Why building a content company is waaaay better than running a production company


(Alex Le May) #1

When I was growing up, I knew I wanted to make movies (web series’ weren’t a thing yet) and everybody I asked said, “start a production company”. So I did. I was soon on my way to making movies, or so I thought. Then reality set in and I suddenly realized; “Holy shit, I don’t know anybody in the business, how am I going to make my badass movies”? Then that same someone, said, well take your cool equipment and do commercials for the time being and then you’ll make a bunch of money to be able to make your movies”. “Awesome, great idea”. I said.

So, I set out to do just that. My first client was a non-profit trying to keep a historic local airport from getting shut down. They paid me $700. Whoo, my first paying gig. Back then, there were no digital cameras and professional video cameras were super expensive to buy. I wanted it to look good so I rented one. BAM! $250 for one day. I had to hire an editor. BAM! $425. I delivered my project and realized I had made $25. Between my time selling the project and making it took about 10 days. Do the math. Not a great return.

Now that’s a pretty rudimentary example but that profit margin would plague me (as it does almost every production company in existence) for much of my career. The fact is, the act of physical production, just doesn’t make that much profit and can quickly become an albatross around a producers neck. Here’s why:

Running a Production Company

  • You’re selling your time for money which means you or you and your team are capped at how much you can make because there is only some much time in a week that you can charge against. Once you reach that cap you either need to hire more people or take more time. Both of which will cost you more money. Because of this, most production companies with a few exceptions struggle to simply break even. A good production company averages 8%-13% profit. That’s on a good day.

  • Limited bandwidth is another major problem. No matter how many people you have working with you, you are limited in how many projects you can be working on at any given time. Again, your income is capped.

  • You don’t actually own anything. You are a gun for hire (most often making things you don’t believe in). Once you’re done you’re done. You and your team, if you have one, made the final project what it is and if it’s successful you won’t see another dime. The people who hired you will. The people who hired you are actually running the right business.

Building A Content Company

  • That’s why building a content company is where true success lies. A content company has a thousand different ways it can make money with no cap. Here why:

  • A content company isn’t limited by time or bandwidth. They can profit from as many series or film concepts that they can make. In addition, they can simply scour the market for other people with great series concepts and make a licensing deal with them. It’s literally endless.

  • They own all or part of everything they have their hands in which means they can receive residuals and ad dollars from literally hundreds of pieces of content at the same time without having to invest any more time or money. In some cases that can go on for years on a single project. Add it all up and you can start to see why this system makes more sense.

  • Now, I can hear some of the resistance, “But, Alex, I want to be a filmmaker, not a paper pusher”. That’s why I love the hybrid model. Be both the production company and the content company. You get to do both the art and the business. This is how I do it and I can’t think of a better way to make a living.

In the end, the production part of our world is certainly the sexier part, but the intellectual property part is where the money is made.


(Bri Castellini) #2

Can you explain the logistics of the difference between a content company and a production company? Is it a different kind of company, at its core? Legally, I mean. In many ways, aren’t you still a gun for hire if someone hires you to make content? Or is the idea that you make content you want to make and get someone else to pay for it, using advice from all your other articles thus far?


(Meg Carroway) #3

I had the same question.


(Alex Le May) #4

The difference is ownership or at least partial ownership of the underlying intellectual property (i.e. the script/film/series etc.). If you run a production company, you are contracted for a one time fee to write or produce that project and never see another dime and have no rights to profit participation. However, if you own a content company, you have an ownership stake in that project and can get paid multiple times via licensing and ad dollars associated with that project and not do a lick of additional work to earn those dollars. if you have ownership in 30 projects, it begins to turn into significant revenue. One is a work for hire (sell your time with no ownership) and the other is a stake in the business of that project. Think of it like building a building, production companies are hired labor and content companies are the property developers.

It a subtle but big distinction.

Hope that clarified it. Let me know if that makes sense and thanks for the great questions.


(Meg Carroway) #5

Is it a mostly semantic difference, then? Like, wouldn’t a content company still refer to itself by name as a production company? “Alex LeMay Productions”? Or would you literally not refer to your company (LLC or what have you) as a production company and it would legally be considered a content company?


(Alex Le May) #6

Definitely not semantic. Doesn’t matter what you call it. You could call your company ham sandwich. It’s a totally different business model. I think you’re confusing the physical act of production with intellectual property ownership. Again, a production co. makes money once on a project by selling its ability to shoot and edit and a content co. has means of making 1000x more revenue from a project by selling ad units and territory liscenses. One is based on selling rights and the other is based on selling labor with no ownership. It’s critical that filmmakers understand there is very little money in physical production services.


(Meg Carroway) #7

Is there a combo kind of company? A company that maybe supports its content work with work for hire stuff?

(sorry I probably sound dumb I’m just trying to get my head around it)


(Alex Le May) #8

Yes, it’s a hybrid of the two. The both make and own. That’s what I have. That way you get studios upfront for production and on the backend with shared ownership.

Not dumb at all. I’m getting pretty granular with this post and your curiosity means you want to succeed at this so it makes me happy! Never be afraid to reach out to me for info. Glad to help.


(Meg Carroway) #9

Thanks, Alex!