Sales and Distribution
"DIY Distribution" was the topic of the very last panel of the entire AFM conference series. They obviously saved the best for last because this is what MOST filmmakers and artists want to hear about: How do you make money distributing yourself without using the current gatekeeper system? And I can speak volumes to this. My experience with my film SHARP was the following: signing all the rights over to a “sales agent” who considered themselves to be a “distributor,” taking 25% of all profits, AFTER the platforms take their own percentage, leaving me with only about 50% of all gross profits, and only AFTER they recoup any expenses they incurred. This is why most indie filmmakers don’t see a single cent of the profits from their film, even though they are usually the ones who put all that work into doing their own marketing and building up their audiences themselves. A sales agent’s only job is to bring the film to the platforms – THAT’s IT! Their job is NOT to get people to see your film. Simply being on iTunes, Amazon, or Netflix will not influence sales. There is not a SINGLE sales agent in existence who will do a grassroots campaign or social media campaign to get people to go to those platforms and watch your movie. Not a single one! So why give up all the rights and all that profit to a middle-man? In retrospect, it was the stupidest decision I ever made. But I didn’t know any better at the time – I knew I needed help. I learned a valuable lesson the hard way, and yet I was still able to self-distribute later on. FYI: So far, SHARP has grossed ≈$8,000 from the tour, ≈$3,000 from online VOD and DVD sales, and reached ≈2,000 people altogether. Much lower than I would like for a $200,000 film, but I feel like $11,000 gross is not bad for my first time self-distributing. Not bad at all, considering that I didn’t do much to promote the film after the tour. If I was able to release the DVD right after the tour like I planned (our sales agent forbade this), I would have been able to continue to drop-down slowly and influence sales even more going into the VOD release (which was supposed to happen in January 2014, then April 2014, according to our sales agent). I know we could have done better, but I learned a TON. My shameless self-promotion: please go watch SHARP for $10 @ www.SHARP-TheMovie.com. I just spent $1,000 to go to Los Angeles and attend the AFM conference, which you now get to experience for free, so the least you can do is watch my great film. ;D
I am not trying to condemn sales agents, though 90% of filmmakers today are dissatisfied with their distribution experience (Jon Reiss, Think Outside the Box Office). If you choose to go the sales agent or distributor route, there is still a lot of potential for income in many territories if you have a great genre film with stars attached that is highly appraised – but it all depends on your film and your audience. Make sure you are working WITH your sales agent, strategizing and marketing together from the very beginning. As the filmmaker, there is nobody more passionate about your film, and you should be in every sales/pitch meeting (Gary Foster, AFM 2014). My sales agent for some reason refused to include me and ignored all my questions throughout the process, despite the fact that I said from the very beginning that I am very hands-on. Huge mistake! I know my audience and my film better than ANYBODY ALIVE, and you will know yours too! Not sure if this is common or if he was just inexperienced/dumb…?
So what the heck do you do?!?!?!? Waaaaaa!! Waaaaa!! Cry like a baby!
The answer: age-old sales and marketing techniques. For centuries, businesses have been doing their own sales and marketing, film studios included. So why should your film be any different? You think your film is so good that people are going to be lining up to sell it for you? Or knocking on your door to buy a DVD? Maybe… maybe not. Since the industrial revolution, studios have followed a very traditional business practice: the 50/50 business model. That’s 50% of the budget towards making a quality product and payroll for the people making that quality product, and 50% of the budget towards influencing sales and payroll for the marketing/sales team. When you look at the budgets for big studio films, the production budget is completely separate from the marketing budget (prints and advertising). It’s usually something like $20mil to make the film and $20mil to market, advertise, and distribute the film. The traditional independent film business model used to involve making the film, getting it into a major festival, and selling the rights on the spot to a major distributor for big money for 20 years. But the days of buyouts are long gone. You must understand this very clearly: HOLLYWOOD IS DEAD! The system does not exist anymore. Being in Sundance, Tribeca, Cannes, SXSW is obviously GREAT exposure for your film. And some films still get acquired as they did in the old days. But the offers today are ridiculous – usually no money upfront, and 50% of profits AFTER they recoup their investment of millions of advertising/marketing dollars – meaning you probably won't see any profits at all. And the number of lawsuits against "distributors" who claim more expenses than they actually incur so they can take more of the filmmakers' profits is staggering! What are you going to do in that case? Spend $20K to sue them and try to win against their well-paid team of attorneys? I've read too many horror stories. You are much better off keeping your relationship with your audience, distributing yourself, and keeping 90% of those profits!
