Lower budgets and the ability to explore unconventional creative directions allow studios to pick up and distribute films like Little Miss Sunshine and Juno without any risk. No longer do they have to think about ancillary markets like “merchandise” to offset a megastar’s salary. Nor do they have to bankroll a film in today’s marketplace. While creativity and talent have always existed in Hollywood, it is digital technology that suddenly renders independent filmmaking affordable. Up-and-coming filmmakers are no longer reliant on big studios to front the cost of extremely expensive 35mm films.

There are many examples of high-performing low-budget films. These diamonds are, of course, counterbalanced by other films that did not fare so well. While investing in films can be risky, an independent film that finds an audience can generate enormous returns. One interesting fact according to www.the-numbers.com is that of the 20 most profitable movies based on return on investment (ROI), 15 of them cost under $1 million dollars to produce. Of the 15, nine of them cost $200K or less.

While the numbers above tell a certain story, it begs the question, what are the movies with the lowest budgets to earn $1 million or more at the domestic box office? The chart below ranks these movies from lowest to highest budget. You will see that a film that cost only $7,000 to produce grossed over $2 million domestically and a film that cost $35K to produce grossed $140 million domestically. The average domestic gross for these top 20 films is an amazing $14 million. The average domestic gross after dropping the two highest grossing films from this list is $5,463,670.

Looking at absolute profit and loss, rather than ROI, the biggest winners and failures belong to the major studios that have adopted a “bet big to win big” philosophy. However, from a venture capital perspective, these stories are basically moot, given that studios bankroll their own films. However, just for reference, Titanic cost $200 million to produce and made $724 million in profit. And as a cautionary tale, and for a little schadenfreude, the film Town & Country cost $105 million to produce and managed to lose $99 million.

The good news for independent filmmakers is that a greater percentage of independent films are attaining theatrical release. According to the Motion Picture Association of America, even though the overall number of movies released in theaters in the U.S. remained on par with 2006, non-MPAA-affiliated independents released 18 more films in 2007.

While tepid returns on independent films are certainly possible, there is a healthy list of independent films that have made good. Even better news, of the films that make it, additional revenue from DVD sales and other ancillary rights are not factored into the numbers you see in these tables. A film generating only a mild box office return can still turn a good profit once DVD sales are tallied. For instance, 3:10 to Yuma cost $50 million, made $53 million domestically and $68 million worldwide, but has garnered another $53 million in DVD sales to date. The future only looks brighter for non-theatrical ancillary markets as we enter an age where the distribution of film can be performed over the Internet with pay-per-view models that eliminate production and shipping costs of DVDs.

When analyzing western films, there is strong argument that low-budget westerns can have extremely profitable returns, while high-budget westerns are perhaps a tad too risky. We aim to make a film for $200K cash and $300K deferred. While we can not promise a return on the initial investment, the box office numbers here suggest a strong chance of recoupment if a theatrical distribution occurs.

The overall domestic marketplace remains strong. As you will see in the table below, according to the most recent information from the Motion Picture Association of America, the U.S. box office in 2007 totaled $9.63 billion, a 5.4% increase over 2006.

Worldwide box office totals are also strong and growing. International motion picture distributors generated more than $26.7 billion in worldwide revenues in 2007—a 4.9% increase from 2006. Table 6 shows this worldwide box office gross to have increased $10 billion dollars in only seven years.

Investment in the film industry is highly speculative and inherently risky. There are, however, ways to stack the deck in favor of a film’s success. Orofino is confident that it will create a motion picture that audiences will enjoy, thereby reaping the financial rewards of doing so. We cannot guarantee that the film will be profitable, or even earn back its budget, but we will stand behind our commitment to seek the best distribution deal possible. The film’s success will be largely dependent upon our ability to produce a film of exceptional quality at a lower cost—a film that can compete in appeal with other higher-budgeted films of the same genre.

Soul Plane. Catwoman. Basic Instinct 2. Memorable films?

Not in the least. And yet they are all big—budget films. What do they have to do with our film? Nothing. With all the money, time, and energy expended, they failed at the box office. What happened?

Lackluster scripts.

Yes, it’s that simple. Content is king. Story is star. Quality drives a movie. And while audiences will go to theaters to see Halle Berry in a tight leather outfit, star power can not ultimately save a lackluster script from box office failure. Audiences are maturing as the industry fights to find and produce original ideas and fresh stories. Now, even the casual moviegoer can smell a rotten script from the ranks of the lobby popcorn line, and increasing ticket prices don’t encourage audiences to haphazardly see a movie just for the hell of it. Viewers crave intellectually challenging work, and if not that, at least a story that can hold its own due to uniqueness. While most big—budget films don’t end up like Pluto Nash ($97 million dollar loss in the U.S.), many struggle to break the profit line due to unoriginality and extraordinarily high break-even margins.

That’s the beauty of independent films. And that’s the beauty of Heathens & Thieves. Quality on a low budget. No Country For Old Men is a recent production that was both a worldwide success and an Academy Award winner. Although the budget was big, that’s not what sold the movie. Audiences flocked to see a mind-twisting Western thriller, one that featured one of the most evil villains we’ve ever seen.

Do the math. When the negative cost (the actual price paid up to and through the completion of the film negative, which is then used in the process of creating release prints shown in theaters), overhead, and P&A costs are factored in, a studio’s picture must gross two and one-half times the film’s budget just to recoup its cost. A film costing $50 million would have to make $125 million to break even. By the same standard of comparison, a film budgeted in the $200,000 range need only gross $500,000 to recoup its cost. This is a number more readily achieved in domestic and international distribution. Any marketability that we can play up to the international market, especially China, would make a huge difference in the success of Heathens & Thieves.

Westerns being highly popular in Asian markets, plus the central Chinese characters of Zhen and Kun Hua, could make this film viable in that market.