Reality check: The numbers behind Last Cab To Darwin’s success

How it happened

GREG HUGHES: “Susan Boehm (head of acquisitions and development, Icon) gave me the script of Last Cab to Darwin in mid-2013. Before joining us she’d worked with the creative team in her capacity as development executive at Screen Australia. She said ‘I love these guys and they need a distributor to close the finance plan’. Time was of the essence. We’re an Australian company but we don’t have a mandate to acquire or distribute Australian film. There’s no quota. We weren’t desperately looking for an Australian film. But we were conscious we hadn’t done one for a couple of years.

“I read it and thought ‘It’s a really great yarn and I love being on the road and spending time with these people’. Sometimes it treads that fine line between authenticity and cliché but I thought of it as culturally resonate Australia storytelling, like Sunday Too Far Away and other films I watched as a kid in Australian film seasons on the BBC. And it moved me. And if I’m moved by the material on the page there’s a good chance the audience will be. I’ve lived here 20 years but I’m a Brit and I passed it around the office to make sure it also resonated with the natives.”

NICK HAYES: “I kept coming back to its quintessential Australian-ness. It had elements of Priscilla (The Adventures of Priscilla: Queen of the Desert). It was set in the regional Australia you drive through on family holidays.”

TRACY WHYBREW: “But it was a contemporary film. And the way the script dealt with euthanasia didn’t feel polarizing; it was life affirming. We’d had a run of ‘disease of the week’ films: Still Alice, Love and Mercy, Infinitely Polar Bear”. (Everyone laughs.)

GREG HUGHES: “There was an analytical process of course but it always comes back to: ‘What is the exit emotion? What is going on in the hearts and minds of the audience as they leave the cinema?’ We didn’t agonize; typically with acquisitions you don’t. We saw clearly that it was a bloody good story. We paid what they asked for: a distribution guarantee (DG) of $200K. We ran the numbers and it made sense. The plan was a small to mid-sized release. The deal gave us Australian and New Zealand rights for 15 years, plus three if the $200K was not recouped.

“From the outset there was a degree of collaboration. Jeremy said he wanted to make a commercial film and wanted feedback. There was lots of healthy debate but also a lot of love in the room. The running time was the subject of many many discussions because it can mean cinemas have to run fewer sessions. We’d all sit at the table and discuss the release date and how to refine the marketing messages around the film. We drove the creative direction of the campaign and cut the TVCs and the trailer.”

Expectations kept growing

GREG HUGHES: “Initially we thought the film would appeal to fans of drama and Australian cinema. We saw the first rough cut in July 2014 and thought, ‘hang on a sec, this has much broader appeal. It’s a movie for the heartland: more suburban and regional than metropolitan. That’s when we started targeting the AIMC as our launch platform. (The Australian International Movie Convention is the annual get-together of exhibitors and distributors, held on the Gold Coast). We showed footage and introduced Jeremy (director/co-writer Jeremy Sims) and Michael (actor Michael Caton). The outpouring of emotion for Michael was overwhelming. People love this guy, love him to death. They also saw that he’d given a proper thespian performance.”

NICK HAYES: “We had been thinking it would be an 80-print release when we watched the rough cut. After trade screenings for exhibitors in Sydney and Melbourne we started to think at least 120 screens, the same number as 12 Years A Slave, which had won an Oscar. After feedback from Event Cinemas and Hoyts it shifted up to 150. Then ICAA proposed premieres for its members. (The Independent Cinema Association of Australia represents independent cinemas across metropolitan and regional Australia.) We did some brainstorming and came up with the idea of filming talent on the red carpet at the Sydney Film Festival and putting together some material for cinemas to show before the film. We gave out promotional tool kits and it was an interesting experiment. There were 58 of those kinds of screenings with a competition to win a trip to Darwin.

“Analysis shows that Australian films perform best in April/May or August/September. It’s outside tentpole season and out of school holidays. We chose August so it could get a Sydney Film Festival premiere. Data was pivotal to release planning; we also knew we needed the film to get an M rating because MA films underperform.”

