New Year's Resolutions & CRI Solutions

In the first week of the new year, most blogs and papers have published articles on new year's resolutions for the film industry and/or wrap-ups of last year's highlights and statistics. Some of The Wrap's resolutions are particularly relevant to the work that CRI fellows are doing now.

Some highlights and areas for consideration:

CHRIS MCGURK, CEO, Cinedigm: People have to re-screw their heads on about the way a film is released. It used to be that a movie had to be picked up by an independent distributor and get to 500 screens to be validated as a movie, but it takes $5 million to $10 million in marketing to do that, and it makes it difficult to get a return on your investment.

The way that a film can be released is an interesting consideration now from micro to ultratoobig budget projects. Ryan has designed his project to "address the lack of economic transparency in independent film with the ultimate goal of helping filmmakers better understand the options available to them when it comes to distributing their films." With a better understanding of the real costs involved in distribution, independent filmmakers will have a much easier time re-screwing their heads on in order to embrace changing release strategies.

FRANKLIN LEONARD, Founder, the Black List: I spend a lot of time thinking about data and how data can be used to improve the film business. One way that seems both obvious and interesting is making movies that already have an audience. Hollywood typically assumes that means, "Oh there’s a built-in audience for this board game." That’s wrong. It means determining ways to identify audiences for specific subjects or ideas via the internet, social media and surveys.

I agree with Leonard--the film industry has barely begun to collaborate with and learn from the tech world in order to harness data about what audiences want. Which is not to suggest that filmmakers should start making movies based on what audiences want. (That would be a cynical verging on gross thing to suggest.) Better tools to target individuals based on their interests and tastes mean better chances for filmmakers and grassroots distributers to build audiences around any film. I'm researching new digital platforms in this space, I'm trying to understand how to build community around film online and learn from that community, and I'm (hopefully) killing the word niche in the process.

GLEN BASNER, CEO, FilmNation: ...It’s much easier to have a hand in the creative process and in the development of a movie than when you're getting a big fee from the studios, making $20 million before you step on set. Don’t get me wrong, studios have a lot of strengths -- more advantages than disadvantages -- but they are not nimble. They can’t tailor each project to specific filmmakers. That has allowed smaller companies to enter the void and have a bigger impact than ever before.

Edward is aiming with his project to build "a new model of independent filmmaking focused on the production of feature films produced within the walls of the university system that will prove to make dollars and sense." Like Basner suggests, now is a perfect time for filmmakers working within a nimbler infrastructure than the studio system to "enter the void." And no one but no one is nimbler than a film student.

Full article here: http://www.thewrap.com/movies/article/how-improve-hollywood-9-experts-weigh-future-film-70126?page=0,0

Crowd Sourced Cinema... how we got here

This week, WIRED posted an article about the emerging phenomenon of crowd-sourced cinema. This trend seems to have emerged as a result of a confluence of factors, including:

(1) The digitization of the modern movie theater.  As studios has pushed back on exhibitors to outfit their facilities with digital projection technology, the requirement to create a 35mm print to play in a big house has fallen by the wayside. Digital theaters can now screen everything from DCPs to Blu-Rays, brining the cost of creating a screenable "print" from thousands to hundreds of dollars.

(2) Low weekday attendance at movie theaters.   There's a reason that the industry reports weekend box office rather than weekly box office. People go to the movies on Friday, Saturday and Sunday, leaving an opportunity for alternative revenue sources during the quiet weeks at the art houses and multiplexes. A model where theaters can show a movie without shouldering the risk makes a lot of sense.

(3) DIY. With Kickstarter and IndieGoGo filmmakers are raising capital themselves. And with the decreasing cost and increasing access to equipment, filmmakers have the ability to make films with more autonomy and creative control. For the entrepreneurial filmmaker, digital distribution and on-demand screenings offers an extension of this approach, affording artists the opportunity to control the distribution process, determine price and access, directly monetize a fan base or all of the above (see: Louis CK).

(4) The niche-ification of the independent film business.  As studio films get bigger, small films seem to be getting smaller (Sundance, SXSW and Tribeca have recently launched sections explicitly for micro-budget filmmakers).  Just as the music industry has seemed to transition from churning out overnight successes that could speak to most of us, to an array of middle class theater-playing acts that speak to few of us, the film industry may be headed in a direction where filmmakers grow and nurture smaller, but loyal audiences. Bring on the sub-genres.

Whether on-demand screenings are a new and legitimate alternative to traditional theatrical release, a marketing tool to help raise awareness and allow filmmakers to directly access (and monetize) their fans, a revolutionary approach to repertory cinema, or something in between, it's a fascinating development and one we should all have our eyes on as it continues to find its footing.

Getting Personal

"Users tell us they don't know what to listen to, and artists tell us they want to connect more closely with fans" says Daniel Ek, CEO and founder at Spotify. "So we're creating a new and personalised way of finding great music."

Spotify recently introduced a suite of new functions as part of their mission to make music discovery more personal. There are very many, very obvious differences between film and music, differences that make music far more apposite to the constant (social) consumption that Spotify encourages. Still, I think that the creators of online platforms for filmmakers and filmfans should study Spotify and its recently added tools (or at least watch this precious little thang).

