Park City Climate: Sundance Infographic 2017, Million $ Piracy Losses, Distribution Changes, and Slamdance Stats

Originally published in Cultural Weekly on January 18, 2017.

Park City has a change in the weather this year. For the first time in along time there will be snow, and, as if to counter deniers, Sundance has programmed a special section on climate change films. The festival will also be marked by social actions directed toward President Trump’s inauguration. As always, though, the action in the cinemas, events, parties, gifting suites, crowded restaurants, five-to-a-room-and-sleeping-on-couches rentals, and late-night negotiation sessions will not all be political.

Using Sundance data as a bellwether for the independent film industry, ground-truthed through interviews with producers, distributors, and sales agents, and, this year, also adding some data from the Slamdance Film Festival, which runs concurrent with Sundance’s opening weekend, here is our weather report on the independent film business. (Scroll to see the infographics at the bottom of this article.)

CLICK HERE TO SEE ANIMATED SUNDANCE 2017 INFOGRAPHIC
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$2.3 billion

Annual spending on independent films has remained fairly constant at $2.3 billion. This is because the number of submissions to Sundance seems to have plateaued. Our estimates of average budget levels are based on discussions with indie movie producers and sales agents. These estimates, too have remained constant since last year.

Piracy is worse than expected

The cost of piracy for independent films is significant. Working with Tecxipio, we are publishing the actual number of torrent illegal downloads for 14 films from Sundance 2015 and 2016.

To understand why our piracy numbers are probably low, I need to get geeky about piracy. There are two kinds of illegal downloads: torrents and streams. Torrents are able to be monitored and quantified; that’s what Texcipio does. Streaming illegal downloads, which in some cases comprise more than half of all pirated downloads of a film, cannot yet be reliably quantified. We are therefore only publishing torrent data.

In making our calculations for the amount of revenue piracy costs each film, we are assuming that only 5% of the people who did an illegal download would have actually purchased the movie, and that their purchase price would have been $3.

Our 5% figure could be a *very* conservative number relative to how much pirated downloads actually cannibalize sales. For example, peer-reviewed academic studies of sales displacement tell us that the rate of piracy displacement is in the range of 14% to 20% at the lower end, up to 100% on the higher end. To be conservative, let’s go with 5%; but I really think the lost revenue is much, much worse.

It’s interesting to compare pirate download numbers for 2015 Sundance films over a full year. For example, Brooklyn had an additional 4.3 million illegal torrent downloads in the past year. Nor are movies for older demographics immune: A Walk in the Woods has had 2.4 million torrent downloads. The film with the most illegal downloads from 2016 is Swiss Army Man (over 7 million torrents); by our minimal estimates that represents a loss of over $1 million in revenue, and based on the peer-reviewed studies cited above, that number could be $3-$4 million in losses.

Virtual reality

VR has fully come into its own, largely due to Sundance and Slamdance’s support of the emerging artform over the past several festivals. For the first time this year Sundance has an official virtual reality section; it received a whopping 346 submissions.

Distribution and sales

We also traced how many Sundance and Slamdance films got distribution – although I refrain from calling every instance a “distribution deal.” For our purposes this year, I am defining distribution as having the film available for sale on a legitimate and public platform – iTunes qualifies, as does traditional theatrical distribution. It costs more money to put a movie up on a major digital platform than it costs to press DVDs; that’s why not every film can get onto iTunes, as they and other platforms have become more selective.

Most of the films at Sundance will be distributed, and about half of Slamdance’s selections will achieve this milestone. However, the sales prices – when there are actual cash advances (or minimum guarantees) – will vary widely. Last year, Sundance saw a record sale of $17.5 million for The Birth of a Nation, an investment that proved ill-advised for Fox Searchlight. In contrast, the highest sales recorded at Slamdance was Batkid Begins (2015) for $1 million to Warners, primarily for remake rights. Last year, Slamdance’s Million Dollar Duck sold to Animal Planet and Lionsgate for a deal worth $350,000-$500,000. (The Slamdance infographic is right below the Sundance infographic.)

The Netflix of it all

Continuing a trend that began five years ago, streaming services like Netflix, Amazon, and iTunes will continue to be the dominant platforms for independent films. Netflix has four original features, one original documentary feature, and episodes from two documentary series screening in the festival.

In addition, the festival has fully acknowledged that some of the best “film” work is now done in episodic television. This year is the first year that episodic content has been eligible, and 403 episodic films were submitted. Nineteen episodic films will screen, including premieres from Netflix, Amazon, and YouTube Red.

