none of that burned mess. They do this for less than $4 a unit and substantially less if you order more and get less printing done.

So let’s say you want to produce the product in DVD-5 format because you have less than 1.5 hours of material, and you want to start with a small batch of 5,000. Now, if you’re a good negotiator, you’ve gotten some money from the distributor already. You don’t need much, just a DVD, box, and 2 page insert. That’s $1.67 a copy or $8,350 total. Add this to your production cost and divide by the number of units (5,000), and that is what you have to sell per unit cost to break even. Add any applicable taxes and a reasonable profit margin (say 10% or more) and that should be your wholesaler cost. Take that same number an add 25% or more for your retail price.

Of course, consideration should be taken for what your competitors are selling theirs for.

As far as the investor: work out whatever deal is mutually satisfactory. There are no rules with individual investors. I would start by offering a flat percentage of return on a fixed date. Like 120% in 3 years or something. Or, an installment plan might be best for both of you. It depends a lot on what s/he wants to get out of it.

Remember that units of ownership are a lot more valuable than a loan situation, so be stingy with the units. Also, expect to need enough money for the first two or three, because by the time it takes for the money to come in from the first, you’ll want to have another one done and ready to go.
 
9ine said:
1. I possibly have an Angel investor(s) for some of the money I need to start this project... I just don't understand WHAT to give in return. I plan on making 8 DVDs in the series the profits from the first one will pay for the rest of the series. So realistically I need the money just to help out with the first one.

Generally, if they put up the money, the standard in Indie film is for investors to get FIRST MONIES RETURNED until their investment is recouped, then all profits fromthere are split 50/50 between the producers and the investors.

IE if it costs $100,000 and you recieved a distribution deal for $200,000, the first $100,00 recieved goes to the investors, then you split the remaining $100,000 of "profit" for $50,000 each.

I don't think it's "realistic" to count your eggs before they hatched. It doesn't matter what kind of business we're talking about, you cannot guarantee that you will sell enough of anything to fund 8 additional products. There are no guarantees especially with a video project. Unless you already accepted payment for pre-orders that equate to your budget for 8 additional pieces, it is NOT a guarantee. Being optimistic is good, but don't bet on anything. Ther is always an acto of god or unforseen elements that can stop a product from selling.
9ine said:
2. I have found some wholesalers that are in the same market exclusively. For example if my DVD was $29.95 what should I sell it to them at? I know it should be based on bulk but I'm not sure at what percentages. I want to do this myself at first to cut cost but I want enough of a margin to hire someone for sales later.

This is odd. Generally if a DVD costs the consumer $29.95, then the store paid between $10-19 for it. The distributor that sold it to them paid between $5-9 for the DVD, and it costs someone around $1-3 to manuafacture it, but they made at least 1,000 copies of the DVD. These percantages (30-70% markup) are not far off from any product in the United Sates. A lot of middlemen + a whole lotta mark up = a good ecomony.

You can get DVD's "REPLICATED" (not duplicated, which generally means DVD-R's or DVD+R's) for around $1-3 each but you have to order at least 1,000 discs.
 
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