The new tools for getting personal are "discover" and "follow" tabs that, in essence, allow Spotify users to curate their curation by choosing which artists', influencers' and friends' recommendations to follow. Unlike platforms I've written about here which do not clearly explain how they will deliver on their promise of filmmaker-fan connection, Spotify recognizes that curation is a key step towards both this connection and towards discovery of new content. As a musician, my connection to a fan is strengthened when he chooses me as a curatorial guide. As a fan, who better to introduce me to new music than the musician who knows that world (and my taste, by virtue of my choosing him) best? By fostering this unique kind of regular interaction between fan and artist, Spotify is both strengthening fan loyalty (for whenever the artist may need it) AND creating a mechanism for discovery.

"From today, music discovery becomes truly personal. It becomes central to the Spotify experience as the service brings artists and fans closer together than ever before."

Yes, music and movies require different modes of consumption and cannot be considered similar for the sake of a business model. But many platforms that are trying to make film discovery truly personal should note how Spotify is marrying personalization with artist-fan connection. Discovery is possible without curation thanks to sophisticated algorithms. But there's nothing personal for artist or fan about connecting with ones and zeroes...

Read more about Spotify's new tools here.

How BitTorrent Will Help Artists

"The email address is the most valuable thing you can get from a consumer. It's probably worth more than a direct sale through iTunes," according to [Matt] Mason, who says the artist can then use that email to sell the fan multiple albums, concert tickets, merchandise and more down the line. We [BitTorrent] did a campaign with the author Tim Ferris on his new book "The 4-Hour Chef." In the first seven days of that campaign, we saw 210,000 downloads of the sample of the book. That's awesome, but what's even more awesome is that of those people, 85,000 of them then visited Tim's Amazon page for the book. That's a sick conversion rate. That's off the charts.

BitTorrent, the file sharing protocol, moves 30% of Internet traffic. BitTorrent, the company, is dedicated to figuring out how they can help content creators take advantage of this staggering statistic.

Here are some highlights from an interesting and encouraging MediaShift interview with BitTorrent's director of Marketing, Matt Mason:

When it comes to entertainment companies, they have an in-grown fear of piracy. Is it hard to change their minds so you can work with them?

Mason: Yes, absolutely, and it's difficult to convince people, and convince everybody at a company that it's a good idea [to work with us]. We might convince a band, their manager and the CEO of the label, but the [general manager] of the label might say, 'You can't work with BitTorrent ever, ever, ever. It means piracy.' And we don't ever get to talk to that person. It's difficult, but we are seeing the tide turn. Over the last year, we've done a lot of cool stuff with content. And when we go out and talk at media events, we tend to get a different reception; people are interested in the experiments we've been running.

Moving into 2013, our mission is: How do we create as many great tools for publishers to access the BitTorrent ecosystem as there are for consumers?

Have you tried getting people to pay for downloads?

Mason: We've experimented with having people pay right off the bat, or at least allow people to donate. Last year we did a really interesting experiment with a TV show called "Pioneer One." Two filmmakers from New York made a pilot. The pilot got a lot of attention and won an award at Tribeca. They were interested in a new way to distribute it, and even a new way to fund the production.

Funding TV is kind of crazy if you do something with one of the big networks or cable channels. You might get $4 million to make your pilot, and it could be great, and it could get great feedback in focus groups. But if there's a scheduling conflict with "Desperate Housewives," that pilot could be shelved and no one will ever see it. That's a reality for a lot of TV producers.

These guys were interested in creating a show and finding out if people were actually interested in seeing it. We put up the pilot through BitTorrent for free, and we gave people the opportunity to donate to make Episode 2. They had between 4 million and 6 million downloads of Episode 1 and got enough donations to make Episode 2. Then they had enough donations to make Episode 3, and then 4, and so on. They got enough donations to make an entire season of "Pioneer One" that ran over an entire year. That was a successful experiment, which was funded directly by the BitTorrent audience.

That's one thing we did, but we've done many more. Our take is that there isn't any one way to distribute content in the digital world. There's actually a different business model for every piece of content.

Is Building for Theatrical The Future of Film?

In a recent editorial "Why It’s Better to Watch Movies in a Theater", Margaret Talbot of the Wall Street Journal makes a compelling case as to why now, more than ever, seeing a movie in theaters is sacred. She states that she looks forward to "the pleasure and relief of knowing that for two-and-a-half hours, I would be permitted the grace of concentration. I would not be answering e-mail, or the phone, or gazing guilty over at a basket of laundry in need of folding or dog hair in need of vacuuming..." Over the past several years, the industry has invested heavily in the theatrical experience--with exhibitors outfitting screens for 3D and 4K display and studios making bigger, splashier tentpole fare custom built for the big screen. And yet movie going continues to decline. 2012 numbers are not yet in but 2011 saw attendance hit a 16 year low.

Anecdotally, few of the people I talk to disagree with Talbot's point of view--that movies are better experienced on the big screen. There are plenty of theories as to why people are less compelled than ever to visit the theater... that ticket prices are out of control... that Hollywood is making bad movies... that television is better.