Chillier

Like the weather, I expect a somewhat chillier buying season than in 2016. There will be even more responsibility put on producers and directors to deliver audiences for their movies, down-shifting traditional marketing efforts from the distributors to filmmakers. I suspect that buyers will be more cautious, and that even Netflix with its trumpeted $6 billion content-acquisition budget will be judicious. There is simply a glut of great content, not all of which is feature films, and Peak TV is already becoming a factor.

We can soon expect a cyclical downturn in our business, and we may see early signs of it in Park City this year, where the weather will be cold even while the politics will be hot.

Sundance Infographic

Sundance 2017 Infographic

 

Slamdance Infographic

Slamdance 2017 Infographic


Top: Jason Segel appears in The Discovery by Charlie McDowell, an official selection of the Premieres program at the 2017 Sundance Film Festival. The film will stream on Netflix in March. Courtesy of Sundance Institute.

Sundance 2016: New Trends Emerge

Originally published in Cultural Weekly on January 27, 2016.

The early deals have not been paltry and neither has the snow. Tempting, blanketed and idle, ski runs seemed to peer down upon Park City as Sundance buyers have been waist-deep in high-dollar negotiations. The 2016 Sundance Film Festival will be known as a historic turning point in the economics of the business, because this was the moment when digital companies showed their strength by making huge, swift purchases.

The largest deal in Sundance history, however, was made by Fox Searchlight, a traditional theatrical distributor. Its negotiations revealed the divide between traditional theatrical distributors and data-driven streaming companies like Netflix and Amazon.

Of course, there was the usual Sundancery. Uber, despite its giant tent and heated waiting area, vexed local authorties with the launch of UberCopter: apparently those helicopter rides and landing pads had not been properly permitted. There were over-full parties with one thousand of your closest personal friends, gifting suites and swag bars. Every brand had its day. You could even visit the Vaseline Lounge; I will allow you to supply the punch line.

Before the festival began, Netflix and Amazon made preemptive purchases; among them, Netflix acquired Rob Burnett’s Fundamentals of Caring for $7 million. Once Sundance officially began last Thursday, the first deals were from the streaming giants.

Prior to a screening on Saturday night, I asked an agent what she expected to get for the film she was repping. “If Netflix or Amazon want it, a lot,” she said. “If they don’t, it’s a whole different deal.”

There was a bit of head-scratching over Amazon’s $10 million purchase of Kenneth Lonergan’s Manchester by the Sea. Although well reviewed and highly praised (Justin Chang (Variety) called it a “bold merging of ensemble drama and character study, all in service of a story about how a person — and crucially, the surrounding community — choose to deal or not deal with the consequences of a fatal mistake”), it is a tragic and niche story.

Rebellion

Netflix reportedly offered $20 million for The Birth of a Nation, Nate Parker’s historical drama about the Nat Turner slave rebellion in 1831. But the filmmaker and his reps turned down the Netflix offer, and struck a deal for $17.5 million with Searchlight, a Sundance record. As has been widely reported (see this play-by-play in The Wrap), the choice came down to a matter of theatrical distribution over dollars.

While Netflix had promised a theatrical release, the filmmakers did not believe Netflix would provide the right kind of distribution for this film’s audiences. There was reason to be skeptical. Streaming and cable companies service the small screen with preferential vigor. For example, Beasts of No Nation, another Netflix film, barely got any marketing push for its theatrical run. (Beasts of No Nation played in 31 theatres for two weeks and grossed $90,777.) Similarly, Discovery Channel barely promoted the theatrical exhibition of Racing Extinction. They did achieve their biggest viewership ever when they aired the doc worldwide on December 2, and that was their objective, but this example points to the differing priorities of small-screen vs large-screen companies.

Will streaming companies continue to pay such large sums? Are they approaching movies because they care about cinema, or because they are using films as content-bait to gather more data on their customers? Their eager appetites could be temporary; in two or three years, after they experience first-hand the economics of the movie business, will they suffer losses on their investments and cut way back? Stay tuned; we’ll be watching closely.

Tarmac with patches

Like this tarmac in Park City, the independent film business expands and contracts with heat and cold. It falls apart only to be put back together.

Piracy Debate

Last week we published our Sundance 2016 Infographic, which included never-before revealed data on pirated downloads of independent films.

We got a lot of comments. Indiewire picked up the piece, and Facebook discussion was lively. Some people contended that pirates actually drive legitimate ticket sales and disputed my estimate of how much piracy costs filmmakers.

On Monday, I attended an Artists Services presentation by Professor Michael D. Smith, who studies information technology and marketing. Smith, who takes the position that he has no position on the issues because he only cares about the data, revealed evidence that fully supports what we put in the infographic. His research will be published this summer as a book entitled Streaming, Sharing, Stealing: Big Data and the Future of Entertainment (MIT Press).