“DIY” “Self” “Direct-to-fan” Distribution
There are many distribution options available to us simple-folk: iTunes through aggregators (30% of profits + $1000 fee), Amazon DVD through CreateSpace (up to 50% I believe), Amazon Instant, Vimeo on Demand ($250 Vimeo Pro subscription + 10% fee) which allows your audience to watch your film on their AppleTV or similar Vimeo-supported television device, VHX (10% fee) which allows you to sell your film straight on your website (check out their sales widget on www.SHARP-TheMovie.com, pretty sweet), and DVD fulfillment through great services like Shopify, Whiplash Merch, and Amazon fulfillment. DVD authoring/duplication can be done through Discmakers.com (usually $1/DVD with sexy label, case, insert, shrink-wrapped with ISBN# ready for Wal-Mart or Target shelves). So you can see that it’s pretty easy and cheap to make your film available in a format that consumers are already used to. If you're still unsatisfied with the results of your DIY campaign, then you can do a “split-rights” deal to sell off the rights to individual markets (theatrical, DVD, cable/satellite, VOD, foreign, etc.). But you probably have a better chance of making more money if you do it yourself – still, it depends on your audience and their purchasing habits.
Why still no talk about touring?
Re: creating a theater EXPERIENCE... Would you pay sixty bucks for a ticket to go see a movie? No! But would you pay sixty bucks for a ticket to go see a movie that was followed by a Q&A with your favorite filmmaker? Hmm… This is exactly what Kevin Smith did with his most recent release, Red State(2011), which supposedly broke even with a $4mil investment with the grassroots tour and theater run alone! Tickets were $60, and gave you admission to a three-hour event to see Kevin Smith present the film and talk about it afterward with a Q&A. Granted, Kevin Smith has a huge platform – now it is easy to see how valuable it is to have your own platform. Musicians have been influencing sales and building audiences through touring since the 1950s! The reason it works is because you are going to your audience, getting in front of them, and asking for the sale yourself, instead of waiting for your audience to come to you. It’s a more proactive approach. It makes sense to me, but I come from a direct sales background. I know from experience, the SHARP Tour was the most powerful tool in promotion, building audience, and influencing sales in our marketing campaign, and the profits prove it: almost 75% of sales came from the tour. Just like a band on tour! Way more powerful even than our social media campaign, because social media will always follow what’s happening in real life. Consider the current state of the music industry: Because of current “new media” copyright laws, streaming platforms are legally allowed to pay artists fractions of a cent per play while they make big bucks from subscriptions and advertising. Musicians no longer make their money from selling albums; they make their money from touring, merchandise, and licensing. Because music has become so easy to produce (now instead of a band and four mouths to feed, all you need is a computer and keyboard), the market has become over-saturated very quickly, and it became very easy to get and share music for super cheap/free, thereby forcing audiences to change their consumption habits. The same laws of supply and demand apply to the film streaming world of Netflix and Hulu – you wouldn’t want to go straight to Netflix first because they pay no more than a flat $5,000 licensing fee, no matter how many views you get. Just like you wouldn’t want to go straight to Spotify first because they pay no more than $0.0002 per play. When your film is available for free on Netflix, why would your audience want to go pay to see it on iTunes or buy a DVD from your website? As filmmakers, I think it is very important to pay close attention to trends in the music industry – music has been around a lot longer than films. Microsoft recently did a study analyzing how consumers psychologically think about consuming media – First, “Can I get it FREE?” then, “Can I watch it on Netflix?” “Can I download it on BitTorrent?” “Can I rent it on iTunes?” (Paul Davidson, AFM 2014). Again, musicians make most of their money from touring and merchandise, and a fat check from T.V./movie licensing & royalties every once in a while. So why are filmmakers not considering grassroots touring? Touring is difficult on your body – long hours, very little sleep, crappy road food. In order to maximize profit margins, it is cheaper to sleep in the car rather than hotel rooms. And being with the same people pretty much 24/7 for months at a time can get challenging. Touring is not for the faint of heart, it is hard work, better-suited for the youngsters. But the SHARP Tour was the best experience of my life – screening my film to fired-up fans every day for a month straight! It was a dream come true!