The good news is that people are still watching movies, lots of movies and in more ways than ever (see: VOD, EST and streaming and ad-supported VOD). But in this brave new world of digital viewing, does it still make sense for Hollywood to build movies for the format where less and less people ultimately experience them? As long as ancillary revenues are based on box office, this is unlikely to change. But for independent fare--which is struggling to compete for exhibition real estate--this could be a growing opportunity.  Something to keep an eye on...

The Hollywood/Silicon Valley Divide

Hollywood and Silicon Valley have a complicated relationship.  They are at once co-dependent and at odds.  As the music and publishing industries have shown, nothing has the potential to disrupt a media industry's business model like technology.  And yet, technology time and time again has created the distribution, storytelling tools and revenue streams that have allowed something as old fashioned as "the movie" to survive for nearly a hundred years. Today, as Hollywood continues to feel its way into the strange, uncertain future, they are finding that their own content is being distributed and monetized--with mixed results--by large, cash-flush technology companies (see: Google, Apple, Amazon, Microsoft and Netflix).   But their content is also being competed with-- by the very same companies they now need in the face of declining home video revenues and unprecedented competition for audience attention.  Instead of paying the enormous license fees that Hollywood is demanding for its movies and television, these technology companies have realized it takes little more than cash and talent to create their own.  And thus the technology companies of the last decade will become entertainment companies of the next.

Much has written about how TV has replaced the motion picture with regards to cultural relevance -- (sure, Argo is good but we all know if you're not watching Homeland, you're not in the conversation) but what is a TV show? As Netflix resurrects busted TV series' and Amazon is making network-developed-but-not-greenlit shows, the line between digital and TV is officially blurred.  Sure, Hollywood's top creative talent remains at the helm but who has the leverage?

Amidst these changes, the often ignored little brother of the content ecosystem continues to be short form digital content.  Though nearly any hot YouTuber has an agent, Hollywood on the whole looks down on the DIY production values and lack of curation in online video.  On the other hand, Funny or Die, College Humor and MyDamnChannel have built advertiser-friendly and loyal audiences (not to mention proving themselves as valuable marketing engines for talent and brands alike) and YouTube continues to pump hundreds of millions of dollars into its original content initiative.

Sure, the vast majority of content creators on these platforms are not making a living doing so (Machinima and Maker Studios being notable exceptions).  But the argument can be made that at the very least, short form video is a low cost, technology-enabled development and discovery tool.  Shane Dawson, Rebecca Black and the Annoying Orange owe their existence to YouTube.  So while new talent can leverage Google's ecosystem (and even dollars) to reach audience at a cost of $300 per minute, Hollywood will continue to rely on technology to create $1M/minute experiences that hope to get people to shut of their laptops and head to the theater-- and to monetize the long tail of their movies, TV shows and (gulp) digital originals.

But ultimately, what about YouTube?  Is it's abundance of cash and creativity, its real time analytics and socially-oriented feedback loop a threat to the old fashioned experience of sitting in a dark room with strangers to be taken somewhere else?  Like I said, it's complicated.

paywalls and tipjars and ads, oh my!

For many reasons, I'm excited about the new Made in NY Media Center, a pioneering institute run by the Mayor's Office of Media Entertainment in partnership with IFP and General Assembly that will give a home and various support to the many people studying or working within the fertile and freewheeling space where the entertainment, technology and advertising industries meet. Central among my reasons for excitement is their "Digital Advertising Academy," "a think tank [that will] help solve real-world brand marketing challenges." The deeper I get into my CRI research project, the more strongly I feel like innovative digital advertising is one of the more critical missing pieces in the online-content-revenue-generation-puzzle. Experiments in digital distribution run rampant, but their innovations lie mostly in streamlining technological processes to get films online and into key distribution channels or in using crowd-sourcing to revise traditional models of financing and exhibition. I've written already about how many of these new platforms fail to actually bring filmmakers and audiences together, despite some of their claims to, and how important this social element is to both the creation of a successful "online community" and to a filmmakers' ability to identify his audience ("niche" or not).  I haven't yet explored one economic apparatus that could potentially sustain such an "online community"--innovative advertising.

"It doesn’t make sense financially to inconvenience my viewers with ads,” says Mr. Urlakis. “The amount of money I’d be making would not be enough to improve the quality of the videos or my own quality of life significantly,” he adds. Dave’s theory is that running ads early in the life of Awkward Spaceship may actually turn viewers away and stifle long-term growth for his channel.

Mr. Urlakis, commenting for an article on sproutsocial.com titled "How to Monetize Your Youtube Channel," references a decision he made to not take advantage of YouTube's Partner Program. Some lucky generators of content ("filmmakers?" "artists?" whatever) have managed to make a living and then some through the Partner program. Still, Urlakis makes the important point that he could alienate potential fans by running the ads he needs to earn an income.

Vimeo's platform has since its inception been an antidote of sorts to YouTube, a place where artists less concerned with virality than quality feel comfortable sending people to watch their work. It would make sense that they have taken a different approach to content monetization.

“We knew that when we wanted to start allowing users to monetize their videos that we still had to do it our way,” Mellencamp told us. The focus has to always be on the user and the content. “For us, this isn’t even necessarily a revenue driver,” she said — noting that the potential to drive revenue does exist. Instead, it’s about “helping our users create more great work.”