Are pirates taste-makers who drive ticket sales? No, says Smith. He and his colleagues studied 533 movies over two time periods, 2006-2008 and 2011-2013. The films included major studio and independent releases. Their conclusions? “If piracy could be eliminated from the theatrical window then box office revenues would increase by (on average) 15%…. All of the movies in our counterfactual analysis would experience increased box-office revenue if piracy were eliminated altogether.” (Ma, Montgomery, and Smith 2015)

In my article last week, I made the assumption that 5% of the people who pirate content would purchase it if there were no illegal alternative. I chose the 5% number because I wanted to be conservative, not alarmist. When I asked Smith about this assumption, he said I was probably low – the real number, he said, could be closer to 15%. If Smith is correct, the films I cited lost three times more revenue than was depicted in the infographic.

I checked with Excipio, the company that analyzed the BitTorrent results used in our infographic, to see if any of the films acquired at Sundance so far were getting illegal downloads. Sign of relief: they are not – so far.

The Free Range Reaction

Every movement begets its opposite; the Tea Party arose as a reaction to Obama’s election. While streaming giants make muscular plays, the free range distribution movement is becoming more effective and sophisticated among a growing cadre of indie filmmakers. As James Kaelan said last week, “You don’t need to wait to get picked anymore.” (Kaelan performed the hat-trick of having films in both Slamdance and Sundance this year.) In an example of the increasingly vibrant DIY movement, Quiver, a digital distribution service that charges a flat fee, not a percentage, now pays filmmakers more than $1 million a month.

In comparison to the record-setting deals I discussed at the beginning of this article, other film deals at Sundance and Slamdance will indeed be paltry. While pretty much every movie at these festivals will get some form of distribution offer, most will be for little or no upfront cash. Even with Amazon’s and Netflix’s big checkbooks, economics for indie filmmakers have not gotten easier.

We’ll continue to look at these developing trends in the months ahead.

Vaseline Lounge

Yes, Virginia, there really is a Vaseline Lounge at Sundance.

Top image from Nate Parker’s The Birth of a Nation. Courtesy Sundance Institute.

Sundance Infographic 2016: Ample Distribution, Paltry Deals, and the Cost of Piracy

Originally published in Cultural Weekly on January 20, 2016.

For the myriad filmmakers descending on Park City this week we have good news and bad. The good news: If your film is in Sundance, it will get distribution. The bad news: Your financial return on distribution will probably be minimal and your film is likely to be pirated, further diminishing your income.

Those key findings come from our annual survey of the independent movie landscape, on view below in our Sundance Infographic. Each year, we crunch the numbers on the Sundance Film Festival and use it as a bellwether for indie filmmaking at large. When Sundance’s Transparency Project begins to share data (later this year, we hope), we will all have even more information for analysis.

CLICK HERE TO SEE ANIMATED SUNDANCE 2016 INFOGRAPHIC

Distribution Dynamics

The overall number of distribution deals at Sundance is staggering. Last year, 105 of the 125 films achieved distribution of one kind or another. That’s a twenty percent increase from the year before, and a stark contrast to 2010, when only twelve films got distributed. What changed? Massive penetration by streaming services like Netflix and iTunes and the increased appetite for cable players like CNN and Discovery to take on feature-length documentaries.

Filmmakers at the Slamdance Film Festival, which runs concurrently in Park City, will have the same experience – all will get some distribution opportunities and most will be financially minimal.

When I say minimal, I mean minimal. Based on my conversations with producers and sales agents, many offers from distribution companies have zero minimum guarantees and rely entirely on back-end participation. When a deal is made with a digital-only distribution company, filmmakers will be expected to show up with a marketing plan in hand and will be expected to help sell tickets or streams themselves.

Why are distribution deals so paltry? Two reasons. First, there is too much content in the marketplace. Last year, there were some 700 feature films released theatrically in the US, of which about 150 came from studios and their subsidiaries. Those studio films accounted for 92.1% of the total box office, leaving approximately 550 independent films to fight for less than eight percent of the box office. Then, there are hundreds or thousands of movies that get digital-only deals, via companies like Amazon or Gravitas. In addition, 2015’s audiences had the opportunity to watch 409 scripted television shows – not hours, but actual shows, each of which has four to 22 episodes. Meanwhile, the number of hours of content uploaded to YouTube each minute is approaching 500. This much content is enough to make one’s eyeballs explode, and yet, with all the tonnage, truly excellent work is still rare.

