Since 1981, the American Film Market has been a major international marketplace where thousands of industry professionals, agents, producers, directors, distributors, and writers meet to pitch, screen, buy, and sell films. They tote being the epicenter of almost $1 Billion worth of movie deals every year.
I was only interested in going to AFM to learn about the current changes in distribution since the streaming boom. In addition to pitch meetings and screenings, they also have conversations, panels, and roundtable discussions with industry leaders. The panels were especially helpful. They had conferences on financing, pitching, production, marketing, and distribution. Each conference consisted of two panel sessions, each on a specific topic: getting stars attached, foreign pre-sales, social media campaigns, publicity, VOD, DIY distribution, etc. The biggest take away that I got from AFM was hearing what industry leaders had to say about where the industry is going. I was ecstatic to hear that most of what they had to say was what I had already concluded after my experience self-distributing my film SHARP, and was already in my business plan for my next film. I didn’t meet anybody at the conference, I didn’t make any career-changing connections, but simply listening to the raw data from industry leaders in the panels was empowering, inspiring, and as exciting as watching a live football game in a stadium (but I’m a nerd about this stuff). Here’s what I took away from the panels…
The industry is changing. That’s a given. But when you hear people talk about the changes, you mostly hear how nobody really knows what to do or where it’s going. Studios are in a holding pattern, watching and observing. I remember Adam Carolla remarking at his conversation session about his film Road Hard which he crowd-funded through his podcast, “I’ve never been in an industry with so many [leaders] who have no idea where it is going next.” But after this year’s AFM conference, anybody who went to all the panels should have a pretty good idea of where the industry is going.
Q: So what is the film marketplace of the future going to look like?
Q: How are people going to hear about films in the future?
Q: How are people going to digest films in the future?
Q: Where are people going to buy/watch films?
For the last century, people have been going to the theater to watch films. It is estimated that 30%–50% of people who consume movies don’t even decide what to watch until they are at the theater and see the product line of titles currently screening(Russell Schwartz, AFM 2014). This is partly due to the fact that older demographics are going to the theater more, while millennials and younger generations will first use their smartphones to see what’s playing at the theater, then decide from there if they want to go or not. With many movie options for customers to choose from, a marketplace environment is thus created – just like when you’re trying to figure out which toothpaste brand/flavor to buy at the grocery store. This marketplace also creates natural competition between titles and studios, which is why studios continue to stick with the same films and genres to occupy those specific niches and position themselves differently from each other in the marketplace. The same positioning is applied at a video store (those that still exist), the DVD section of department stores, and even Netflix. It is common practice for a company to pay a marketplace (Target, Wal-Mart, Vons, Hollywood Video, etc.) for premiere positioning higher on the shelf so their products can be seen more, but it is still up to the consumer to choose based on the cover art, who’s in the film(stars), what they remember about the film(psychological niche positioning), etc. This is pretty specific marketing stuff, but don’t fret – the internet has completely changed the way people digest media. Only recently have people been able to buy a film online or through their AppleTV or similar television device without even getting up from the couch. This has made purchasing and consuming much easier, with a single click in some cases. Because of this ease, online consumption has become the norm. Most media is now digested online through VOD and streaming platforms like Netflix or Hulu.
So what’s going to happen to theaters?
I don’t see the theater experience going away. It is still the biggest profit center in the entertainment industry altogether(including music and other entertainment), grossing $11 Billion in 2013 (though it has not grown more than 1% in the last few years). In fact, studios seem to be in their hay day right now – they have perfected the big blockbuster experience as well as their marketing techniques by partnering with major brands(BMW + Aston Martin & 007, Oreo & Transformers, Coke Zero & Avatar). Plus with 3-D, digital projection, and 16.1 surround sound, the experience is now better than ever. But because it is now easier to wait and buy a film online, studios will have to add more value to the theater experience and market the theater experience as just that: an EXPERIENCE. People still want to go to theaters to experience the big screen and big sound. I know I do. Theaters already make most of their profit, not from ticket sales, but from concessions – a great way to add value to the experience. Now there are new super theaters with big comfy couches and waiters to serve you beer and food – another great way to add value to the experience, though still a little pricey.