To help their users make income and thus be able to "create more great work," Vimeo introduced to their site "tip jar" and VOD services. The tip jar allows for seamless deposits into the filmmaker's PayPal account, and the VOD service, to be launched in early 2013, acts as a typical paywall with pricing set by the filmmaker. The tip jar service invokes the interesting "Pay What You Want" behavioral context, which is appropriate since it allows people to feel like they're doing a good thing by paying for content, which is (let's be real) the impulse behind the financing of most truly independent films. Vimeo's tip jar is very young, and its VOD service has yet to launch, so little information exists on whether/how much artists have benefited from these services. Inevitably, there will be some success stories. Still, one service is fundamentally based in old guard economics (pay for content), and the other is, simply, charity.

Vimeo and Youtube are both obviously paramount platforms for generators of content and filmmakers alike, and they should be commended for offering their users opportunities to make income from their work--especially if, as Vimeo CEO Dae Mellencamp suggests for her company, there is no revenue in it for them. It's still worth noting that paywalls, tipjars and (traditional) ads are familiar features of pre-digital distribution, and it's worth wondering what's next.

Filmmakers should be able to find their fans online. Fans should be able to discover films online (whether they comprise a target audience or not). Perhaps a platform has not been able to make this happen sustainably for itself and for its filmmakers because advertising has not entered the equation in an innovative way. What kind of advertising would fans of quality content be not just willing but happy to sit through? Maybe this kind of advertising wouldn't require sitting through but interacting with. How could such interaction be incorporated authentically into a social context? These questions are vague, but a response has been defined by the Made in NY Media Center: innovators from the filmmaking, advertising and technology worlds will come together as a think tank to address the challenges facing producers, startups, and brands alike. This cross-industry collaboration is a pioneering innovation itself, and one that will be so exciting to follow!

Clay Christensen on the Predictability of Digital Disruption

Innovation guru and HBS professor Clay Christensen has become famous for his theories on disruption.  The industries change but the problem remains the same.  Specifically, he asks the question "what is the right way to respond when technology disrupts the position of an established business?" Neiman Journalism Lab's Joshua Benton  posted a conversation (sound cloud included) he had with Christensen and other notables on the subject last week.  The lessons apply across industries, but should be prescient for those of us in the content business.

One highlight:

CHRISTENSEN: Yeah, well, I’m proud but also sad to say that pretty much everything that we foresaw is happening. I think we didn’t quite understand, and still don’t really understand, how quickly things fall off the cliff. I think the reason why this happens is that, even as the disruption is getting more and more steam in the marketplace, the core business persists, and really quite profitable for a very long time. Then, when the disruption gets good enough to address the needs of your customers, very quickly, all of a sudden, you go off the cliff.

Full piece HERE

Indiewire Readers Wanted and Desired -- For Film Independent's First-Ever Movie Hackathon!!

I'm so excited to see what comes out of this...  

www.indiewire.com/article/indiewire-wants-you-for-film-independents-first-ever-movie-hackathon?utm_source=iContact&utm_medium=email&utm_campaign=Indiewire%20Today&utm_content=

Is the Press Beginning Paying Attention to Digital/VOD Content?

Conventional wisdom is if you want press for your movie, open it theatrically.  If you want  the press to pay attention to your episodic work, you better hope it's on television.  But things appear to be changing. While it's undeniable that a theatrical release opens a movie up to a wider press core than a home video or VOD/digital only release, it's also true that the press seems to be getting more and more comfortable writing about VOD and digital content.  Indiewire has started been running a monthly column calling out their top VOD picks, featuring many films that have limited, if any, theatrical prospects.  Check out this month's list.

And while the NYTimes still requires a New York theatrical opening in order to review a film and is not offering regular reviews of the latest Machinima series they have not been shy in writing about digital content.  Last week they published an article dedicated to the exclusive digital content (mostly short form comedy) HBO has been releasing on HBO Go.

Reputable movie-centric PR agencies like Falco INK have digital practices that not only focus on online press, but that take on direct to digital titles.

This is all part of a bigger question as to whether content should be defined by it's distribution.  If you're like me and don't know many people who saw Office Space or Clerks in the movie theater... or who watched Arrested Development on Fox-- but who love all of the above, you be on my side and say the answer is "no."

Helping One Another Become More Intense

Is the use of the phrase virtual community a perversion of the notion of community? What do we mean by community, anyway? What should we know about the history of technological transformation of community? Is the virtualization of human relationships unhealthy? Are virtual communities simulacra for authentic community, in an age where everything is commodified? Is online social behavior addictive? Most important, are hopes for a revitalization of the democratic public sphere dangerously naïve? --Howard Rheingold, The Virual Community (325)

Media theorist and widely agreed upon coiner of the designation "virtual community" Howard Rheingold asked these critical questions as he watched OG social-networking blow up in 1993. Nearly two decades later, these questions remain understandably unanswered--they're tough! But while it's understandable that theorists grapple still with these questions, it's unsettling that members of the "communities" in question don't seem to have interest in the implications of such questions. And if it's unsettling that "community" members don't seem to have interest in the questions, it's foolish that founders of such professed "communities" don't address them at all.