The second reason distribution deals are low is the continuing devaluation of creative content. Increasingly audiences want to pay little or nothing for content in a fixed form – movies, books, music – even as they will pay nearly $1,000 for a three-day pass to Coachella. This is a generational, cultural shift –  and that’s where piracy comes in.

Piracy Costs

We know that piracy is a big issue for studio films, and we wanted to learn how it affects independent movies. For this year’s Sundance analysis, we worked with Excipio – a company that collects forensic evidence against pirates and does analytics. Excipio analyzes data collected from BitTorrent networks and does not extrapolate or estimate.

The results should be troubling to all independent filmmakers. Excipio analyzed illegal downloads of fourteen films that screened at Sundance in 2014 and 2015. All had at least hundreds of thousands of pirate downloads; Whiplash was downloaded illegally more than 12 million times.

What does piracy cost? Some piracy proponents (yes, there actually are such people) say it costs nothing and that it even helps build awareness for films, but that argument is false on its face. There is already a surfeit of content and one more free movie does not make a ripple. Audiences must be targeted carefully with specific marketing campaigns to build awareness and want-to-see; pirated films subvert that process. Piracy directly affects the bottom line, because some percentage of people who download illegally would have paid for the film if there were no illegal no-cost alternative.

How can we estimate the cost? We decided to be conservative. We’re estimating that if the illegal option were not available, five percent of customers would have paid for downloads and that they would have paid only $3 per transaction, which is a low number for digital downloads. Using this formula, we found that the fourteen films we sampled lost between $57,000 and $1.83 million in revenue.

Jonathan Sehring, president of IFC Films and Sundance Selects, and a producer of Boyhood told me: “Obviously piracy hurts every film company and any owner of intellectual property, regardless of size and scope. It is painful to look at those numbers and try to rationalize why people do this, especially to indie films.” Boyhood has had 10,383,141 pirate downloads. By our estimates, that cost the film $1.56 million. Life and death money for an indie filmmaker.

$3 Billion Invested

Each year, we estimate the budget of all the films submitted to Sundance to get a ballpark on how much is being invested in independent movies. Based on my conversations with producers, distributors, financiers, and people familiar with the festival circuit, this year we are estimating an average budget of $1 million per dramatic feature and $400,000 per feature documentary. The aggregate total tops $3 billion.

Does investment in indie films pay off? Clearly not, in most cases. But it is difficult to calculate on a case-by-case basis. For example, our infographic shows the sales price and the US box office gross, but most often films are bought for many territories – not just for the US. With Netflix now available in 190 countries, they often buy the world. Further, digital revenues are not transparent and are closely guarded. Unlike theatrical box office figures, which are publicly available, the amount of total views and income from all aggregated digital sources is not possible to track. Even insiders who run streaming companies tell me there is no way to get a clear figure beyond what they see from their own services. That lack of transparency has to change for independent filmmakers to get a fair understanding of today’s distribution economics and be able to strike deals that are fair all around.

Given the state of things, film distribution is ripe for continuing disruption. Increasingly, independents are exploring alternatives and finding entrepreneurial ways to do it themselves. Filmmaker James Kaelan, whose virtual reality experience The Visitor is in Slamdance, and who produced Hard World for Small Things in Sundance’s New Frontier section, told me, “With the advent of crowdfunding, with the efflorescing of free range distribution platforms, you don’t need to wait to get picked anymore. You can make your film on your own terms, and exhibit it directly to your audience without signing away your most-cherished rights. That’s a monumental shift.”

That shift is a trend likely to be even more prominent when we survey the independent film landscape a year from now.

SEE ANIMATED AND INTERACTIVE SUNDANCE 2016 INFOGRAPHIC

Sundance Infographic 2016

Sundance Infographic 2016

Sundance Infographic 2016 | Produced by Cultural Weekly and Entertainment Media Partners | Sponsored by Macmillan Learning

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Infographic sponsored by Macmillan Learning. Produced by Entertainment Media Partners for Cultural Weekly. Tod Hardin, special features editor; Ahmad Zaeem, designer.

Top image: Sky Ladder: The Art of Cai Guo-Qiang directed by Kevin Macdonald in World Documentary section at Sundance Film Festival. Photo courtesy Sundance Institute.

Filmmakers: Get Ready for Film Festivals

On December 9, 2015, I did a seminar for the filmmakers whose movies have been accepted to Slamdance 2016. This seminar will be useful for all filmmakers getting ready for film festivals anywhere and hoping to take maximum advantage of the opportunity.

Adam Leipzig

Adam Leipzig talks with Slamdance filmmakers. Photo by Peter Baxter

Slamdance founder Peter Baxter joined us (you’ll hear his voice in the intro). We did the seminar in the CreativeFuture offices where I serve as COO.