The Collapsing of Window Distribution
For many years, studios have followed a traditional distribution technique called “windowing,” in which a product becomes available in it’s most expensive and profitable form FIRST, then it will slowly drop-down to cheaper and easier ways to watch the film until it’s available for free on television or online streaming. This distribution technique is based on a classic direct sales technique called “dropping-down” (I learned from selling Cutco). In the entertainment industry, this traditional windowing would usually start with a 90 day theater release, followed by a 90 day DVD release, cable/satellite licensing, then streaming last. What many distributors are now considering is collapsing the windows between product availability by releasing a film on more than one platform at the same time. Many distributors have even tested this tactic with “day-and-date” releases in which the film is released on ALL platforms at the same time (theater, VOD, DVD, Blu-Ray, etc.). This technique is pretty cool because it allows for the creation of much stronger marketing funnels directing people to continue down your rabbit hole (so-to-speak), and keep purchasing the next thing without waiting – DRM-free download, DVD with special features, t-shirt, poster, etc. This is called “dropping-up” (the opposite of dropping-down, also learned from Cutco). There are many more distribution options available now. It really just depends on your audience. Are they the type of people who get really into the EXPERIENCE and want to dress up to see the film? Or are they the more intellectual/analytic type who prefer to sit at home, smoke a bowl, and watch a film in private? This is why a connection with your audience is so important. To increase sales, you’ll have to know your audience’s wants/needs well enough to make your film available by whatever means they’d prefer.
“How does somebody know what they want if they haven’t even seen it?”
–Ashton Kutcher as Steve Jobs in Jobs
The potential cons to day-and-date releases are exclusivity (standard contracts), technical considerations, fear, and potential loss of profits. The biggest argument for day-and-date releases is to combat PIRACY. Piracy is still a huge issue, mostly in foreign territories like Russia where piracy is common – slashing some box office earnings by 90% (Mark Gill, AFM 2014).
Still to this day, most American films make 40%–60% of their profit from foreign territories. While U.S. box offices grossed $11 Billion last year(2013), international box offices grossed $25 Billion. America (U.S. and Canada) is a very big territory, but there are still thousands more available to us as filmmakers due to the fact that most cultures still follow and consume American media (except maybe India and most of Asia). By 2017, box office earnings in China will exceed those in the U.S.(Tom Berry, AFM 2014). In fact, iQIYI (the biggest Chinese digital platform) was a major sponsor of AFM 2014. It would make more sense if Netflix sponsored AFM, but that gives you an idea of the influence of the Chinese market right now. AFM 2014 even hosted a “China day” during the conference in order to celebrate our Chinese film partners. China already has the largest population in the world. Now that China is becoming industrialized, the quality of life is raising, more families are being created, thereby increasing the demand for entertainment and other material desires that are common in wealthy industrialized countries. 10 new screens open in China everyday (The Guardian, 2014). TEN! What does that mean for independent films? On the internet, there aren’t many borders. The only borders that exist are cultural and language barriers. But human themes and emotions are universal. Many imagine a future where every film finds its audience online within a worldwide marketplace (AFM 2014). Imagine a distribution platform in which you can upload any film, its script, and its poster image, and the internet will convert it for you in every language available, add subtitles, change the poster image, go find the niche audiences for the themes/subjects of your film, present the film to them on social media or e-mail, and ask them to buy. Perhaps it won’t be that easy, but the company that creates such a platform will absolutely become a billion dollar company. Maybe it’s not too far-off to assume that consumers will even grow to love this new marketing system, and always make sure to like all their favorite films, actor, musicians, products, and brands on Facebook…??? I know I would want to be alerted every time Roman Coppola, P.T. Anderson, or Daniel Day Lewis come out with a new film, or every time my favorite type of beets become available at the local grocery store. I wouldn’t be surprised! Have you noticed that Facebook now suggests brands and products you may like based on your like and click data? Freaky! For me, Facebook analytics are either right on or way off. But it doesn’t bother me that much because I appreciate that they are at least trying to present me with things that I would probably like. Maybe that’s just me!
What does all this mean for the independent world?
Already, more films come out of the independent world than the studio world. You wouldn’t see a documentary on 3,000 theater screens nation-wide, but documentaries are being turned-out like Fords on a factory line for very cheap, and making great profits in self-distribution before being released on Netflix. But the lack of docs on theater screens may change as the demand for true stories increases. Maybe we’ll someday see theaters that only screen documentaries, just like independent theaters only play indie films. That would be cool! But what does all this mean for your first low-budget independent film? There are so many distribution options available now, and it is easier/cheaper than ever to find and market to your niche audience, so there is nothing stopping you from building your own audience and getting your film out there yourself.