Rheingold continues (338):

Ethical issues occurred to me when I entered the business of growing virtual communities. Is building a virtual community for parents, for example, using money provided by a company that sells diapers, a way of turning community into a commodity? Is this a bad thing? Is it really right to call a collection of web pages or smutty chatrooms a “community?” how much commercial ownership are the members of a virtual community willing to accept, in exchange for the technical and social resources necessary for maintaining the community? Is it possible to be in the business of building communities for profit and still write about them?

"Ethical issues" can be understood as "market risks" here if it makes the business planner comfier--the point is that Rheingold considers how actual members of a community will respond to the predetermined virtual ecosystem built for them (if also for investors).

Author-composer-scientist-legitimate multi-hyphenate Jaron Lanier writes in his You Are Not A Gadget (47):

The 'wisdom of crowds' effect should be thought of as a tool. The value of a tool is its usefulness in accomplishing a task. The point should never be the glorification of the tool. Unfortunately, simplistic free market ideologues and noospherians tend to reinforce one another's unjustified sentimentalities about their chosen tools.

Many among the small coterie of folks who write about and/or experiment within the online world of film distribution and discovery assert the importance of "new" and "sustainable" "tools" and "models." Few, however, consider who exactly will use these tools, how they will use them, how they will know about them, and what tasks the tools will ultimately accomplish. There are some fantastic new online tools for filmmakers, like that offered by website Kinonation (the start-up evolution of which Roger Jackson has been so generously and transparently blogging about on Hope For Film) which accomplishes the critical task of allowing filmmakers to upload their work in order to have it transcoded to the different formats required by various VOD and EST services.

KinoNation further aims to help their filmmakers find an audience. It remains unclear to me how tools that allow selected filmmakers to get their films online (other examples include: Sokap and Yekra and even VHX For Artists for artists who aren't Aziz Ansari) but which don't have built-in audiences (like YouTube channels or Kickstarter) plan to connect filmmakers and fans. These platforms rightfully assume and assert that there are legions of potential fans out there consuming an unprecedented amount of content, but they don't explain why these legions will assume their specific tools.

Filmmaker and fan connection is a task that needs a tool, and it most likely won't be the same tool that gets a film transcoded, crowd-funded, or "liked" by the filmmaker's friends. But as soon as you're talking about the people involved (filmmakers and fans) as opposed to the technology, you're talking about social behavior and you're talking about "community." And the general questions surrounding virtual community and behavior are no better answered now than they were in 1993. I have focused my CRI research on these questions because I think their exploration is crucial for building the tool that can address the specific task of connecting filmmakers and fans.

"The places that work online always turn out to be the beloved projects of individuals, not the automated aggregations of the cloud," writes Lanier. He signals out one such place, a community of oud players (super legitimate multi-hyphenate) where "you can feel each participant's passion for the instrument, and we help one another become more intense" (71-2). (How) Can an online tool allow us to help one another become more intense, and, by assumed extension, more involved, more invested, more interested in each other's work and in each other?

Prometheus and The Continued Challenege of Digital Movie Sales

This month The New York Times reported that Fox has started to experiment with windowing in order to try and drive EST (electronic sell through, aka download-to-own) revenues. Specifically, they launched Ridley Scott's sci-fi thriller PROMETHEUS for digital purchase three weeks before the October 9 DVD/VOD street date for a reduced $14.99 HD price (standard HD pricing on studio fare is $19.99). It's no secret that digital sales are struggling to make up for the steady erosion of physical media sales (translation: DVD is going the way of the CD). Why folks are not prone to buy movies digitally is up for debate but a few of the discussed reasons are as follows: (1) Price: $20 may be too much for a file that takes a long time to download (these things can be up to 5G) and is locked into a certain ecosystem. (2) Perceived Value: while iTunes extras (a desktop only version of DVD extras) and other such forms of digital bonus content are gaining traction, consumers are still not getting much more than a big, heavy file.  And as it's hard to display the digital movies you've bought at home, the self-expressive benefits of movie ownership may die with physical media. (3) Windowing: maybe people don't want to buy the file because they don't have to. If you're only going to watch the movie once or twice, VOD/digital rental is the more sensible option and currently the VOD/EST windows are one and the same.  Simply put- why buy when you can rent?

The PROMETHEUS release addresses (1) and (3) and thus far the results look pretty good. Despite only being available for purchase, the movie is currently #3 in iTunes.

Entrepreneurship

Entrepreneurship in the film industry. I wanted to become a producer because of the entrepreneur spirit involved in producing a movie. I found this TED talk inspiring.

[youtube]http://www.youtube.com/watch?v=11hS_HxDbwo[/youtube]

The Promise of VOD

Variety published an article this week that cited the recent VOD success of Radius-TWC's first ever release BACHELORETTE (see my last post) as well as Lionsgate/Roadside release ARBITRAGE, a movie being cited as the biggest theatrical opening ever ($2M) for a day and date VOD release.  The release strategies of these two movies appear to have differences (given the modest theatrical play of 50 screens it could be argued that Radius is using theatrical to fuel VOD via the wider press core and $10 pre-theatrical VOD price point while Roadside/Lionsgate is flipping the equation using VOD to fuel theatrical)--but in many ways it's what these cases have in common that matters more. With the decline of DVD and international revenues, independent film has found itself with a crumbling revenue model.  The reality is that movies are expensive to make and often in the case of indies even more expensive to release.  And for certain films, it may be worth giving up the potential for scaling a theatrical release to thousands of screens (let's face it, that is one of the trade offs of going out on VOD first)  in order to market once and meet the audience on it's own terms.  You want to check out the movie in the theater?  Great.  On your cable system?  Sure.  Rent it on your iPad?  Done.

