3.1 The film business value chain
Figure 6 is a representation of the film value chain. This is a summary of a very complicated process.
This chart is not definitive, but it highlights the different stages in the creation and consumption of an independent feature film. Terminology may vary, and stages can be broken down differently.
Here is some closer explanation of these principal stages:
Development: This is a crucially important process in its own right, which you'll learn more about next week. A lot of effort goes into getting a film idea and script right, before the project ‘goes to market’ to be financed.
Finance: In the world of independent film, in general, each film is financed on its own terms and in its own way. Major studios are able to apply their own funds or secure long-term investment for film funding, so the finance process is not such a concern for them, but in the world of independent film, finance is the most difficult stage.
Pre-pre-production (pre-prep): Note the last development stage, with a dotted line relationship to finance. It is called pre-pre-production and refers to a very difficult stage in the life of some films that are working under tight timeframes.
The film is not yet officially financed. However, money needs to be spent in order to secure key cast and crew, and start to find locations, and so forth. Someone needs to fund pre-prep, but this is a highly risky investment, because the film might collapse at the last minute.
Production: In some ways the simplest part of the chain. Though it has its own risks and uncertainties, it is a very established ‘industrial’ process. It is divided into pre-production, the official ‘prep’ period, principal photography, when the camera is rolling, and post-production when the editing and sound and visual effects (VFX) and music aspects are incorporated.
Distribution: The process of getting the film into the hands of the theatre chains, broadcasters, video stores and video on demand (VoD) operators. The companies that do this are called distributors. In general a producer uses a sales agent to license a film to distributors outside the producer’s own country.
Exploitation: The process by which consumers actually experience the film. The most important and first exploitation market is the cinema; the companies that run cinemas and cinema chains are called exhibitors. However, as you may know (and will learn more about soon), films are consumed in many different ways, with digital technologies growing ever more important.
Remember that the term ‘value chain’ is also used to analyse business processes in different industries. Its usage here, referring to all the stages of life that a project goes through from the very beginning to the very end, is specific to the film industry.
This course is structured around the different elements of the value chain. Week 2 talks about development. Week 3 jumps to distribution and exploitation. A major source of finance is from distributors and sales agents paying for the rights to the film before it is made. Therefore, you really need to have a sense of how distribution works before you can understand finance. Week 4 then explores finance. Week 5 covers production itself. Then in Week 6 – the final week of the course – you will take a step back and consolidate.
Activity 3 What happens along the value chain?
Now that you have a good idea of the general process, try to match the activities below with the relevant stages of the value chain (these are the seven stages listed in Figure 6 on the previous page).
Using the following two lists, match each numbered item with the correct letter.
Find ideas, secure rights, option agreement
Secure finance, hire writer, hire director
Hire casting director, secure key cast, preliminary budget
Prepare estimates, secure pre-sales, certify as British
Pre-production, principal photography, post-production
Marketing campaign, broadcast licence, video/DVD/VoD licencing
Cinema exhibition, DVD rental and sales, download to own
- 1 = d
- 2 = f
- 3 = a
- 4 = c
- 5 = b
- 6 = g
- 7 = e
This is generally how you'd allocate the activities to the listed stages of the value chain, but it's important to note that this can all vary, case by case.
Is there anything here that surprises you in how the activities are allocated? Some of these terms may not yet be familiar to you – don’t be put off. By the end of the course, you’ll be well up to speed on what these activities and concepts are.
As you progress through the course you will quickly realise that a strictly chronological representation of the value chain is not accurate. In real life, activities from one stage merge into another. For example, activities such as preparing sales estimates and pre-pre-production can be regarded as part of the development stage or as part of financing.
You can find out more about the value chain in the Further Reading section.