Deconstructing ‘NSFW’ — our Little Indie Movie that made a 673.7% Return on Investment (R.O.I)

When amateur/not-yet-fully-established filmmakers and producers find out that I work in distribution and sales, I inevitably get questions — questions about particular distributors, questions about particular deal points — but most of all, I get asked how the hell anyone can make money by making an independent film. The same people asking that question usually point out that more and more films are being produced each year and as a result, returns are (in aggregate) dismal.

The truth is, there are many different ways to answer that question — all of them valid — but it occurred to me recently that one way I can tackle this question is by simply laying out my cards about the one time (so far) that I financed and produced a feature narrative film — which did indeed “make money”. I started by approaching a past client (and current friend) filmmaker Ryan Balas to create a film with the express intent of making a profitable project. What follows is an honest, transparent look at the production and release of that very project from my perspective as both producer and sole investor.

In 2013, Ryan and I wrote and produced a little feature film, NSFW. The “development process” was pretty straightforward: after I pitched to him that I would put up the money to shoot something small if we could design it for financial return, we got to work. We came up with a general story together, including the main point of conflict and story “beats” in a single evening. Ryan expanded this to an outline with the intent on working without a script. More on that later. When we were kicking around the outline one day walking around TriBeCa, someone walked by wearing a T-shirt that looked like it said ‘NSFW’ and inspiration struck — we would co-opt that attention-grabbing acronym for our title. Though sales attrition is difficult, my instincts tell me that the title was ultimately responsible for a significant portion of our financial returns. And returns there were.

There’s nothing particularly interesting or unique about putting together a small-scale film, but the profit it did generate was out-sized given its minuscule budget. Now that it’s been 4 years since wrapping on production, I can see that our little movie — which never appeared at an “industry” film festival like Sundance or SXSW, had no known cast and never played theaters in NYC or LA or anywhere — is one of the few I’ve seen first-hand make its budget back several times. So that, in a sense, is unique — most films (an estimate of 99%+ is probably fair if we’re including every film released to digital markets in a given year) lose money for their investor(s). In our case, the income ‘NSFW’ generated over the years is equal to 7.737 times it’s budget — an “R.O.I” of 673.7%.

So how did we get here, 4 years later? I’d be remiss if I didn’t answer this question by first getting clear some bits of information that I would inevitably be asked if I didn’t come out with them up-front — so here goes:

Even though it was a micro-budget film, everyone seriously involved was modestly paid. Our two lead actors received $50 per day; our director/writer received 50% of the proceeds after we paid back our budget; our “composer” (for the song IN OUR TRAILER) was paid $100; as the sole investor and producer, I took home the other 50% of the proceeds after the budget was recouped. Our budget, for the purposes of this analysis, is our final budget — after costs associated with pre-production, production, post-production and prepping the film for distribution. It includes everything we spent to get this movie made and out to market. I’m well aware that the film has pretty terrible reviews. As an investor, this doesn’t bother me. The purpose of this analysis is intended for filmmakers to better understand feature film as an investment vehicle and, I hope, to get the perspective of someone investing in feature film (which, call me old-fashioned, a filmmaker has a responsibility to since her/his money is allowing you to make “your” movie). Ultimately, we’re not talking about much money (see below) and one could argue that everything that makes this success possible doesn’t scale to significantly larger budgets. I mostly agree with this, but I’m not sure it matters. I’ll go into more detail on why later.

With the above disclosed/acknowledged, it makes sense for me to provide the headline figures here, which I’ll break down in further detail later.

$38,158.66 — is the gross income received by our distributor from all digital and cable distribution platforms.

$27,744 .00— is the income we’ve received from our distributor after 3 full years in release. This represents the above figure, minus the distributor’s fee and $875 of additional encoding costs to ‘NSFW’ on new platforms which partnered with Gravitas only after ‘NSFW’ was delivered to them in 2013.

$3,167.00 —is the amount we raised, via pre-sales, from our Kickstarter campaign.

$2,881.97 — is the amount we actually received from Kickstarter after their fees and the costs associated with fulfilling backer rewards (pre-sales of the film).

$3,958.00 — is the final budget for “NSFW”. This includes all distribution costs.

$26,667.81 — is the amount of royalties paid out, YTD, to myself and Ryan.