It can be argued that a theatrical release of an independent film has always been a loss leader for the ancillaries.  With BACHELORETTE, it's no different--except that the studio can capitalize on those ancillaries the minute people hear about the movie for the first time.  And if ARBITRAGE just proved once again that VOD drives theatrical, conventional wisdom for day and date VOD for a wider theatrical release might be that VOD can also be marketing that pays.

This is far from having played itself out but one thing I know is that these are interesting problems and I'm glad there are smart, film-lovers like the folks at Radius, Lionsgate and Roadside working on them.

Nonprofit Film Financing

March 2010 By Jon M. Garon*

This is part of a series of book excerpts from The Independent Filmmaker's Law and Business Guide: Financing, Shooting, and Distributing Independent and Digital Films designed to introduce filmmakers and others interested in creating content on the legal issues involved in the filmmaking process.

For guerrilla and digital filmmakers, nonprofit grants often go unnoticed. Many nonprofit organizations are willing to participate in independent film projects. Some invest in film as an art form regardless of content, while others support particular projects because they are interested in promoting the message of the filmmaker—this is particularly true for documentary film.

Another selling point of nonprofit investment in independent filmmaking is that the donors’ return on investment is guaranteed. Given the number of independent films that never recoup any of the investors’ principal, shrewd supporters may prefer the more general benefit provided by a charitable tax deduction than the unlikely chance that they will see an equivalent return on their investment. Moreover, the tax deduction occurs at the time of the donation, so the return is immediate and without risk. For first-time filmmakers, particularly documentary filmmakers, charitable support is a very legitimate way to enter the business.

For the filmmaker himself, a further benefit is the level of appreciation afforded by the sponsors. Nonprofits often recognize that most of the work done on an independent film is essentially volunteer time, donated to complete a worthwhile project. As a result, they may offer the filmmaker wide latitude and a great deal of respect.

A limitation on nonprofit fundraising is that the money is often quite modest. The donors may also lack any sophistication regarding the project, unlike sources connected with the film industry. When funds become available from industry sources, they may often lead to other opportunities to promote the film or to valuable connections essential to the casting or production of the project.

1. Sources for Nonprofit Film Financing

Organizations that provide resources to filmmakers include the Sundance Documentary Fund, assisting the development of documentaries on social issues; the Fund for Jewish Documentary Filmmaking, focusing on Jewish history and culture; the National Black Programming Consortium, focusing on films emanating from African American communities; the Astraea National Lesbian Action Foundation, addressing issues in the lesbian community; and many geographic programs, such as the New York State Council on the Arts, the Minnesota Independent Film Fund, the Pacific Pioneer Film Fund, and the Texas Filmmakers Production Fund.

The Paul Robeson Fund is typical of the documentary funding model. Grants ranging from $2,000 to $15,000 are provided for documentaries dealing with relevant social issues. Filmmakers must complete grant applications that detail the project and provide samples of their prior work.

In many other cases, a nonprofit organization may not specifically be looking to finance a film project, but rather to provide funds for community outreach, training, or other goals. If the film being developed pro-motes those goals, the film project may become a valuable investment for the organization.

2. Fiscal Sponsorships

Nonprofit organizations may raise money from private donors or from grant organizations to fund those who support their exempt charitable purpose. As charitable organizations, they do not pay federal income tax, and they allow their donors to receive a charitable deduction against personal tax obligations. These charities are often referred to by their IRS tax designation, as 501(c)(3) organizations.

A few 501(c)(3) organizations have the development of noncommercial film and video as their charitable purpose. Organizations such as the Independent Film Project (IFP), Film Arts, and others accept donor funds to promote film projects. Under the typical fiscal agency relationship, a filmmaker applies for fiscal sponsorship by providing information on the film project, the filmmakers, the budget, and the distribution strategy. If approved by the fiscal agent, that charity serves as the entity that receives the donations. The charity then provides the donated fees to the filmmaker. The fiscal agent typically charges a 5 to 10 percent fee for its services.

The filmmaker is responsible for careful financial accounting and for compliance with all applicable tax laws. For example, the donor cannot be given any financial interest in the film, because this would transform the charitable gift into a for-profit investment. Donors can be given tokens of appreciation, but if these gifts have any significant monetary value, then the donor must be informed of the value of the gift, and the donor must deduct that value from the value of the donation listed on her tax returns.

3. Partnership Projects and Agenda-Based Films

Fiscal sponsorships are not limited to arts organizations. Any 501(c)(3) organization may elect to serve as a film’s fiscal agent, provided the film meets its charitable purpose. For example, a charity dedicated to promoting the elimination of a particular rare disease may find that a documentary highlighting the devastating consequences of the disease would help promote awareness and encourage pharmaceutical research to find a cure. A filmmaker hoping to make such a documentary could enter into a relationship with that charity by which it served as the project’s fiscal agent.

