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Category Archives: Berating Hollywood

or: Can independent filmmakers make money on the Internet?

The music labels are in a bit a quandary. Prince is giving away his music. Nine Inch Nails tells their fans to steal. Radiohead wants you to pick your own price for their new independently produced album, In Rainbows. Madonna is ditching her record label for a concert promoter. The music labels derive their income from representing talent. Apparently, big name musical talent no longer requires representation. Like I said, quandary.

John Coulton (or JoCo, as folks on teh neterwebs like to call him; typing is hard) isn’t big name talent, at least, not in the way the artists I mentioned above are. The rich and famous can afford to take the risk of cutting out the middle man because, well, they’re already rich and famous. If they try something that flops, no big deal. And the odds of flopping are lower because folks already know their names. But Coulton, an erstwhile software developer has successfully done what few others in the music industry have, namely he’s made a name for himself in music with nothing more than wild creativity and an Internet connection.

From September 05 to September 06, Coulton’s thing a week podcast released one new free song per week. On his site he states that the project was:

[A]n attempt to keep the creative juices flowing as freely as possible, and a way for me to push myself to take risks, work quickly and trust in the creative process. It was also a stunt designed to get people to notice me.

He got noticed. Once, on a trip to Seattle, Coulton unexpectedly found his Saturday night open. He mentioned the opening on his blog, and told his fans that if they could find him a venue, he’d play a show.

Before I’d done that (podcast), when I’d do a show — and it was almost always a New York show — it’d be four friends who’d come out and a couple people who had seen me from other work that I’d done and maybe a couple strangers. But never big crowds. And certainly it would have been impossible for me to go to another city and draw an audience.

The impromptu Seattle show drew 80 people, and Coulton had never been there before. Things had changed.

JoCo releases all his tunes (not just the free ones; he offers many for sale through his site) under a creative commons license that allows fans to share and remix his stuff, as long as it’s for non-commercial use, and they attribute him. The resulting fan creations run the gamut from music videos, to card games. With his name still attached. I don’t know what the marketing geniuses at the record labels call that sort of thing (actually, I think piracy is the term), but ‘free publicity’ doesn’t seem too far off the mark.

Coulton uses eventful.com to decide where he should perform. Eventful users can ‘demand’ a Coulton performance, that is, request that he come to town and play a set. Once demand somewhere reaches a critical mass, he books a venue there and lets his fans know when and where he’ll be playing. This way, he doesn’t have to play empty houses. His fans have already told him they’d be there.

In giving away music, letting fans ‘play’ with it, and having them determine his showtimes, Coulton has forged an entirely new business model for musicians. One that’s not dependent on a label to promote him. His fans do it for him. By many measures, he’s successful. He’s not a super-star like Prince or Madonna (he still has to use two names), but Coulton has carved out a comfortable niche on the music industry success scale somewhere between the Billboard Top 40 and starving artist.

No one is doing this in the movie business

It may be that the cost of entry is still too high. Putting together a camera kit, lighting kit, audio kit, hard drives/backup and editing suite can cost as much as $60,000¹. That’s orders of magnitude cheaper than what large productions use, but still beyond the reach of your average Joe with the next Big Idea™. That figure doesn’t include fees paid to crew or actors. Nor does it cover a plan for marketing and distribution. Let’s not forget that the movie business is, in fact, a business. I can make a movie for WAAAAY cheaper than the studios, but the margin between what it costs to make and profitability is rather large without marketing and distribution; in other words, without the help of the studios. Even if you have noble artistic flimmaking motives, you’re in it to make money, or you’re not in it for long.
Say you and I actually make a movie. We’ve sunk the negative cost². Hopefully we can get our Spice Girls Spy Movie into hot festivals which, in turn, will get it in front of the people who can spend the money on marketing and distribution. Odds are low. Film festivals like Sundance or Toronto receive thousands of entries a year, and show only and handful. And even if you get accepted, there’re no guarantees anyone’ll buy your film.

