The online film financing hub Slated has added to its research showing that its scoring system leads to a better performance for movie investors. The new study, “Achieving alpha: How to outperform the film finance market by more than three times,” saying that out performing “has always been frustratingly elusive.”
Slated, which was launched in 2012 by Stephan Paternot and Duncan Cork to connect established independent filmmakers and investors, shared the results of “Achieving Alpha: How to outperform the film finance market by more than three times,” with THR. “Achieving alpha” is a finance industry term for “outperforming the index” of a given market. And beating the market “has always been frustratingly elusive,” the firm said.
The company previously backtested its algorithms on 1,600 films in the U.S. from 2010 through 2015. It said that it has been asked for any proof that they also work when one wants to predict performance. In response, the Slated team assembled a virtual portfolio of 50 film projects of different budget sizes, ran its scoring system against them prior to release, starting in June 2016, and tracked each film’s box-office performance through the end of its worldwide theatrical run. “The high scoring projects didn’t just outperform the index, they blew it away,” Slated summarized the results of this “forward testing,” or testing in real time.
The firm analyzed such films as Hacksaw Ridge, Central Intelligence, The Neon Demon, Bad Moms, Snowden, American Honey and The Magnificent Seven.
The company previously backtested its algorithms on 1,600 films in the U.S. from 2010 through 2015. It said that it has been asked for any proof that they also work when one wants to predict performance. In response, the Slated team assembled a virtual portfolio of 50 film projects of different budget sizes, ran its scoring system against them prior to release, starting in June 2016, and tracked each film’s box-office performance through the end of its worldwide theatrical run. “The high scoring projects didn’t just outperform the index, they blew it away,” Slated summarized the results of this “forward testing,” or testing in real time.
The firm analyzed such films as Hacksaw Ridge, Central Intelligence, The Neon Demon, Bad Moms, Snowden, American Honey and The Magnificent Seven.
It compared their aggregate financial performance to a subset of 13 projects whose Slated Scores exceeded certain minimums, including a 60-plus team score (waived in case of a script score of 80-plus and qualifying financial and package scores), a script score of 75-plus, a financial score of 80-plus and a package score of 70-plus.
The subset performed 2.2 times better. Focusing only on movies with budgets of $20 million or less narrowed things down further to eight films, whose financial performance was 3.5 times better than the whole group of 50 projects. Of course, financiers could choose higher or lower minimum scores, or other criteria, that align with their fund’s investment goals.
Slated’s takeaways for financiers: avoiding financing movies with underperforming scores has a “massive impact” on a hypothetical film fund’s portfolio, and it is important to “diversify one’s film investment across a slate of movies.”
Slated acknowledged though that it hasn’t found a crystal ball. The subset missed out on some hits, while some of its films, such as Moonlight and La La Land, “were home runs,” and others, such as Miss Sloane and Bleed for This, were “strikeouts.”
Concluded Slated: “Being rigorous about ruling out projects based on minimum scores led to far fewer misses, though, even if it meant a couple of missed opportunities (e.g. Manchester by The Sea and Bad Moms).”
Slated will continue running its forward tests indefinitely, saying that “benefits not only our fund partners, but the independent film market as a whole.”