FIRST PERSON | Peter Broderick: “Welcome To The New World of Distribution,” Part 1
Welcome to the New World of Distribution. Many filmmakers are
emigrating from the Old World, where they have little chance of
succeeding. They are attracted by unprecedented opportunities and the
freedom to shape their own destiny. Life in the New World requires them
to work harder, be more tenacious, and take more risks. There are
daunting challenges and no guarantees of success. But this hasn’t
stopped more and more intrepid filmmakers from exploring uncharted
territory and staking claims.
Before the discovery of the New World, the Old
World of Distribution reigned supreme. It is a hierarchical realm where
filmmakers must petition the powers that be to grant them distribution.
Independents who are able to make overall deals are required to give
distributors total control of the marketing and distribution of their
films. The terms of these deals have gotten worse and few filmmakers
end up satisfied.
All is not well for companies and filmmakers in what I call the Old World of Distribution. At Film Independent‘s Film Financing Conference, Mark Gill vividly described “the ways the independent film business is in trouble” in his widely read and discussed keynote.
Mark listed the companies and divisions that have been shut down or are
teetering on the brink of bankruptcy, noted that five others are in
“serious financial peril,” and said that ten independent film
financiers may soon “exit the business.” Mark made a persuasive case
that “the sky really is falling… because the accumulation of bad news
is kind of awe-inspiring.” While he doesn’t expect that the sky will
“hit the ground everywhere,” he warned “it will feel like we just
survived a medieval plague. The carnage and the stench will be
Mark’s keynote focused on the distributors, production companies,
studio specialty divisions, and foreign sales companies that dominate
independent film in the Old World. Mark has many years of experience in
this world. He was President of Miramax Films, then head of Warner Independent Pictures, and is now CEO of The Film Department. He sees things from the perspective of a seasoned Old World executive.
I see things from the filmmaker’s perspective. For the past 11
years, I have been helping filmmakers maximize revenues, get their
films seen as widely as possible, and launch or further their careers.
From 1997 until 2002, I experienced the deteriorating state of the Old
World of Distribution as head of IFC‘s Next Wave Films.
After the company closed, I discovered the New World of Distribution in
its formative stages. A few directors had already gotten impressive
results by splitting up their rights and selling DVDs directly from
Filmmakers started asking me to advise them on distribution, and, before I knew it, I was a “distribution strategist“
working with independents across the country and around the globe.
Since late 2002, I have consulted with more than 500 filmmakers. While
some have taken traditional paths in the Old World, many more have
blazed trails in the new one. I’ve learned from their successes and
failures and had the opportunity to share these lessons with other
filmmakers, who then have been able to go further down these trails. It
has been very exciting to be able to participate in the building of the
New World, where the old rules no longer apply.
Many of the rulers of the Old World continue to look backwards.
Having spent their entire careers in this realm, played by its rules
and succeeded, they can’t see past the limits of their experience. For
them, the Old World is the known world, which they refer to as “the
film business.” They explain away the serious problems facing the Old
World by citing the film glut, higher marketing costs, mediocre films,
and the historically cyclical nature of the industry. They appear to
believe that everything will be just fine with enough discipline and
patience–if fewer, better films are made, costs are controlled, and
they can hold out until the next upturn.
Many of these executives seem unaware of the larger structural
changes threatening their world. They recognize that video-on-demand
and digital downloads will become more significant revenue streams but
seem confident that they can incorporate them into their traditional
distribution model. These executives do not understand the fundamental
importance of the internet or its disruptive power. By enabling
filmmakers in the New World to reach audiences directly and
dramatically reducing their distribution costs, it empowers them to
keep control of their “content’.
The Old World executives who do acknowledge the New World can be as
dismissive as record industry executives were when they first noticed
the internet. Their usual condescending response is the internet may
work for “little” films with “niche” audiences. After admitting that
the internet represents added competition for eyeballs, they are quick
to point out that little money is currently being made from digital
downloads or online advertising.
Notable successes in the New World represent the shape of things to
come. Several filmmakers have each made more than one million dollars
selling their films directly from their websites. Other filmmakers have
begun raising money online. During 10 days of internet fundraising, Robert Greenwald attracted $385,000 in contributions for his documentary “Iraq for Sale.”
Arin Crumley and Susan Buice built awareness for their feature “Four Eyed Monsters” through a series of video podcasts. They then made their film available for free on YouTube and MySpace, where it was viewed over a million times. Arin and Susan made money through shared ad revenues and Spout.com sign-ups, and then snagged a deal with IFC for domestic television and home video distribution. Wayne Wang will follow in their footsteps when he premieres his new feature “The Princess of Nebraska” on YouTube October 17th.
The power of the internet was also demonstrated by the remarkably successful documentary, “The Secret.”
During the first stage of its release, “The Secret” could be streamed
or purchased at the film’s website, but was not available in theaters,
on television, in stores, or on Amazon. During the next stage, the book was launched by Simon & Schuster
in bookstores and online. After the book shot to the top of the
bestseller list, “The Secret” DVD was finally made available in retail
stores and on Amazon. Over 2 million DVDs were sold during the first
twelve months of its release.
