The state of the industry sometimes can be a troubling thing but there can always be light at the end of the tunnel depending which way one is looking. Attending the Independent Film & Television Alliance (IFTA) Production Conference in Century City, one could feel the progression and honesty setting in as the aspects of the new state of distribution which were adequately discussed The realization and decision on approach creates a more stable thought for the future.
After opening remarks by former Fox Chairman Bill Mechanic, who declared in tandem that the balance of technology and attendance will create a new structure since “the outlets are there”, gave credence to the impending discussion of the state of new distribution avenues and financial incentives to motivate the industry.
The discussion entitled “New Distribution Options For The Future” was piqued by the initial thoughts of Pierre David, the chairman of the producers committee of the IFTA, who said simply “find your niche and do that stuff”. His perception is that even with a big film, in terms of the aspects of pre-sale or even specific territory basis, you might be “lucky if you get $10,000 in Italy”. He also marks that the UK sector as down too since Woolworths basically dumped 1000s of DVDs onto the streets to be sold in the past ywar. He does make the point that Germany and Australia are stable in terms of its markets but that is a rarity in the world. He believes that there is still a DVD Market in the States but that too is down 17% as of this year. Unless you have a pre-sold perspective like a Lundgren, Seagal or a Van Damme, it becomes difficult. The category of increasing interest, in his perspective, is television because, in his mind, it is a stable world where you can have a game plan. There is a flow of channels opening up worldwide and this should be considered part of the future. There are outlets on Lifetime, Icon and ScyFy but you have to make the right kind of product. Pierre also mentions the incumbent impact of VOD [Video On Demand[ using IFC as an example but saying that currently in the sector, they will grab 70% of the revenue.
Nolan Gallagher, Founder & CEO of Gravitas Ventures, balances this saying that there seems to be a lot of confusion, in his mind, as to where the revenue is coming from. The big question is when VOD is going to be the savior. People are starting to make money in the sector but is it enough to warrant the movie budgets? Gallagher says that there will be a continual integration into digital cable in the homes. The amount of digital boxes will increase viewership at least 20 million. The going rate currently to put your movie in front of 50 million potential viewers via an On Demand possibility is $20,000 but there is no gaurantee anybody will buy or watch it. Publicity, he says, even the most basic kind, is key. The thought right now in terms of a workable model is a transactional VOD deal for four or six months then switching to a TV deal right after as a blueprint. The problem is that you can make at times only $5000 on such a deal which seems non-productive. This is because people tend to want to underpromise and overdeliver which is the paradox of sorts. A horror film, in his estimation, can do $80,000. The growing angle is a deal through a multi-pronged distributor like a Lionsgate which can get into 50 million homes direct (in the VOD sector) through Comcast and Time Warner Cable. Right now there can be 140 movies on Comcast On Demand at any given time. The inherent problem is that a year from now there might be 1400 movies showing an increase of tenfold and a saturation that makes differentiation hard. It all becomes about marketing in this scenario. The benefit approach here is to approach two or three different companies and rotate them on subsequent projects . This of course can present a negotiation problem but the specific Gallagher suggests is to only make the deals for 2 year intervals.
In comparison, Steve Bickell, who heads International Distribution for The Film Department, says that the bottom line is that the economic structure of the film business is absolutely broken. The inherent change works from generation to generation. There was an overabundance of video when video came in. Same with free channels and the influx of cable. Now DVD sales are falling and VOD is not able to pick up the slack because currently there are no safety nets in terms of business models. International Distribution is much more difficult and selective now because all the territories have compacted their business. Our domestic distribution model here in the States, Bickell explains, doesn’t exist anymore. It is virtually impossible to find a domestic distributor to do what you need since most of them won’t do P&A (Print & Advertising) anymore. This makes it hard in the short term to get films off the ground. The issue of key is the marketing and how to use it. The future is coming he says but “the timing is fucked up”. Even going to 50 million homes unless there is a back end is not enough to finance a film.
Marc DeBevoise, Sr. VP of Digital Media at Starz, offers a slightly different perspective. His thought is that doing the DVD process is still cheaper than doing a digital file for consumption. We are closer to a branching point, he believes, than most people think. The problem, in his experience, is that people tend to make a quick or rash decision in terms of their distribution. As a rule, he suggests to not doing anything ad supported as a first spot distribution point. Jumping the gun into “free” is something to be very wary of. His perspective is that those who survive will be able to piece themselves back together if they figure out a way to get to the promotion and secure a slot on a new media platform. His company used to do 100 DVD releases a year which is now down to 50 maybe even using the angle of their own Anchor Bay films.