In this 75-minute seminar, you will learn the answers to these questions:

  • Do I need marketing materials, and if so, what would they be?
  • Should I hire a publicist?
  • How do I pick the right sales agent?
  • How to pick a sales agent?
  • Should I stay for the whole festival?
  • What kind of deals are being make for independent films?
  • What can I do with my short film?
  • How do I answer the question I will be asked most often?
  • What about other film festivals?
  • How can the festival leverage my career?

Congratulations to all the filmmakers, and I hope you find this useful.

We did an audio recording of the seminar. Listen or download here:

Top photo: Adam Leipzig (l) and Slamdance founder Peter Baxter discuss indie film strategies in a film noir-ish parking lot. Photo by Deron Williams.

The Distribution Equation

Originally published in Cultural Weekly on April 22, 2015.

Congratulations! You just finished your movie, which puts you at the edge of the winner’s circle—lots of people start movies and are never able to bring them out of post-production to the light of day. You finished yours.

You made it micro-budget, for $400,000, and it’s awesome, or so your friends tell you. Your investors are happy, but also nervous: Will they get their money back?

Let’s say your friends are right, and your movie is awesome. You even manage to go further, and get your film into a festival, maybe Tribeca. Grateful festival audiences will see it, and distributors, too. Because that’s what you need, distribution.

Distribution is the fulcrum of the financial equation, because without distribution audiences cannot see your movie and investors have no hope of financial return. This is where most independent films fall down: they do not have a distribution plan before they start production. Hence they are vulnerable. Of all the feature-length films that are completed each year in the US, fewer than 10% actually get any form of distribution. Ninety percent or more repose uselessly on hard drives, gathering dust in someone’s garage.

You don’t want your film to be among the 90%. Your investors certainly don’t want that. How do you solve the problem?

In the first place, you need to make a good movie, and I mean really good—a film that works for its genre, delivers for its audience, is excellent in its execution and boasts a brilliant cast. Whether you cast known or unknown actors, they’ve got to be great.

Let’s go to the next step and assume your movie really is good, but you enter the festival with no distribution set. At this point, there are two possible outcomes: either a distributor will want your movie and offer you a deal, or not.

If it does happen, you may feel as though you have won the lottery. In one sense you have, in terms of an opportunity to be distributed by a legit company. But your investors likely will not be pleased. Unless your film sparks massive attention, which in turn attracts the interest of more than one distributor, hence fueling a bidding war, you will be offered pennies on the dollar.

As evidence of this, you can look at the films that played this January at the 2015 Sundance Film Festival. Even now, deals are still being discussed, and most of the films in the festival will be picked up for distribution. But very few will have had the chance to raise their sales price with a bidding war; most will sell for $100,000 or far less.

That is not a good financial outcome. However, if you did not pre-plan your distribution strategy, pre-plan it even before you started shooting, this is the situation you will be faced with.

Is there another possible outcome, a way to improve your side of the distribution equation?

There is. Today, wise filmmakers and their investors are planning and budgeting for a distribution strategy from the moment of their first fund-raise. For a low-budget movie, they raise an additional $300,000-$500,000 and keep it in the bank, so they can cause distribution to happen if the perfect distribution company does not make the right offer.

Let’s take a look at two scenarios to see how this might play out.

Scenario 1: Traditional Distribution

You made your movie and also have a $500,000 war chest for marketing and distribution. If distributors see your movie, love it, and offer you a fair price, you can take it.

At that moment, though, you have terrific bargaining leverage. You don’t need the distribution deal because you have the resources to do it yourself. Of course you want the deal, because a legit distribution company is in the distribution business and will do a far better job of distribution in most cases than you will—it is their métier, after all.

But now you have leverage. Either you can take that $500,000 marketing war-chest and give it back to your investors; your investors will be happy. Or you can strike a more aggressive deal with the distribution company, offering to co-finance the marketing spend. Some distribution companies won’t let you do that—they will want to keep full control over marketing and the opacity of its accounting. On the other hand, some will let you co-venture P&A, and they’ll admire your foresight. Depending on how much marketing money you actually have to co-invest with the distributor, you can potentially drive the standard distribution fee of 30% down to about 15%. That will make your investors delighted.

Let’s run some numbers.

When distribution companies offer to buy your movie, what they are really doing is giving you cash as an advance against potential future earnings. Let’s say you get an offer of $1 million for your $1 million movie. Of course you will take it, because now your investors will come close to breaking even. You’ll also be offered 50% of the proceeds after distribution fees and expenses are recouped by the distribution company; the company will keep the other 50%. Will you ever see more money than your initial advance? Not likely.