673.7% is the Return on Investment, expressed as a percentage. We spent a total of $3,958 and for that investment, received a total of $30,625 from pre-sales from Kickstarter ($2,882) + Digital Platforms ($27,744). For those of you counting, ROI is calculated as (Benefit from Investment — Investment Amount)/(Investment Amount)

With the hard figures in hand, the question remains — how did we do this? It all starts with what every sound investment prioritizes: risk mitigation.

I mostly left it to Ryan to make the film as best he could with the resources given to him. My focus was on limiting those resources as tightly as reasonably possible. Case in point: You may notice that the difference between the amount of royalties paid out ($26,667) and the gross income ($27,744) is $1,077, which is the same as the difference between the kickstarter “actually received” funds ($2,882) and the ($3,958) budget.

From this you can conclude that we basically recouped all but $1,077 from putting on a Kickstarter campaign after we had the finished film.

What does this mean for me, as an investor? I eliminated the risk of losing the “full budget” before we even spent it; in fact we only spent about $1,750 of my money, which was enough to get the film completed. The remaining funds — our distribution costs, roughly $2,200— were covered by our Kickstarter campaign — and THEN some. The campaign itself was in large part successful because we already had a finished film which we could point to as evidence we knew what we were doing and could deliver a final product. As a result, before the film ever became available for to audiences via our distributor, my investment risk was down to recouping the remaining $1,077 of the of the $1,750 we actually spent.

Since mitigation of risk is the name of the game, perhaps it makes sense to take a step further back and look at some key points on the production budget of roughly $1,750:

We shot for 5 days. This meant the actors — all 2 of them, save for a 3rd who shows up in just 1 scene — only cost $500. It also meant we only had to feed them (and ourselves) for 5 days. Whether you’re working with 1 hired cast/crew or 20, you have to feed them (even if you don’t pay them). So no matter how you slice it, when you’re making movies the old adage is true in its most literal sense: time=$ .

. The production “crew” was filmmaker Ryan Balas, with sometimes myself and sometimes our lead actor running sound (when he wasn’t on screen, naturally).

The equipment —basically a camera, a tripod and h4n microphone — was all owned already. We used no film lights to cut down on the time it takes to set up — which is great, since, again, time=$ .

to cut down on the time it takes to set up — which is great, since, again, . We hired actors who we knew were really talented at improvising dialogue. There are two reasons for this — 1.) it’s easier for dialogue to sound authentic when its not written and 2.) it’s much faster to work with natural dialogue (assuming you have actors who are talented at improv) since the actors don’t have to memorize lines. This is, again, a major budget saver since time=$ (are we seeing a theme here?).

it’s easier for dialogue to sound authentic when its not written and it’s much faster to work with natural dialogue (assuming you have actors who are talented at improv) since the actors don’t have to memorize lines. This is, again, a major budget saver since (are we seeing a theme here?). Our locations — my apartment, my parents apartment, the early-morning streets of Manhattan’s NoLiTa neighborhood where I lived at the time —were all free to use.

Bottom line — we took a queue from Errol Morris; by literally tossing out the script, keeping the cast tiny and the story bare-bones, we made our film Fast, Cheap and Out-of-Control.

Even though the final budget came out under $4,000.00, this in and of itself is not a recipe for profit. If there’s something about indie film investment risk I’ve learned from the 100+ films I’ve helped buy/sell/distribute in some capacity over the years, it’s that plenty of indies don’t make more than a couple of thousand dollars, period. Sadly, this is even true of films that appear at festivals like The Mill Valley Film Festival, SXSW, The Hollywood Film Festival, Tribeca Film Festival, etc. — I’ve seen first hand films premier at those festivals and land deals with reputable distributors, only to see in the months and years to follow that the royalties paid to those filmmakers just don’t add up beyond a couple of thousand dollars.

Why, then, was ‘NSFW’ able to perform at a level where we could not only meet our budget but exceed it many times over? We have some data from our distributor to help us, along with some guesswork.

Title : ‘NSFW’ is to teens and young millennials what seeing the “N” parental advisory notice on pay-TV (HBO, Cinemax, Showtime) was to those of us born in the 80’s — which is to say it’s a dog-whistle for nudity. Broadly speaking, the demographics for users who access films via digital platforms is young and male. Take from that what you will.