On the Internet, no one can hear you scream

Do we turn to the webernets? Bandwidth is expensive when we’re talking gigabytes per flick. We could host the thing on YouTube, but there goes the picture quality (why did we spend all that money on a RED ONE?), and how do you make a profit? We could host it for free, and hope that folks would click on the ads surrounding it, but you and I both know that clickthrough rates on web ads aren’t enough to cover our bandwidth costs. We could set up an online store and charge people $x to download it, where x would cover the cost of hosting and bandwidth, but we still haven’t figured out how to recover the negative cost.

And forget about actually getting people to your site. On the Internet you’re virtual needle in a Mount Everest-sized haystack. Or, as Seth Godin said, “No one cares about you. Almost no one knows you exist.”³ Why in the world is someone going to even pay you $x when they’ve never even heard of you? A bet on getting DiggDotted is as good as one on the festivals. And in the meantime, you slowly leak money to your host.

In short, we still haven’t come up with a workable business model that doesn’t rely on the crapshoot of getting into a big film festival or bleeding yourself to death on the internet.

So, great blog brain, what’s the solution? Will there be any JoCo’s of the film industry? Are there already, and I just don’t know about it?

Notes:

  1. This number came together when I investigated actually buying all that hardware. The reason being, that I’d to think I could start a small production company to make my own films, ala Robert Rodriguez. I’m not sure what it would cost to rent this stuff.
  2. Negative cost is an industry term to describe the cost of actually making a movie. In other words, the cost to the producers from blank slate to master negative. Other costs are marketing and distributing, either of which costs a very not-insignificant pile of moolah.
  3. Who’s There, p.5

Recently Apple announced that they’re working on device that’s designed to take content that’s sitting on your PC’s hard drive and stream in wirelessly to your TV set. Overlooking that there are already products out there that do this kind of thing, the implications of this announcement get me really jazzed up. The opportunities for both consumers and content producers have just gotted larger.

For Consumers

First, there’s the opportunity to junk your cable or satellite subscription. This kind of setup really means you can pick your TV and movies a’la carte. If you’re like me, you don’t spend much time watching TV, but you’ve got one or two programs you try to catch when you can. Now, instead of paying the cable company $40 a month for tons of channels you don’t watch, you go to your favorite show’s website, find the link to their RSS feed, and pay a subscription fee (or perhaps a per-episode fee, if you’re not sure you’re going to like the show, but want to try it out). Then, when the next show gets pushed to their servers, your PC snags it and the next time your fire up the iTV, Front Row shows you the list of episodes you missed because you had a million honey-do’s or you were out of town. You squeeze them in between running the kids to soccer practice and volunteering at the soup kitchen.

Only video is big. It takes a while to squeeze through the tubes. Luckily, the content producer is aware of this (more aware than you are, actually) and has provided a link to a Bittorrent feed. Your PC will now download the show at your internet connection’s maximum capacity while you’re out watching kids circle around a white and black ball and kick each other in the shins.

Your computer does all the work that your Tivo used to. If you’re reading this, you’ve already sunk the money into the necessary hardware/software, aside from that little box Apple’s coming out with at the beginning of 2007.

Let’s say that a season’s worth of subscriptions to a show is 40 bucks. Three or four shows runs you $120-160 a season. You’re not paying that $480 a year now ($40/month cable/dish), so you’re saving money during the summer when the only thing on is reruns. And, you’re only paying for the things you want to see and not all the excess cruft. Besides, you’re guaranteed that the money you spent went directly to the guy making the show you love, giving him more ability to keep producing. He keeps on making, you keep on buying, in a virtuous circle. (Firefly fans can attest to their willingness to do this, just to keep such a great show on the air.) Maybe the producer’s even able to provide this stuff advertising free. Or because his audience is such a targeted niche, the advertising he accepts can be just as refined. You might actually LIKE his advertising. You might watch the show JUST for the advertising. (Re: Super Bowl).