Here are ten guiding principles of New World distribution:
1. GREATER CONTROL – Filmmakers retain overall control of
their distribution, choosing which rights to give distribution partners
and which to retain. If filmmakers hire a service deal company or a
booker to arrange a theatrical run, they control the marketing
campaign, spending, and the timing of their release. In the OW (Old
World), a distributor that acquires all rights has total control of
distribution. Filmmakers usually have little or no influence on key
marketing and distribution decisions.
2. HYBRID DISTRIBUTION – Filmmakers split up their rights,
working with distribution partners in certain sectors and keeping the
right to make direct sales. They can make separate deals for: retail
home video, television, educational, nontheatrical, and VOD, as well as
splitting up their digital rights. They also sell DVDs from their
websites and at screenings, and may make digital downloads available
directly from their sites. In the OW, filmmakers make overall deals,
giving one company all their rights (now known or ever to be dreamed
up) for as long as 25 years.
3. CUSTOMIZED STRATEGIES – Filmmakers design creative
distribution strategies customized to their film’s content and target
audiences. They can begin outreach to audiences and potential
organizational partners before or during production. They often ignore
traditional windows, selling DVDs from their websites before they are
available in stores, sometimes during their theatrical release, and
even at festivals. Filmmakers are able to test their strategies
step-by-step, and modify them as needed. In the OW, distribution plans
are much more formulaic and rigid.
4. CORE AUDIENCES – Filmmakers target core audiences. Their
priority is to reach them effectively, and then hopefully cross over to
a wider public. They reach core audiences directly both online and
offline, through websites, mailing lists, organizations, and
publications. In the OW, many distributors market to a general
audience, which is highly inefficient and more and more expensive.
Notable exceptions, Fox Searchlight and Bob Berney, have demonstrated how effective highly targeted marketing can be. “Napoleon Dynamite” first targeted nerds, “Passion of the Christ” began with evangelicals, and “My Big Fat Greek Wedding“
started with Greek Americans. Building on their original base, each of
these films was then able to significantly expand and diversify their
5. REDUCING COSTS – Filmmakers reduce costs by using the
internet and by spending less on traditional print, television, and
radio advertising. While four years ago a five-city theatrical service
deal cost $250,000 – $300,000, today comparable service deals can cost
half that or even less. In the OW, marketing costs have risen
6. DIRECT ACCESS TO VIEWERS – Filmmakers use the internet to reach audiences directly. The makers of the motorcycle-racing documentary, “Faster,”
used the web to quickly and inexpensively reach motorcycle fans around
the world. They pulled off an inspired stunt at the Cannes Film
Festival, which generated international coverage and widespread
awareness among fans. This sparked lucrative DVD sales first from the
website and then in retail stores. In the OW, filmmakers only have
indirect access to audiences through distributors.
7. DIRECT SALES – Filmmakers make much higher margins on
direct sales from their websites and at screenings than they do through
retail sales. They can make as much as $23 profit on a $24.95 website
sale (plus $4.95 for shipping and handling). A retail sale of the same
DVD only nets $2.50 via a typical 20% royalty video deal. If filmmakers
sell an educational copy from their websites to a college or university
for $250 (an average educational price), they can net $240. Direct
sales to consumers provide valuable customer data, which enables
filmmakers to make future sales to these buyers. They can sell other
versions of a film, the soundtrack, books, posters, and t-shirts. In
the OW, filmmakers are not permitted to make direct sales, have no
access to customer data, and have no merchandising rights.
8. GLOBAL DISTRIBUTION – Filmmakers are now making their
films available to viewers anywhere in the world. Supplementing their
deals with distributors in other countries, they sell their films to
consumers in unsold territories via DVD or digital download directly
from their websites. For the first time, filmmakers are aggregating
audiences across national boundaries. In the OW, distribution is
territory by territory, and most independent films have little or no
9. SEPARATE REVENUE STREAMS – Filmmakers limit
cross-collateralization and accounting problems by splitting up their
distribution rights. All revenues from sales on their websites come
directly to them or through the fulfillment company they’ve hired to
store and ship DVDs. By separating the revenues from each distribution
partner, filmmakers prevent expenses from one distribution channel
being charged against revenues from another. This makes accounting
simpler and more transparent. In an OW overall deal, all revenues and
all expenses are combined, making monitoring revenues much more
10. TRUE FANS – Filmmakers connect with viewers online and at
screenings, establish direct relationships with them, and build core
personal audiences. They ask for their support, making it clear that
DVD purchases from the website will help them break even and make more
movies. Every filmmaker with a website has the chance to turn visitors
into subscribers, subscribers into purchasers, and purchasers into true
fans who can contribute to new productions. In the OW, filmmakers do
not have direct access to viewers.
(c) 2008 Peter Broderick