How Kevin Smith's Red State Has Already Earned Back Its Budget

kevinsmith300.jpgSurprise, haters! Kevin Smith's big Red State gamble has paid off. A report last week cited Smith as having announced that his film was "in the black" during a keynote address at a National Association of Broadcasters event last week -- a vague phrase that suggested that somehow Red State had earned back its $4 million budget through Smith's 15-city screening and speaking tour. Yet Box Office Mojo lists a mere $851,832 box office take to date. How does Smith's math work out, exactly?

Pretty well, as it turns out, but not exactly as you might guess. Responding to Movieline via e-mail to clarify the Red State matter, Smith corrected tech/business blog GigaOM's initial assumption: "That article is inaccurate, but the sentiment is in the same ballpark."

Over at The Red Statements, Smith clears it up -- and does the math for the skeptics out there -- in a blog entry entitled "QT and me." The piece begins as a glorious retelling of a recent night spent watching Red State in the company of Quentin Tarantino and Michael Parks, but eventually gets to the business speak:

"Over the course of the 15 shows of the Red State USA Tour, we made almost one million dollars from ticket and merchandise sales. A few times, we had the highest per screen average in the country. We started out with a record-making show at Radio City Music Hall and went on to average 1100 people per screening. Had we booked ourselves into smaller houses, we could've SOLD OUT every show; but being in the larger houses cost us nothing extra...

You take what we made on the tour, you add that to the $1.5mil we've pulled in from foreign sales thus far (with a few big territories yet to sell). Add to that $3mil we're on the verge of closing for all North American distribution rights excluding theatrical (which means VOD/HomeVideo/PayTV/Streaming).

The flick cost $5mil to make, but $4mil after the California tax incentive. One of the only things Jon and I promised the Red State investors in exchange for letting us handle American theatrical distribution ourselves was that their $4mil would be covered as soon as possible -- something very few other production entities can promise or even offer. Invest a million dollars in almost any production, and you rarely if ever get your money back within five years, let alone the one year it's looking like it's gonna take for our guys to make their money back.

Add up all those figures above and you'll notice our gains are higher than our spending. And without any dopey marketing figures to have to recoup, once we close the aforementioned deals (which John Sloss & Law Co. are working to close as we speak), simple math dictates Red State is in the black -- long before any wide release. That's music to the ears of any investor who only put up their money in September."

So, to reiterate, Smith's math goes a little something like this:

($851,832 in ticket sales, per Box Office Mojo + merchandising = $1M)

+ $1.5M in foreign sales thus far

+ $3M in North American VOD/home video/streaming sales which are "on the verge of closing," according to Smith

- ($5M production budget --> $4M after tax incentives)

= $1.5M profit after deducting production budget

Not too shabby considering that, as Smith proudly points out, the Red State roadshows didn't employ any outside marketing budget beyond his own already-in-place SModcast media infrastructure. Initially, however, many were skeptical that Smith's self-release plan could meet the early goal of earning back even half of its $4 million budget. After the first roadshow date, Twitchfilm's Todd Brown went so far as to run the numbers with a little speculative math, determining that the Red State roadshow was unlikely to recoup the targeted $2 million once screening and travel expenses were tabulated.

Brown's hypothetical equation didn't include merchandising sales, which Smith folds in with his ticket sales, and assumes that theater rental rates and talent travel for Q&A appearances would cut into the numbers substantially. However, that didn't account for the foreign sales Smith includes or the domestic home video/VOD/streaming sales that he says are near completion.

But Brown's point about applying this model to other indie films under the SMod banner -- indeed, the very same argument most frequently raised by bloggers and Smith-watchers since he announced his plan at Sundance -- stands. Without interest as fervent as that for Red State (for Smith's first release following the announcement of this maverick new business/distribution model, for those curious about its controversial subject, for its stars) any other independent release seems unlikely to draw the kind of roadshow audience that Red State did. And without that kind of proven early audience interest, any other indie release may not win the kind of buyer attention that won Red State the deals that made a positive mathematics equation possible ("Those $3 million in deals I was talking about? That only materialized because our little movie went out and performed well.").

Smith can cross that bridge when he comes to it, one supposes; for now, at least as far as he's concerned, Red State seems to have already exceeded expectations -- and it doesn't open theatrically for another six months.



Comments

  • Devin Faraci says:

    Smith throwing in merch sales is so dishonest. As is the fact that he pretends like the tour was free.
    And guess what? MANY movies make their budgets back on foreign pre-sales. This is not a function of the tour on any level and should further not be counted towards the tour, if he's using the tour as some kind of point-making event. That foreign pre-sale would have happened with or without him talking to half full theaters across America.
    That's not even counting the unhatched eggs of his magical 3million number slammed into that.

  • Scoop says:

    Your math (and Kevin's) ignores the other costs:
    1) The $850,000 in box office is not clear profit, as assumed in your model. Theater owners do not let you use their facilities for free. You must either split the gross or pay a rental fee.
    2) One does not travel around the USA for free. There are costs involved in making a 15-city tour. That would include airfare, restaurant meals, rental cars or taxis/limos, and probably pretty swanky hotels. That would depend on how many people were traveling and the luxury involved.
    I suppose the $850,000 gross resulted in about $400,000 net. The good news is that any positive number is gravy. The net profit from the tour itself is almost irrelevant to the calculation. Ignoring it altogether, the film cost $5 million and has already produced $5.5 million in profit. ($1 million tax incentive, $3 million domestic sales, $1.5 million foreign.)
    Of course, as Smith notes, if the tour had not been successful, those domestic and foreign sales would not have materialized.