Curt Marvis, President Of Digital Media at Lionsgate, is in a key position with a justified perspective in helping jumpstart this new revolution. He says that LG has changed dramatically over the past ten years which is what has allowed them to remain competitive. They are no longer a private distribution company. They now own 50% of TV Guide Network and FearNET. He relates that he had a meeting last Friday with the senior heads of the departments of Lionsgate. It was set up to show what was happening at the VSOs and the cable networks in terms of the VOD initiative. He says there are now a number of new points of distribution. They went through about 15 boxes of different territories and angles. If you look at XBOX, it reaches about 23 million people. That is larger than the 22 million subscribers for Comcast which is the largest MSO in the country. Add on top of that the IPOD and ITOUCH users who are in the billions but, of which, over 50 million buy and download regularly. Add on top of that the fact that YouTube might be moving to a transactional based business and there is a whole new world. However, it needs to be functional in terms of a business model. There is a large audience that exists but it matters how to get to them. The film industry currently has no direction from which to exploit this area. Marvis believes these are the deals to make along with TV. In the downturn, he says making reference to Bill Mechanic’s early statement, there is opportunity on the back end of this crisis. VOD simply has not picked up the slack yet because of consumer awareness but that will change. Consumers simply need to be educated. Marvis still believes it will 2 to 3 years before VOD truly takes off but will become more diversified in the channel offerings that will be coming online.
Elizabeth Guider, an editor at Hollywood Reporter, has a similar perception to some of the others but comes from a different angle in the mass media. She sees the current crisis as a complicated situation. As the media, they want the independents to have success but it is just not happening. At The Reporter, they are tracking an alarming amount of bankruptcies, somewhere between 30 and 50 with the amount of production deals are going down from 550 to about 250. All the Pay TV deals have dried up since the channels themselves have started to merge together to save their own bottom line. By reaction, their stocks have plummeted and their ad sales are simply done. Summit somehow with “Twilight” was able to capture lightning in a bottle but that is an isolated occurence.
Gustavo Montaudon, President of Alebrije Entertainment, handles a lot of the business for Latin America which he says is having tough times in terms of theatrical business. Technology primarily is a problem down there with a lack of broadband. The VOD operators are scarce with Digital Latin America being the only primary. The TV component is growing but at a disconcerting rate.
Howard Frumes, a well respected attorney from Alexander, Frumes & Horowitz and the counsel for the IFTA, offers an almost chilling perspective. He says that the oddity is that that right now more than half his time is spent on productions coming in or in actual investments from China. It is not American or European co-productions. They look at them more as “local films”. The domestic marketplace is no longer a source of financing for independent films. The problem is that with China they are still building theaters. Frumes says the highest grossing film in China was “Titanic” but that was over ten years ago. China is the one optimistic outlay. The problem is that most people are relying still on P&A which is a hundred-year-old mechanism and no longer applies, especially with digital. He cites in terms of stories pictures like “Juno”, “Slumdog Millionaire” and “Twilight” which are simply more direct in their angle of marketing globally. The key he says is that at the very beginning, you have to think about the very end.
His advice is threefold. First, when you start looking at your film and script, keep in mind that you have to deliver on all these mechanisms. You have to build some marketing dollars into your budget from the get go. Second, you need to have a variety of people to collaborate with. Meet with marketers, international distributors and bankers to get a perspective because no one can get credit currently. The key is going with different partners on a case-by-case basis whether it be European, Asian or whatever. The key is diversity.
The closing thoughts, which drew applause, came from Mitchell Berman, CEO of Zillion TV, who was more theoretical (which seems a little like grandstanding) than the practicality of the others. Berman admits that we are in a state of change but that it is going on all over the world. He says that we have to just take a method and try it then try it again, making a reference to a quote from FDR back in the 30s. Berman says that he started at HBO and then help start Sky in New Zealand. The new aspects he is seeing in Asia he believes will change the perspective. 4G has already started to permeate and Verizon has started to deploy it. It is all about who can adapt to the change in technology that continues to permeate. He mentions Vizio specifically as a distribution channel outlet since it works through wireless. His specific structure is that old people are holding onto old business model. The new people are ready.
It is just seeing what is coming ahead of the pack. But time is a battle for distribution that will fought as the years progress.
By Tim Wassberg