The filmmaker would be responsible for attracting new donations to the charity earmarked for the documentary, and the charity would be responsible for assuring that the tax and reporting obligations were fully met. The agreement should provide for the filmmaker’s salary, whether paid up front or deferred, and also stipulate that any donations in excess of the production and distribution costs be retained by the charity. The charity may charge a small fee to cover the expenses it incurs. The filmmaker retains the ownership of the film and its copyright, and all revenue from the film.

Even without becoming a fiscal agent, a nonprofit may serve as a conduit for additional funds donated by supporters of the film project. For example, if a church were willing to sponsor a production based on the life of one of its former pastors, the church would probably provide a modest grant toward the production costs (and perhaps provide the use of the church without charge as a shooting location). In addition, the church could collect funds for the film project from other donors. So long as the payments were consistent with the charitable purpose of the organization, a nonprofit could choose to use its resources to underwrite the film project.

4. Accounting and Accountability of Nonprofit Film Financing

As mentioned above, the fiscal agent is responsible for ensuring that the film project’s fundraising meets its tax obligations. If the fiscal agent is a film arts charity, it will likely have little or no control over the content of the film. (Non-arts charities are likely to participate as fiscal agents only in those situations where the charity and filmmaker have agreed in general terms about the content.) To meet IRS regulations, however, the fiscal agent must have a legal right to control the project, to assure that the funds are used in a manner consistent with the agreed-upon budget and that financial record keeping and reporting occurs properly. Charities with ongoing fiscal agency programs will have operational guidelines that the filmmaker must agree to follow. The filmmaker remains responsible for any liabilities of the production.

The film company does not itself become a 501(c)(3) charity. Instead, it should receive an annual tax form from the fiscal agent identifying the funds donated to it. Since the amount should be offset by the costs of production, there should be no taxes owed on these payments. If the film company is a sole proprietorship, however, and the budget includes the filmmaker’s salary, then this will constitute personal income to the filmmaker.

* Jon Garon is admitted in New Hampshire, California and Minnesota.

Adapted from The Independent Filmmaker's Law and Business Guide: Financing, Shooting, and Distributing Independent and Digital Films, A Capella Books (2d Ed. 2009) (reprinted with permission). Jon Garon is professor of law, Hamline University School of Law; of counsel, Gallagher, Callahan & Gartrell.

EST -- What Will It Take?

While VOD continues to grow, Electronic Sell Through (EST) does not, leading many to conclude that digital ownership simply does not make sense to consumers.  One of the ways the industry has tried to course correct (a race against the clock to figure out the new model until DVD is gone completely) is by introducing Ultra Violet, an authenticated cloud-based locker that utilizes a "pay once, play anywhere" approach.  The service--deployed by a consortium of studios, cable companies, device makers and retailers--has managed to attract 800,000 users in the US.  While this is certainly not critical mass, it may be an indication that we're on the right track. But are there other levers that could be pulled to give digital sales a jump start?  The research arm of private equity trading firm BTIG released an article that suggests that the answer lies in one simple word: price.  Their argument is simply that digital files are inherently worth less than DVD.  No one seems to be buying HD movies on iTunes for $20 but would they for $10?  It's certainly a much more reasonable upsell from the $4 rental customers are considering side by side in the same digital storefront.  But is this incremental revenue or further cannibalization of DVD?  All fair questions that will only start to be answered as studios and content owners start to push and pull these windows.  For example, FOX is releasing Prometheus digitally two weeks ahead of the DVD release at an HD price of $15.  Things could start getting interesting.

Check out the whole piece here (registration required).

Communities Run On...Transparency?

Here's a thought-provoking post by Chris Dorr on indie film and network effects (in case you didn't already see it featured on the Truly Free Film blog). Film people talk a lot about transparency these days, but they rarely consider its implications beyond making the folks at companies who require discretion with numbers vaguely uneasy.

Chris' suggests that thorough, generous transparency (like that offered by James Cooper with his kickstarterforfilmmakers project) if continuously offered and collected by an active community (still grappling with that word) has powerful potential to create a network effect. This (very) basically means that the more transparent information is offered by the participants of the network, the smarter, more powerful and more attractive the network becomes.

The obvious questions remain: what does this network look like? What are the online tools available to facilitate such a network?

In a class I took at ITP on online communities, our lovely teacher Kristen Taylor/kthread would systematically bring us back to the question "Communities run on...?" Love, passion, connection, purpose, and other such adequate-verging-on-necessary answers came up often. I don't think that transparency is a requisite community engine, but I think the implications of its employment for a network of film fans and makers are exciting and require further examination. I'm on it!

What else do (online film) communities run on?