The amount that cinemas keep, versus the amount that goes back to the distribution company, is called the “settlement rate.” The settlement rate averages 42%, which means that the cinema keeps 58% of every ticket sold, and the distributor gets 42%. But that is the average across all movies, including studio movies. In the indie world, the settlement rate is far less, sometimes dropping as low at 20% for documentaries.

Let’s say your settlement rate is 40%. After the distributor gets its share (40% of the tickets sold), the distributor will charge its fee (typically 30%) and then subtract the cost of advertising, marketing and publicity, a number that can be surprisingly high, even in the independent landscape. If the box office is good, the distributor will keep spending marketing money to chase a higher box office return, and the net result will be that theatrical run will lose money.

Enter home entertainment sales, the big basket that includes cable, VOD, SVOD, Amazon, iTunes and the like. The average settlement rate here is higher—70% will go back to the distributor, then the distributor will still charge its 30% fee off the top, plus subtract additional expenses.

As you’re about to discover, it is good to be in the distribution business, and not so good to be in the movie making or movie financing business. Here’s the math:

Let’s assume your movie will make $1 million at the theatrical box office, and an additional $1 million in home entertainment. 215 movies made at least this much money in 2014.

If you are working with a traditional distributor, the $1 million box office revenue will bring back $400,000 to the distributor, because of the 40% settlement rate. The distributor will take its 30% distribution fee, leaving $280,000. Marketing expenses will probably have been $750,000, so that means the film is at a net loss of $470,000.

Home entertainment could begin after, during, or before the theatrical run. Assuming an additional $1 million in home entertainment revenue, and a 70% settlement rate, $700,000 will come back to the distributor. The distributor will take its 30% fee, leaving $490,000. The distributor probably spent an additional $100,000 in home entertainment marketing, so the film is now at a net loss of $80,000.

You and your investors will not get anything more than the initial advance, whatever that was. Note that although the film is showing a loss, the distributor will still have made $330,000 in its distribution fees.

If you had access to your marketing investment war-chest, you could have co-ventured the P&A spend with your distributor, with each of you paying for half of the total $850,000 marketing spend (or $425,000 apiece). Now, in addition to getting that money back, you could have been able to shave the distribution fee to 15%, which means your investors would have been able to get back an additional $165,000.

Will your investors make a profit? It all depends on the advance you got from the distributor in the first place. If the advance was only $100,000, and your movie cost $400,000, your investors will be in a losing position.

Scenario 2: Free Range Distribution

However, let’s say you choose to be responsible for distribution yourself. Now you will work harder, because you will have executive responsibility for keeping everything on track, even though you will hire top-caliber people to handle distribution for you. But you will spend less. The settlement rate will be the same, but the distribution fee will be less (distribution professionals work for a percentage) and you will keep far more money.

You would play out this scenario if you don’t get a distribution offer or you don’t get one that’s financially exciting. Now you can take your marketing war-chest of $500,000 and guarantee distribution by hiring one of the stronger companies that can book theatres, handle marketing and publicity, and make VOD, SVOD and cable deals. In this case, because you are the “client,” you will have full transparency into costs and spends, and distribution expenses will be far lower.

This financial scenario can be even better. Given the same financials, your P&A cost will be less— likely $500,000 all-in, for home entertainment and theatrical marketing, and also including the for-hire distribution professional’s upfront fee.

Why will your marketing expense be less? Because free range distributors do things more grassroots, and have cleverer ways of using their resources.

The total revenue will be the same, $1.1 million ($400,000 from theatrical and $700,000 from home entertainment). Assuming you now pay the professionals you hired 10% of the generated revenue, you will spend $110,000 in additional distribution fees, leaving you with $990,000. Now let’s subtract the marketing expenses of $500,000: you’ll end up with $490,000.

As you can see, that is a far better financial outcome. Your movie would be in profits.

I must end with a bunch of disclaimers. There is no regular ratio anymore for theatrical-to-home entertainment revenue in the indie sector, so any film’s specific performance will vary widely. I’ve simplified a complex process for this article, and there are other factors to take into account, such as international revenue, but it is probably safe not to include it, as American independent films don’t traditionally make that much money overseas. Finally, of the 693 films released last year, only 215 of them made more than $1 million at the theatrical box office, so the movie business is as risky as ever and financial success is no sure thing. Which means, again, your movie needs to be exceptional, with a clearly-defined and big enough audience before you start making it.

All the more reason, therefore, to build distribution costs into your business model from the beginning. Without them, you and your investors stand even less of a chance of being in the winner’s circle.

My thanks to Glen Reynolds and Sebastian Twardosz at Circus Road Films for their expertise and checking my numbers and formulas.