: ‘NSFW’ is to teens and young millennials what seeing the “N” parental advisory notice on pay-TV (HBO, Cinemax, Showtime) was to those of us born in the 80’s — which is to say it’s a dog-whistle for nudity. Broadly speaking, the demographics for users who access films via digital platforms is young and male. Take from that what you will. Distribution Footprint: ‘NSFW’ was available fucking everywhere. We can thank GRAVITAS VENTURES for their tireless work in expanding their network of partners— which makes all the difference for small films like ‘NSFW’. This isn’t true of all digital distributors/aggregators and can make a load of difference in your overall returns if your film has the ability to perform even modestly on foreign/niche/less popular digital video platforms.

‘NSFW’ was available fucking everywhere. We can thank GRAVITAS VENTURES for their tireless work in expanding their network of partners— which makes all the difference for small films like ‘NSFW’. This isn’t true of all digital distributors/aggregators and can make a load of difference in your overall returns if your film has the ability to perform even modestly on foreign/niche/less popular digital video platforms. The Trailer and Artwork: The marketing elements are more important to independent films than most independent filmmakers realize. Filmmaking teams tend to focus on making the best film possible — and while there are worthwhile reasons for doing this (not least of which is career advancement) it’s not nearly as important to small-scale productions as making those elements viewers can engage with before committing to a purchase — namely art and trailer — as enticing for viewers as possible. In our case, the trailer made the film feel “bigger” than it really was by appearing to show a wide variety of locations (despite the fact that almost the entire movie actually takes place in a studio apartment) and shows a lot of skin — even though the movie would, in reality, struggle to earn an “R” rating and is closer to PG-13 in the amount of explicit sexual content it contains.

So what about those last hanging threads — the question of whether or not this model is scale-able & the fact that the reviews were mostly terrible.

As far as scale, I agree that the approach we took here simply doesn’t work when you’re looking at a budget 100x as big. The economics start to fall apart for the simple reason that not enough people seek-out unknown indies to sample and as a result, the potential audience is just too small to realistically count on hundreds of thousands of dollars to roll in. Or to put it another way — once the budget gets big enough, the only way you’ll a film can be profitable is if it’s not an unknown indie — the film will either need known talent (“name” cast) or known support (a very positive reception at top tier festivals and/or critical acclaim). The former (casting known names) is a terribly expensive and risky bet and the latter (getting accepted to a top-tier film festival and hitting it big there) is only marginally within the control of the filmmaking team (and whether or not the industry is willing to admit it, requires a degree of luck and/or networking).

This, likewise, is why as an investor I don’t care that the reviews were terrible — I know that if the reviews had been strong and people really enjoyed the film, that does little in my efforts as an investor to turn a profit. It would have to go viral (think ‘Paranormal Activity’) for the audience reaction to make a big difference.

As a producer who co-wrote ‘NSFW’ (and whose real life inspired some plot elements of the story) I take the bad reviews in stride — at the end of the day making the best film we possibly could wasn’t the top priority — but it never is (I have yet to meet a filmmaker who will sell their kidney to get the budget their dream project needs) and we made the best movie we could with the constraints we had. More than that, Ryan experimented designing the film with small-screen digital viewing in mind and by shooting non-sync sound which was really valuable experience for the both of us. It should come as no surprise, then, that I was deeply proud of what we had done with ‘NSFW’ as soon as I saw the first cut — and well before we knew for sure that it would be a financial success. Finally, as Ryan pointed out to me after reading the initial draft of this post, we did get some positive reviews from small-time critics and fans alike.

Today, the film is still earning money. Thanks to our friends at Gravitas, ‘NSFW’ is available far and wide and new people are discovering it every day. Whether or not they know it, they’re getting exposed to Ryan’s work for the first time and I’m proud of that since he’s a skilled filmmaker who, when he finally does break out, will be the longest-gestating ‘overnight success I’ve ever met’. As an investor, getting the quarterly royalty checks I keep getting are stark reminders that despite the trends I see working in distribution, a motivated filmmaking team which approaches a the development process as a for-profit company would can indeed make films not just out of love, but also for the profit motive.