Weissman & Hirschhorn on Disruption in Film and Media [VIDEO]

In THIS talk, Andrew Weissman (Union Square Ventures) and Jason Hirschhorn (Media ReDEFined) discuss the new tools available to filmmakers in this brave new (internet and social) world. It's well worth taking the time to watch the whole talk but if you can't, my three takeaways:

1. The cost structure of releasing films needs to be challenged. The biggest opportunity is in marketing and using social media to reach people more cheaply and efficiently. These changes will be difficult and painful as the current cost structure supports an entire industry.
2. Windowing allows revenues to be maximized but it hurts the user experience. The industry needs to be much more focused on giving a better experience to the fans.
3. Filmmaking is more entrepreneurial than ever as artists have to be creative on the fund raising, storytelling and deal making sides of the business.

3 TRANSMEDIA WINS

This week the Tribeca Film Institute and the Ford Foundation announced that they would award $400K in New Media grants to a range of amazing projects. Among other things, this represents further evidence of the evolving state of content and storytelling. Feature films, twitter feeds, articles, mobile games-- all fall under the expanding definition of "content". And while the film and TV industries have challenges ahead in continuing to find ways to monetize their content in the face of so many fee alternatives, storytellers seem to have more tools than ever to tell and expand their stories. Here are a few examples of transmedia (definition: several media serving a single narrative) done right. These examples blur the lines between content and marketing, branding and entertainment… but than anything they suggest what is possible for filmmaker and storytellers looking to break out of the single screen canvas.

Enjoy.

1. RCVR

Billed as X-Files meets Lost, this Motorolla-sponsored web series produced by top YouTube channel Machinima follows covert government agents as they seek to suppress the truth about extraterrestrial encounters. In addition to the six episode web series, the narrative was carried out over several websites such as www.sigma-agency.org, an official-looking government website for the series' harboring government entity. Additionally, the narrative expanded via a series of twitter feeds (such as that of Alvin J. Peters--@ProjectRCVR). The series racked up more than 6M views in just a few weeks.

2. YEAR ZERO

A 2007 album by industrial rockers Nine Inch Nails, Year Zero was a self described concept album that criticized the contemporary policies of the US government by presenting a dystopian vision of the year 2022. The marketing campaign around the release of the record was nothing short of ground breaking, which included USB drives in rock club bathrooms that contained passwords for secret websites and leaked documents pertaining to the album's narrative. T shirts were sold with messages, also tied to unique URLs and alternate reality games emerged to allow fans to live in the world of the album. The album debuted at #2 on the Billboard Top 100 selling 180K+ copies in its first week. NIN founder Trent Reznor is also rumored to be working on a Year Zero miniseries with BBC Productions for HBO.

3. THE WALKING DEAD

What in three seasons has become a global television phenomenon began as an award-winning comic series from Image Comics. The post-apocalyptic drama has steadily expanded its story into other media, including games and web series-- allowing airing network AMC to further engage die-hards to the series and to bridge viewers between seasons. In addition to the franchise's growing list of mobile and social games, AMCtv.com launched The Walking Dead: Torn Apart a six episode web series directed by Greg Nicotero that explores the origin story of Hannah, aka Bicycle Girl, the infamous zombie from Season 1. A second web series is in the works.

5 Reasons BACHELORETTE'S Early VOD Success Matters

In advance of next month's theatrical run, Radius-TWC's first pickup, Bachelorette debuted at #1 in the iTunes charts and is already generating healthy revenues (a reported $500K in the first three days).  While it's admittedly a bit early for analysis, this is a great bit of news as the industry tries to understand the power and potential of VOD.  This development is significant for many reasons... To name a few:

(1) No P&A. The movie is grabbing attention and earning revenue (of the low fixed cost digital variety, by the way) without the benefit of a studio-sized P&A spend. Radius-TWC has maintained itself as a multi-platform--as opposed to direct to VOD--arm.  To that end, if the theatrical works, this strategy will be seen as further proof for a model we all want to work... and the pre-theatrical VOD window may start to catch on as "marketing that pays."

(2) Pricing is king. Some are skeptical of the $9.99 "Ultra VOD" pricing model given that studio fare typically rents for $3.99 in the VOD window ("why rent a small movie for $10 when you can rent The Avengers for less than half the price?"). But on the flip side, there are those that maintain that great content in an early window deserves a premium price.  There is also the argument that $10 is still a deal given the cost and effort required to get to the theater.  In this case, the price point doesn't appear to be scaring audiences away... a glimmer of hope for those hoping VOD is the savior of independent film.

(3) Female-driven comedy continues to connect. While some are pointing out that a few of our biggest comedic stars appear to be falling from the sky, audiences continue to be interested in hilarious women in interesting roles.

(4) iTunes/VOD is a discovery platform. Without the ability to outspend studios, smaller films depend, in part, on editorial support from distribution partners to get discovered.  The combination of a strong PR presence (see: free marketing) and iTunes' support (the film has masthead placement alongside the likes of Battleship and The Dictator) seems to have been enough to allow audiences to connect the dots and discover this film.

(5) No one knows anything (except maybe Tom and Jason). While Radius-TWC co-Presidents Tom Quinn and Jason Janego are not new to multi-platform distribution (they developed and perfected the model at Magnolia), parts of the industry seem to be catching up to the idea that the marketing and distribution for an independent film can be as special, unique and tailored as the content itself.  The early success of Bachelorette might just advance the argument in favor of flexibility and experimentation as opposed to restricted windows and pricing.