Top image from the self-distributed film ‘Particle Fever.’

Free Range Distribution It’s Viable for Sundance and Slamdance Films

Originally published in Cultural Weekly on January 21, 2015

Inside Track for Independent Filmmakers, my new book that gives step-by-step instructions for filmmakers to get their movies made and seen, shares important tips on the newest distribution frontier. Call it Free Range Distribution, which captures the energy and Wild West experience you’ll find here. (It’s a term I learned from my friends at Seed & Spark, an organization that supports and facilitates independent filmmaking.)

If you’re a filmmaker with a film at Sundance or Slamdance, or if you want to be, you may find that Free Range Distribution is a viable option for getting your work in front of your audience. If you’re in the audience, and you want to see films that aren’t “big” enough for traditional distribution, you may find that Free Range Distribution is the best hope you’ll have of encountering movies that fit your taste.

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What is Free Range Distribution?

Free Range Distribution platforms are websites that make it possible for filmmakers to sell or rent their movies. In a digital setting, a “sale” can be defined as a download that the customer can keep forever, and a “rental” is a streaming or viewing opportunity that expires within a certain period of time, usually 24 to 72 hours. Sale prices are typically higher than rental prices.

These distribution platforms go well beyond the monetization strategies of more basic sites like YouTube, where interaction is limited to advertising or requesting a donation. Instead, these platforms allow you to have a direct, transactional relationship with individual audience members.

Some Free Range Distribution sites are open to everyone, such as Vimeo, which allows you to upload and sell your movie as long as you subscribe to its Pro service. Other ones are more selective and require a submissions and acceptance process. I prefer these selective platforms because there are fewer movies on them, and their curation procedure establishes a certain level of quality. At the same time, they charge more for their services, through either a setup fee or a share of revenue.

[alert type=alert-white ]VIEW OUR SUNDANCE BY THE NUMBERS INFOGRAPHIC[/alert]

If you’re a filmmaker interested in exploring the Free Range Distribution option, you need to do your homework. There are many Free Range Distribution platforms available (some are listed in the Essential Resources section of my book), and because this is an emerging and fluid marketplace, their terms and offerings change frequently. Look for a platform that has been successful for films similar to yours and that has the features most important to you.

If you select a platform that has a submissions procedure, study it carefully and make sure you have all your materials in order. Often, staff members are available by email or phone to help guide you through the process, and to answer questions as you determine if this is the right platform for you.

It’s a good idea to be in touch with your potential Free Range distributors early on in your filmmaking journey, even before your movie is finished. You’ll learn what is possible and what is not, and it will be just one more step in planning your release strategy well before you premiere your film—which is exactly what the big studios do.

A frame from the Indiegogo campaign for 'Across the Sea,' a first feature directed by Esra Saydam and Nisan Dag. screening at Slamdance 2015

A frame from the Indiegogo campaign for ‘Across the Sea,’ a first feature directed by Esra Saydam and Nisan Dag. screening at Slamdance 2015

However, no matter which Free Range Distribution platform you choose, be prepared: you must be your own marketing department. For any creative entrepreneur, in any field, this job requirement is the most important and the most uncomfortable.

Let’s look at discomfort and importance.

For creative people, those of us who work primarily alone in coffee shops or studios, it is truly difficult to step into the public sphere and trumpet their own stuff. This is true for filmmakers as well, even though there’s a lot of social activity involved in on-set camaraderie. When your movie’s done, you’ll probably feel the film will speak for itself.

Newsflash: it won’t. It’s your job to speak up for it. You must demonstrate to the world how important your film is, and you do this by talking about it, in every medium, at every chance you get.

If you choose Free Range Distribution, marketing is 100% a requirement, and you must build out and execute your own marketing plan. Movie tickets—or downloads—are not going to sell themselves. You must bring the audience to your film, hold their hands, entice and encourage them, and, finally, get their money.

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1. Buy Inside Track for Independent Filmmakers at Dolly’s Bookstore on Main St. in Park City.
2. Take a creative photo of the book somewhere in Park City.
3. Email your photo to [email protected] and you’ll get FREE his popular Crowdfunding webinar, a $15 value.
Details at Dolly’s Bookstore.
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How do you prepare yourself? Fortunately, marketing is not magic; it simply requires that you plan for it, and that you have a clear understanding of your film. You need to:

  • Know what your film is about.
  • Know who your audience is with great specificity. Your film is not “for everybody.” By definition, each independent movie has a clear-cut, distinct niche audience, not a general demographic.
  • Know the size and duration of your social media following (and the social media following of your actors and creative team). You need to build it up over the year you are making your movie, so they are waiting for you on the day you release.
  • If you did a crowdfunding campaign, which is a good idea as an audience-engagement tool, maintain a strong relationship with the contributors (and the people who peeked but did not contribute), so you are ready to turn them into your core advocates.