GREG HUGHES: “So much momentum was building behind the film. We realised we’d have to go wide day and date (opening in all cinemas on the same day) and spend over $1 million. You can’t open on 200 screens and spend $600K: it’s not going to work. It was one of those moments when you have to step up and put your proverbials on the line. It’s about unlocking the film’s potential. The rough equation is you can spend about a third of your box office target on marketing, which means you’ll break even on theatrical. (See later – cinemas generally get two-thirds of gross box office revenue.) It’s about the lifetime of the film not just the theatrical release. If you don’t break even on theatrical you would be very lucky to make any money. The biggest decision you make when releasing a film is how much to spend on theatrical marketing.

“In the end we opened on 225 screens, rising to 350 with the addition of smaller singles screen sites and council-run cinemas. The total spend on P&A was $1.3 million. It was a lot easier to take that risk because we’d only spent $200K on the DG. We had much more modest expectations back when we acquired the film. But a further $100K DG was due to be paid if the film reached a specific box office target.”

Cast access a big factor

TRACY WHYBREW: “The potential of a film is not enough to guarantee its success: the film has to be good. Yes, thankyou, they gave us that. But there are many other factors that affect your ability to platform and drive awareness for a movie release. Will we have access to cast and crew for editorial coverage and what media hooks can we use? We couldn’t have guessed that 2015 would be such a big year for Australian film but it was a very welcome help.

“With media buying we brief our agency based on our overall box office goal. For Last Cab To Darwin it was $4 million. Working from an average ticket price of $10 that means we need roughly 400,000 people to see the film. Then it is a case of deciding how many people we need to reach in order to get that many bums on seats. It is a guideline that can vary based on the type of film, type of audience and other factors that may influence awareness: well-known subject matter, high profile cast, awards focus, etc. We focus the bulk of our media activity in the lead-up to and first week of a film’s release. The idea is to drive a strong opening week and then expect the film do the bulk of the heavy lifting from there. For this film, the opening week target was just under 100,000 people. As we expected the SFF launch and the talent tour to provide a very strong awareness platform, we set a conversion target of five percent which translated into a media buying target of about two million sets of eyeballs.”

“I had a media budget of $700K and about $300K of that went on television, especially on Nine and Seven. Seven is number one in a lot of key regional markets. Metropolitan television is incredibly expensive but you’ve got to spend the money where the most fish are biting. Regional television and pay TV gives you better bang for your buck. We spent $110K on press, including press boosting, that is, cooperative activity with cinemas to augment their own session time advertising. We spent $100K on outdoor: trams and buses in Melbourne; buses in Sydney; and on billboards on freeways in Queensland. In the minds of consumers, outdoor positions a film as a major film. Our digital spend was across celebrity and news sites, a lot of it targeting 35+ females. About $50K went on point of sale: standees, posters, flyers.

“The talent tour was big and cost $180K. There were 43 Q&A screenings across 19 cities and towns – in addition to the 58 preview screenings that Nick mentioned earlier. Screen Australia’s P&A loan facility gave us the opportunity to take the film day and date into the regions with the talent. And we knew the face-to-face interviews would give us a lot of media coverage. And then there was the tea towels! They were part of our prize packages at all the Q&As. If someone asked a question they got a tea towel. Jeremy was always saying: ‘That’s not a question, I can’t give you a tea towel’. We spent $23K and got 5,000. We didn’t dream we’d get the level of access we did to the cast and crew. Not everyone had access in their contracts but we had almost unfettered access for three months. We were very fortunate. Michael turned 72 on tour and he and Jeremy worked their butts off. People also wanted to see Jeremy – to thank him for making the movie. At our peak we had Jeremy, Michael, Reg Cribb, Ningali (Lawford-Wolf), Mark (Coles Smith) and (producers) Greg (Duffy) and Lisa (Duff). We also had Emma (Hamilton) for the Sydney Film Festival. We toured 11 people – our team numbered four. The schedule was insane.”

