Thursday, October 30, 2014

Where Does the Revenue Come from in Indie Film?

Oh where, oh where does the revenue come from in indie film? Unless you have a film in the marketplace, it's hard to know exactly where the revenue comes from. There are so many avenues to think about - domestic and foreign sales in theatrical, television/cable, Video-on-Demand (VOD), DVD, and nontheatrical/educational.

What I have found through the sales of my own titles is that most of the revenue from an independent film is generated from VOD. This means I have seen most of the sales of my films through On Demand via cable and digital distribution online through sites like iTunes, Amazon, Vudu, Netflix, and Hulu.

Theatrical releases for independent films are very hard to justify. They're costly and time-consuming and more often than not - a bust. It's very hard to fill theaters in cities where you have no friends or family to rally people to see your film on the big screen. When was the last time you went to see a random indie flick at your local theater? If you're like me, it takes publicity for me to even know about the film (and strong publicity usually takes time and money to generate) or a colleague/friend to push me to go. So unless you have a very niche audience to which you can market and have the time and money to build a strong grassroots campaign, doing a theatrical usually doesn't make sense for a small indie film.

So what's the solution to seeing your film on the big screen? Film festivals. Use film festivals as your theatrical release. Lean on the festivals to help you fill the theater and use the publicity from the screenings to build buzz that can help you sell the film once it hits the VOD platforms. And some festivals do pay screening fees so you can even earn some revenue from your screenings. Or you can use the festival circuit to travel the world, meet your audience, gather their email addresses, and get help building a fan base.

What about DVD? Unfortunately, DVD deals are mainly dead at this point unless you have a genre flick or a very popular indie film that Redbox cares about. In that case, you can strike a DVD deal. In other cases, a DVD manufacturer will either ask for a piece of your VOD or you will need to figure out how to create and sell DVDs on your own. We sell our film The Diary of Preston Plummer through Amazon's CreateSpace. It's not a huge moneymaker but every sale helps so it's worth doing.

Television sales of indie films are hard to come by these days. The networks have gotten to the point of only considering films with big-name actors. If you are lucky to break through this prerequisite (it's definitely possible - I've done it) and snag one, good for you! The sale of a small indie film to a TV network probably won't make a significant dent in your budget - unless your budget was teeny-tiny - but television sales certainly help with visibility of your film, which can help translate to more VOD revenue.

Foreign sales. Oy. Just oy. First, foreign buyers love to see big-name actors in the films they buy. And foreign countries don't have strong streaming solutions yet so most of the sales are for television, which means there are less markets in which to sell. To reach foreign buyers, you usually have to go through foreign sales agents because they have all the relationships to the buyers and these agents will have high expenses and take about 20% to 25% of your revenue from your foreign sales. There's definitely revenue to be had in the foreign market but the question is how to get most of it coming back to the filmmakers instead of it just lining the pockets of the foreign sales agents. It's a conundrum and trust me, I'm working on figuring out a solution.

Nontheatrical avenues like airlines and museums are viable arenas for sales but not every film will make sense for these buyers. Definitely go after them because again, every sale helps!

And, one of the biggest lessons I have learned is to forego all-rights deals, unless the distributor is paying off the debt, deferrals and investors. All-rights deals allow distributors to steal from Peter to pay Paul. For example, let's say your DVD sales tanked and you actually owe money in expenses for making the DVDs. The distributor will take revenue from your VOD sales and apply it towards their losses in the DVD deal. If you had sold the rights separately then you would have received all of your VOD revenue and the DVD distributor would have been in the red that quarter (something you don't want but it's even worse if your hard-earned revenue is sucked up by losses in another market).

Additionally, all-rights deals often come with a high sales fee, like 20%, and their expense caps are typically high with no oversight on how much they're spending on fulfilling each deal. It can cost $1500 to deliver to iTunes alone and the distributor may be tacking on additional fees to process the sale. How do you really know?

The best thing you can do is hold on to as many rights as you can and sell them individually. How do you do this? Hire a sales agent who has successfully sold the rights to their titles individually and agrees that selling the rights to your title separately is the best strategy for your film.

The money trail in indie film can be hard to follow. That's why there's a big push right now for more transparency from filmmakers about the kinds of deals they're getting. And filmmakers are speaking out. You can see case studies in the books by the Film Collaborative here. They offer free copies online.

Transparency will only increase our chances of successfully budgeting and paying off our films. Knowledge is power!


Stolaroff said...

Yeah, Jane, this is all true, although I'm finding that it's getting grimmer by the month, especially if you're trying to get some kind of 6 figure return for your film. Yes, there are all kinds of places to sell your film these days, but talk to producers and you'll find that most of these platforms are returning pennies instead of dollars back to the filmmakers, once the distributor and the platform take their cut. My last film "Pig" has done very well on iTunes, (it was in New & Noteworthy for Sci-Fi for 7 months straight), but of course Apple takes their share and then our distrib takes theirs, after recouping costs. Fortunately, (I guess?), our distrib spent very little on the film, so that money is coming back to us; it's just not that much. And we made the film for very little. But then our film couldn't get Cable VOD or Cable TV or Netflix, (don't get me started on Netflix! They're abandoning the little indies they used to champion). And while our distrib created a DVD, it didn't make Redbox or Walmart, so it has only sold a few hundred units.

It seems to get worse if you spend more money on your film. If you make a million dollar horror film, for instance, without stars, it seems nearly impossible to get that money back. My foreign sales agent on "Pig" told me not to spend more than $300k on a horror film these days. There's just a lot of product now and foreign territories are inundated and domestically, these films are getting day-and-date or straight to VOD at best, and that kind of release will only generate so much net revenue back to the producer, (and it's very hard to figure out how much that will be in advance when you're trying to estimate returns).

One little tip on foreign sales: everything you said about high costs and fees is correct, so you have to sell a lot to get over that fixed cost hump. BUT, try to negotiate a corridor, if you don't get an advance. That corridor will get money back to you as soon as your film starts selling, rather than after it recoups. In some cases, you'll get more with the corridor than you would have waiting.

Thanks for this post!

janekk said...

Hi Mark,
Thanks for the comment! Yes, I agree with all of this. It's very hard to get your budget back on an indie film, especially if you have a no-name cast. My budgets keep getting smaller and smaller. It's a tough industry and I do hope we can figure out how to make it more financially viable. Currently, my focus is on building quality content that can be made on a small budget. I am committed to trying to figure out how to bolster our future. I don't see a clear answer but I'll keep trying!