If you and your team take these steps, you’ll be well on your way.

In case you didn’t notice, you have just become the Chief Marketing Officer of your very own film company! That, along with persistence, talent, passion and big ideas, is one of the essential attributes of successful independent filmmakers today.

Buy Inside Track for Independent Filmmakers here.

This article is adapted from Inside Track for Independent Filmmakers by Adam Leipzig. Copyright © 2015 by Bedford/St. Martin’s. Used with permission of the publisher.

Top image: ‘Western’ / U.S.A., Mexico (Directors: Bill Ross, Turner Ross), screens in the Sundance 2015 U.S. Documentary Competition. Photo courtesy Sundance Institute.

Sundance InfoGraphic: Are Indies the 8th Studio?

With an annual production budget that exceeds $3 billion, independent movies rival the major studios’ spend on filmmaking, even as indies vastly outstrip the studios in sheer volume.

That’s a key finding of our exploration of Sundance by the numbers, which we’ve rendered in our 2014 Sundance Infographic below. There are seven major movie studios: Warner Bros., Disney, Universal, Sony/Columbia, Lionsgate, 20th Century Fox, and Paramount. Can we now reasonably call independent filmmakers the Eighth Studio, because their aggregate production expenses clearly put them in the major studio league?

I don’t believe anyone has ever attempted to quantify the amount of money spent on independent films before. To do this, we decided to use Sundance as a bellwether of the entire independent film sector; with more than 4,000 feature-length films submitted each year, Sundance certainly represents a healthy sample of the industry. While absolutely every indie movie isn’t submitted to Sundance, the highest-profile ones generally are. So the Sundance submission numbers represent a good statistical estimate of the most viable indie movies produced each year.

Then we needed to make an estimate of how much money had been spent on each film. After speaking to a dozen producers, sales agents and indie financiers, we settled on $750,000 per movie, as a blended average number. A few people urged us to estimate a higher number. Even though some movies are made for less, many are made for far, far more, which would put the average cost over $1 million. We decided to keep our estimate at $750,000 to stay on the conservative side.

We also estimate that more than 400,000 people work on indie movies each year, assuming that an average of 100 people work on each film, through all phases of production and post-production.

Opening Night Curse?

In other findings, we took a look at what many distributors call the “Sundance opening night curse”–their belief that if a movie is chosen for Sundance’s opening night, it won’t do well at the box office. Here we found mixed results, which means the “curse” is often true, but not always. Since 2010, 10 films have screened on opening night. Two of them, Twenty Feet From Stardom and Searching for Sugar Man were indie box office success stories; the rest were not.

We Also Discovered:

Distribution: 2011 was the pivot year; since that year, more than half the films screened at Sundance have achieved distribution deals. That’s because of the explosion of streaming and digital delivery systems. Of course, many of those deals are non-theatrical, and some are for acquisition prices as low as nothing (or nearly nothing–$25,000), which means that most independent financiers won’t recoup their investments.

Biggest sales: Since 2010, the movies that are sold for the most money usually have not been worth it. The winner of this game are Fox Searchlight and Focus Features, which bought well and had theatrical success with The Way Way Back and The Kids Are All Right.

The 8th Studio’s Balance Sheet

Still, the overall picture is far from pretty, and if we were to do a balance sheet for the Eighth Studio, the indie film industry, it would be bleeding more red than a Nicolas Winding Refn movie. In that way, the Sundance Infographic is also a cautionary tale. Fewer than 2% of the fully-finished, feature-length films submitted to the Festival will get any kind of distribution whatsoever. Of the more than $3 billion invested annually, less than 2% will ever be recouped.

Does that mean investors shouldn’t bankroll indie movies, and filmmakers should stop making them? Of course not. But I do wish financiers would invest more wisely, with seasoned guidance and a clear plan for distribution beforehand, and that filmmakers would concentrate on crafting far better movies. Creators and audiences alike would be better served with higher quality and lower quantity. The numbers make that abundantly clear.

Sundance Infographic 2014: The Festival by the Numbers

Sundance Infographic 2014: The Festival by the Numbers

Click on infographic to enlarge.

Sundance 2014 Infographic produced by Entertainment Media Partners and Cultural Weekly.

Sundance 2014 Infographic produced by Entertainment Media Partners and Cultural Weekly.

Update: Since this infographic was prepared, Sundance added 2 additional films; 121 films were screened this year.

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