GREG HUGHES: “It’s impossible to calculate what the cast tour added to gross box office but on similar films the proportion of box office sales that comes from independent cinemas, particularly regionals, is 35%. On Last Cab it was 47%. It still would have played in those cinemas but later and with fewer sessions. There is value in thinking about regional cinema as a place where film can be born.”

Where the ticket revenue goes

GREG HUGHES: “The distributor might start with, say, a 50% share of box office revenue, then it decays away. By week four or five it could be down to 25%. These terms are negotiated film by film. The general rule is that cinemas retain two-thirds of all ticket revenue, the distributor receives the balance and then receives a fee of 30-35% of that balance. We expect Last Cab to gross $8 million in Australian and New Zealand cinemas. After GST that will be $7.2m. About a third of this net box office will be $2.4 million. Icon will receive a distribution fee of about 35%. This will leave a balance of $1.56 million which becomes the producer’s share. From this Icon will recoup its $200K DG and the $1.3 million P&A. Once the producer’s share exceeds the value of the guarantee and the P&A, Icon will start remitting overages (i.e. the excess amounts) to the producer. (When Hughes says “the producer’s share” he means the money that goes to all the investors. The production industry generally calls this “gross receipts”.)

“Film distribution is a very high risk business and these days films have to break even theatrically or come out with a small deficit. It is a fairly rare occurrence to have overages from theatrical – which is why we’re willing to talk about this film.

“The royalties we get on ancillary sales varies by revenue stream. The royalty payable for each right is different. We work very hard to get favourable terms and this is sensitive, competitive information. The majority of a TV sale would go towards the producer’s share but we get to keep a lot of the proceeds of video sales because there are high unit costs. Gross receipts will wash through the P&L (profit and loss statement) over the life of the film and the producer’s share will accumulate but it’s very difficult to predict the final results. The biggest chunk of revenue does still come from physical video – some films tick over for a long time, some don’t. Perhaps there will be $1.5 million in wholesale revenues from Last Cab but the mantra for the last two or three years has been ‘video won’t save you’. Ten years ago we would have got over $500K in wholesale sales to rental stores alone but not now. Then we have pay TV, digital VOD and SVOD (eg Netflix) which altogether might bring in $1 million over the life of the title. Airlines and hotels might be worth $75K. Everyone gets on airlines with content loaded on their own gadgets so airline sales are no longer as lucrative. I’ve got nothing in the P&L for free to air. There’s no pot of gold at the end of that rainbow but it could be $100K.

“It is difficult to predict what revenue will come back from ancillary markets over a lengthy time period but at the end of 15 years Icon expects to have made a contribution margin of about $1 million. I expect the producers’ share to be a similar figure.

“This industry thrives on schadenfreude but I’ve never known or handled a film personally that has had so much genuine goodwill from everyone. They acknowledged the blood, sweat and tears. They sent personal notes and that’s rare. Once cinemas have confidence in a film it’s infectious. It’s an industry in which everyone is always weighing up risk: on a Monday they’re thinking ‘Will I take this film off?’ ‘Will I put this one on?’ We’ve had a success in an industry that has its challenges. I’m happy to share what were the success factors on this film but I don’t have a formula.”

Why a budget of $3.993m

LISA DUFF: “Our first budget, back in 2007, was more than $8 million. The investors, both private and government, wanted it to be less. Jeremy (director/co-writer Jeremy Sims) said: “I’ve got a good feeling about $ 6.7 million” so I got it down to that. Screen Australia thought if the film was budgeted at more than $4 million we wouldn’t be able to finance it. By carefully working out what could be compromised, I brought it down to just below $4 million. It was hard work and we were left with a skeleton crew on the road and lots of multitasking of roles, including Greg, the writer Reg Cribb and I doing traffic control all the way from Broken Hill to Darwin. Our largest ticket item was travel: accommodation, airfares, petrol, mileage on the small trucks we hired from Adelaide. We had to get a large number of people from Sydney to Broken Hill – and Rex airlines, the only airline that flies into Broken Hill is very expensive – then to Darwin and home again. Our first recce was in 2012: a group of us drove from Broken Hill to Darwin. What I’m most happy about, in terms of getting the budget down to $4 million, is that something will go back to our investors.”

