When people think about how the movies that they watch are made, they often focus on the large studios. They may not realize that a large number of films are actually the creation of smaller production companies that are subsidiaries of the parent studio or independent companies that are under contract to the studios that they recognize. The production companies acquire funding for the project from the larger studio or from other sources and then oversees the actual making of the film.
If they have no direct connection to the larger studios, these theoretically independent companies may enter into what they call “first look” deals with the larger corporations. This results in them becoming semi autonomous subsidiaries to the bigger entity for the duration of the contract. They develop an idea to the script phase and sometimes later and then take it to the parent company. The parent company has the first shot at funding the film through to completion. If they decline, the small production outfit is free to attempt to find other avenues of funding and the large studio receives no share of the profits. The fees that they pay for these first look rights give the production company the capitol that they need for day-to-day operations.
Usually, the studios have some connection to the production company and its officers with whom they have first look deals. Universal Studios maintains a first look relationship with Global Products through Global’s CEO Marc Shmuger, who worked at Universal for 12 years, including being their Chairman for three of them. This type of close relationship can result in additional funding for the development and scripting phases of production.
After a production company secures funding for a project, they handle the multitude of tasks that surround the actual production of the film. They develop the budget that will be implemented and schedule the dates for the shoot by coordinating with the actors and the crew. They arrange for the postproduction editing and for any special effects that may be required. When the film is finished, they find distributors for it and take care of marketing and publicity to ensure that the public is aware of the movie. All of these duties require staff to handle them. That requires more staff to coordinate between the departments.
Production companies are judged by the success of their projects. A production company that has only put out straight to video films or documentaries is unlikely to attract well-known actors. Without the big name stars, they will not be able to get the funding needed for the best editing or to afford marketing that will ensure that a film finds a wide audience. Sometimes a film will become a sleeper success simply through word of mouth. This can result in the production company becoming better known and more attractive to the actors and to investors. Other times they will strike a deal with a studio and become an in house production company that is fully owned by the parent corporation.
The film industry is a very profitable business. There are multitudes of small production companies that strive to bring the people the best entertainment that they are able. Some of them will be folded into the big studios and others will find a niche market that suits them and makes them happy. A few will grow large and maintain their independence. What they will all do is make sure that there is always something new to watch.