Here’s how I would do it:
Based on everything that I’ve read, heard at AFM, and experienced first-hand, here’s how I would suggest making your film (and how I plan to make my next film): Write a business plan to show investors how you will be influencing sales to pursue getting their money back without hoping for a miracle sales agent or distribution deal. This should be much more attractive to investors who are interested in making some money back. In the budget for the film should be $200,000–$300,000 to produce the film, AND $100,000–$200,000 to market/distribute the film. Hire a securities attorney ($5,000–$7,000) to draft a Private Placement Memorandum and form your LLC so investors can legally invest. Make sweet pitch packages that include your sexy business plan and marketing/distribution strategy. Get a star to agree to a cameo with $10,000–$20,000 (this will increase chances of split-right distribution, increase your audience, and improve your brand). Start with a list of qualified customers (wealthy people with over $1mil net worth or make over $300,000/year), who like you and have enough disposable income that losing $10,000–$100,000 isn’t that big of a deal. This is a lot easier than you would think. Old rich people want to help young ambitious entrepreneurs that remind them of a younger version of themselves! Schedule pitch meetings, treat them to a nice lunch, try to have a drink with them(alcohol is a great sales tool), and continue to pursue with pleasant persistence after the meeting until you get a definite yes or no. You’ll get a lot of no’s, so the bigger your list, the better. Then keep asking for referrals to other wealthy investors! Once the money is raised, start building your team – production team AND marketing team. Once pre-production starts, both teams will work simultaneously, so it will require more management on your part. While you are making your film, your marketing team will produce great content (like behind the scenes videos) and use social media, blog articles, YouTube, your website, an e-mail subscription list, even podcasts to distribute your content, build your audience, and keep them engaged throughout the entire production of the film. Build a “digital street team” whose only job is to reach out to organizations that may be interested in your film for cross-promotion opportunities(affiliate marketing, tapping in to their e-mail lists, etc.). Recruit influencers to help promote for you. Do publicity stunts to get attention, get in the newspaper. Get creative in garnering as many ad touches and eyeballs as you possibly can. Give fans incentive to share – referral incentive. Once the film is finished, schedule and promote a premiere, followed immediately by a cross-country tour (20-30 cities) for a month or so on which you sell DVDs and merchandise, “DVD coming out soon, but available to you and only you RIGHT NOW for a discounted price.” On the tour, give incentive to share, buy, like, get people excited, etc. Once the tour is over, do a small theater run in 20-30 other cities via Tugg Inc. (great company!). Then after a few months of a theater run, do a day-and-date release of the DVD with special features AND Digital VOD online(VHX, Vimeo, iTunes, Amazon Instant, etc.). Drop down very slowly. Only then should you look in to getting a sales agent to see if there is any interest in ancillary markets like cable/satellite, foreign, wide theater release, etc. The interest in a film diminishes once it is released in any format (this is why our current system sucks), so you will have a lesser chance of getting a sales agent to help you sell it to bigger distributors. HOWEVER, you have a better chance of making more money releasing it yourself, and the distribution world is much more interested in films with a large audience – which you will have after self-distributing. So, it’s a gamble. Lastly, pay an aggregator to get your film on Netflix. This should be the very last step because Netflix only pays $5,000 no matter how many views you get. Consider even releasing it on YouTube for FREE as your very very last step. You’d be surprised how much more attention you’d get. There are so many other steps and aspects to this, but there’s a basic outline of what I would do. Again, it depends on your film and your audience.
I said it in my SHARP premiere speech: we are entering a new golden age of independent art creation and distribution, the biggest renaissance of digital art we may ever see as a species. The gatekeepers are dead! The power is shifting to be in the artists’ hands. Artists can now be their own studios and record companies, and make 90%–100% of profits themselves. Yes, this new age will require much more skill and knowledge, especially in the fields of marketing, business, and sales. I understand many artists fear or shun this side of “the business.” When I say these same things to my fellow filmmakers, I notice their eyes glaze over as if they don’t understand or don’t believe me. It boggles my mind because I see it so clearly. But do not fear – as artists, we are much more prepared to be entrepreneurs than white-collar frat bros with a masters in business. As artists, we are naturally gifted in thinking creatively, thinking differently, thinking outside the box, acting on inspiration and intuition – this is the mindset we will need to stand out, differentiate ourselves, and be successful in the marketplace of the future. Those who fear change and do not embrace this new age where art and marketing are virtually the same thing will be left behind. If you just want to direct or write or photograph, then do that and keep doing it. But the content creators of the future will not be “writers,” “directors,” “cinematographers,” “editors,” “marketers,” “distributors”… they will be writers/directors/cinematographers/editors/marketers/salesmen – or more simply “ARTISTS.” Which are you? In order to succeed, the artists of the future will have to think of themselves as CEOs or “technology entrepreneurs.” People used to go to a theater or video store to buy a film. In the future, your favorite films will find you online, and it will be easier than ever to buy and watch. Welcome to the age of self-distribution.