Producer Offset ($1.289m of the budget)

The Producer Offset (PO) is a tax rebate on the cost of production, payable once a film is finished. As such, it is a form of indirect government funding for features and television. For features the PO is set at 40% of “qualifying” Australian expenditure. On Last Cab to Darwin the PO equated to 32% of the budget because it can’t be claimed on some expenditure items – financing costs, for example.

LISA DUFF: “When Australian producers sit down to begin the task of financing features they know they have up to 40% of their budget on the table already thanks to the PO. That money is their equity and it gives them a seat at the recoupment table. According to the rules, at least 90% of the (anticipated) PO must be cash flowed into the finance plan, leaving 10% as the producers’ margin. It’s the producer’s little piece of the pie. We offered a portion of our margin of the Producers Offset to our private investors to sweeten the deal. Instead of having to wait they got it as soon as we got our rebate from the offset. It meant they could start recouping their investment probably a year earlier.”

Besides the distribution guarantee (DG) of $200K from Icon Film Distributors against Australia and New Zealand there was an $80K DG against the rest of world (ROW) from Films Distribution. These amounts have to be repaid from sales and are cash flowed into the budget.

GREG DUFFY: “I was confident that if I could get people to read the final script we’d get a sales agent. We had two offers but some of the financiers thought Swedish company Eyewell was too new to the market and therefore didn’t have enough of a track record. We went with Films Boutique initially but were bumped upstairs to parent company Films Distribution.

LISA DUFF: “It was a struggle to get a sales agent at script stage. We approached about 15 and only got one bite that was acceptable to the investors. Originally Films Boutique said it would put in a DG of A$75K. They later agreed to show their commitment to the film by increasing the DG to US$75K. Films Boutique decided it was more commercial in nature and therefore more suitable for the larger company. Whilst the Australian distributor has been able to find a large audience relatively easily, the ROW sales agent has found it more difficult. They say this is largely because it sits between being arthouse and commercial. It’s not a straight pitch as either. And they believe that some of the colloquial language is a difficult sell in the territories they usually deal with. Screen Australia insists on having a ROW sales agent that is willing to put up a DG as a condition of their financing. It’s safer to get the money up front – as we did – but for some films, finding a ROW sales agent that suits the film once it has been finished and has achieved a degree of local box office success, could mean more choice and bargaining power.”

Screen Australia invested $1.1 million, representing 27.55% of the budget; ScreenNSW $250K; and the South Australian Film Corporation $68K. The film had champions in all the agencies at that time: Martha Coleman and Susan Boehm in Screen Australia’s development department; Megan Simpson-Huberman at ScreenNSW, who gave Last Cab its first development money in 2009 when she was at the now defunct Australian Film Commission; and Richard Harris, whom Greg Duffy, with his lawyer hat on, had dealt with when Harris was executive director at the Australian Directors Guild. All these people have moved on to other places now.

An additional $100K in regional filming grant monies came from ScreenNSW and $100K from the Northern Territory Government, under various schemes. As it does not have to be paid back it becomes part of the producers’ equity in the film, in that the recoupment/copyright share attached to the grant is given to the producer. “We hit a wall in mid-2013. Always in Australian films you end up with a gap of 10-25% in the budget after pulling in government money, a lender to cash flow the PO and marketplace attachments. Two things would not come together for us: we couldn’t get an international sales agent and we had a gap of 20%. The gap was the real problem. Last Cab is a (Northern) Territory story. Although we fictionalised it, it was the first place in Australia to have the guts to pass euthanasia laws. We wanted the state to have skin in the game. Other government agencies were in but we couldn’t get anyone in NT excited about the film.”