    • Pat says:

      I think the way the box office, 15 city tour worked was that Smith rented the theater and showed the movie. One night only type thing. I'm an Indie filmmaker and I have done this. I would rent the theater for $800 to $1000. I had it in a 4 hour block. So you figure that would be enough time, for seating, viewing and Q and A. The theater loves it cause they don't have to take any risks and they get all concessions.

      So, $15,000 for the theaters not $400,000. Theaters get half of the box office when there is a release. That's not what this was. The theater will rent their space to anyone.

  • joe says:

    I think everyone is trying to buck the system, but Smith has said that he makes more money talking about movies than actually making them. The attraction is Smith himself and partially the movie. Trying to say that the movie is the draw is just incorrect.

  • Lakawak says:

    Awesome. Factor in made up money that Smith claims is "about to happen", then ignore the fact that the studio does NOT get 100% of box office gross. It starts out almost 100% for the studios for the opening weekend but gets lower with each week in release and the percentage for the studios goes down pretty quickly, (and this movie made about 25% of its money in its 4th week). Foreign box office is even less favorable to the studios. Also ignore that marketing is not free. (The tour is marketing, and would be EXTREMELY costly and if they are not counting that toward the cost of the movie, then they have to pay taxes on the revenue made on that tour.) Nor is actually making the prints of the movies. And the merchandising (since Smith is so quick to bring that up) is not all profit either. And of course, 2011 money is not worth the same as 2010 money.
    Of course they will pass this off as a success. Kevin Smith still thinks he has made a good movie in the last 14 years. That shows how delusional he is. Like his boast that it was the highest per screen average. Ooooh! That NEVER happens with a tiny release movie! Oh wait...it happens all the time. Especially when those few locations are big theaters.

  • Martini Shark says:

    He also is not including the proceeds from the prop sales of Chronic's codpiece.

  • NotASheep says:

    You desperate liberals will do ANYTHING to make your guys look good! Here you are shamelessly doing damage control AGAIN. Smith is a FAILED non-artist who gets a lot of buzz from the media but NOT sales to match the hype. He's a politically correct WHORE who ironically got famous from a rude anti-gay scene by the character Jay in the first Clerks movie! Now he's kissing Hollywood's ass to repent and they love to promote him as some sort of 'pied piper' of today's youth. What a load of CRAP! We ain't buying it.

  • Boris says:

    How would you guys feel if you made a movie for 4 million, having stars like Parks, Leo, Goodman in it, traveling around the country with your own tourbus-packed with all of your friends and familys, having no pressure of any C.E.O.?
    You´d feel like rockstars!
    But he stays patient, keeps focussing on Smodcast and laughing about you guys who instead of getting into a club to party, choose to stay at home to write boooooring calculations....

  • Goober says:

    I truly don't understand how this is seen as a "gamble" that's "paid off." At least 80% of figures given are coming from selling distribution rights, unrelated to the tour. The vast majority of films sells distribution rights and expects to make a good amount from doing so, 'Red State' is just another.
    I realise he says that the distribution deals "only materialized because our little movie went out and performed well," but I'd wager having John Goodman and other recognizable names in the cast, it being a horror film, and it being directed by Smith were what truly sold the films, not how well a tour of the film with the stars and director talking on stage went (as well as receipts that include the bizarre addition of however many 'Silent Bob' t-shirts and toys sold in the lobby).
    I'm not trying to poop on his parade here, but this whole thing just doesn't make sense. If you believe the figures Smith's given then the plain reality is that the tour netted at most $850,000 before expenses. The other 4 - 5 million came from the the same sort of deals made by virtually every film, independent or otherwise, from 'Sucker Punch' to 'The King's Speech'
    $850,000 I think is a big success but all this adding on of other figures seems to me to indicate that Smith's whole plan fell short of what he was hoping for.

  • Jamus Magnus says:

    Your suppositions about the costs related to the tour are way off. They traveled on a tour bus, which can be bought relatively inexpensively. So, no cost for air travel. And most likely it minimizes the need for hotel stays, as well. But, even if you are correct, and the tour only netted $400k, that's weeks and weeks of marketing (which is what this is, a Red State marketing tour) for a fraction of what it would cost for just opening week promos the traditional way.

  • John says:

    Hey I'm gay and I liked this movie.
    Just because I think John Goodman is hot!!!
    and so is Kevin Smith.
    Make them the bread and I'll be the meat of that sandwich any day baby!
    :)

  • Joey says:

    I love John and he loves me! We both like the movie. Great job putting this together Kevin!!!

  • Alan says:

    What Kevin Smith is doing is inspiring. Think of all the film students who he has inspired by breaking down the traditional production and distribution models. It always amazes me how many negative comments Smith accumulates on the internet from people who should perhaps focus on finding a hobby or talent and try to create something themselves other than just trying to knock people down for trying.

    "You are the one's who are the ball lickers"

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