Screen Territory only has limited funds for individual films -and only for local NT films – and it had spent its total annual grants pool of about $300K anyway. Nevertheless, Screen Territory director Penny McDonald was keen to help.

GREG DUFFY: “She said ‘you’ve got to come up and meet people face to face’. One of our friends, and an actor in the film, Jeremy Cumpston, was working up there as a doctor and he had a friend with a restaurant who was willing to put on an event for us. The restaurant is opposite Parliament House and the upper house estimates committee was in session and quite a few members of the government were happy to cross the road to meet Michael Caton. Some were conservative politicians who had tried to drive through the right-to-die legislation and they were excited about getting some traction on the debate again. By the end of the night we’d arranged meetings at Parliament House and by next morning we had $100K cash and probably another $100K worth of logistical support, including vehicles, access to (crown) land, accommodation and office space. The greatest thing they did for us was to loan us eight 4WDs that were bullet proof. These vehicles meant that we could actually do the drive up the Oodnadatta Track through Marree, William Creek and Oodnadatta with the cast and crew.

“A script reading at the Dungog Film Festival in 2011, at which Michael Caton read the lead part, was a key event in the development of the film: the Q&A afterwards sparked a lot of script changes, Michael got very excited about the film and we thought ‘we’ve got our guy’. We could then go to distributors saying ‘This is our cast’. Jacki Weaver was involved in the original play and she stuck with us right through although was probably being advised by her US people not to. We could not have got Last Cab financed without Michael and Jacki. Because we couldn’t pay them what they would normally be paid we built in kickers for both of them if the box office reached $3.5 million, then $5 million. This is stipulated in the distribution agreements not the recoupment schedule.

GREG DUFFY: “We still had a gap of 15-17% but we felt confident about approaching people in the private sector whom we’d been introduced to personally over the years. Jeremy helped significantly with this. Most had been involved in film and television investment. Those who hadn’t were brought to the table by those that had. Our executive producers helped enormously: Ned Lander, Edward Simpson, Ian Darling, Mark Nelson and Andrew Myer. We bounced proposals off them all the time about the financing. Other EPs came in later: Michael Burton from Cutting Edge, Chris and Natasha Cuffe, Jon Adgemis and Prue McLeod. They loved the script and were excited by our passion ­particularly Jeremy’s – to tell the story and thought it was a great Australian yarn.”

LISA DUFF: “In finding ways to fill the gap in the finance plan we set about to find a post-production company to invest. Many post-production companies offer deals, but we really needed a bona fide cash investment – not a discount on services but money in the bank up front. Some already had funds tied up in other films. It was a relief when we went to Cutting Edge and they agreed. Jeremy had recorded voice-overs at Nylon Studios, a music and sound production house. They were excited about the prospect of working on a feature film. They both invested and looked after all of our sound post production. In the final stages of financing and contracting, we did the sums and still had a gap of $10K, which Jeremy’s production company put up. It’s not uncommon for producers to invest their own funds to meet a shortfall.”

GREG DUFFY: “Before the film was released nearly every exhibitor was saying to us: ‘You bring that film and Michael Caton to my cinema and you’ll double the takings’. We knew that the film would work on word of mouth so we sat down with Icon and said ‘We need to get this film out to the audience’. Thankfully they agreed, planned the talent tour all over the country and then threw their hearts and souls into it.

“We do what we do because we love to tell stories. It’s why we took a haircut on our share to give the private investors a sweetener because we want to keep making films with the help of our private investors. The rough rule of thumb is that you have to make three or four times the budget of the film before everyone recoups all of their investment. In our case, that would be at least $12 million. However, for our private investors, because we have given them an accelerated recoupment, they will probably fully recoup when the film reaches $10 million. That may happen if it does well in ancillary markets and if it does well internationally, especially if it is released theatrically in some territories.”