For Producers

Used to be that you had to get someone else to really fall in love with your magnificent creation in order to get it in front of an audience. It just cost too dang much to make and distribute video over the airwaves for anyone to do it independently. But on the internet, you only pay for the amount of video you actually distribute. You only get charged for the bytes you serve, and if your customers pay (subscribe) before they download, then you can actually negate the cost of serving those clunky video bytes. It’s not a problem if more people download the show, because built into the subscription cost is the cost of transferring that show over the tubes. A scaling audience means absolutely zero in terms of scalability costs. Add in the benefits of a Bittorrent-distributed show, and you may not even end up having to serve all the bits to all your customers. In an intoxicating display of customer loyalty, they take on some of the load themselves.

If your show inspires enough customer loyalty, they’ll be clamoring for extras. DVDs of behind-the-scenes. T-shirts and mugs. Jedi Lightsabers. Let’s not forget that Lucas built an empire not from the box office receipts, but from millions of kids who bought the action figures. You’re not going to have the struggle most filmmakers go through to retain merchandising rights, because you didn’t ask someone to distribute the show for you.

And you don’t have to have a 21 million person audience. The internet was made to serve niche markets. If you like it, odds are there are a couple thousand other internet-connected folks out there who will too. You’re main problem will be in finding those people, or more precisely, getting them to find you, which is a topic for another day.

For Apple (and other iTV cloners)

Wouldn’t it be great to be able to subscribe to a show straight from within Front row (or whatever your GUI is)? Wouldn’t it be great for Front Row to include some kind of Bittorrent client, so your users wouldn’t even have to think about getting one? Wouldn’t it be great to make this as easy as possible?

The big media companies shouldn’t worry that people will post their copyrighted material on YouTube. They should worry that people will post their own stuff on YouTube, and audiences will watch that instead.
Paul Graham

What if there was a company that distributed independent films via a download over the internet? What if it didn’t cost the independent filmmaker more than a couple dollars a month to access this kind of distribution? What if the company split the profits of distributing the film equitably with the filmmaker? What if the downloads were playable on whatever device you own or could be burned to DVD and played on your set-top player?

What if, instead of exclusively watching lame Hollywood movies in a poorly-managed theater experience, people could watch engaging flicks in the comfort of their living room, or on the train, or wherever else.

What if Hollywood stopped mattering?

It’s coming. Film making is more accessible to us peasants now than it has ever been, and this trend will only continue. More and more people are becoming dissatisfied with the theater-going experience, and even more are bemoaning the lack of actual entertainment coming out of the world’s entertainment capital. The result? Less people will be going to theaters, but more will make movies on their own. That’s a problem. The So-Cal oligopoly controls which movies get onto theater screens, and you can bet they’re not going to defer pride of place to the ‘amateur.’

That’s where my hypothetical company comes in. It provides a marketplace for films that Hollywood will ignore. It’s cheap and affordable for the independent filmmaker (read: guy with a budget tighter than a lycra bodysuit), and offers more of the upside than theatrical distribution. It gets your movie seen, and it gets you a bigger piece of the pie.

And it’s no longer hypothetical. Stay tuned…

An aspiring media entrepeneur (by name, me) wants to know:

Given: An online store that legally sells downloads of DVD ISO images that

  • You could burn to disk and play on your set top player or convert for watching on your PC or portable video player (basically DRM free):
  • Would be identical in content from what you’d buy in a brick and mortar

I’d like to know the following things regarding you techy folks, and your initial reaction to such a proposal.

  1. How much would you pay for such a download?
  2. How long would you be willing to wait for such a download to complete?
  3. What kind of features would you expect / need from an online store that provided such a service?

Fire away.

According to The Wall Street Journal, [via IMDB] Hollywood's budgets continue to escalate. The movies listed in the blurb cost between $210 to $300 million. The gist of the article is that visual effects (VFX) costs are skyrocketing, pushing up the cost of a finished film. I don't understand this. Robert Rodriguez made Sin City for $40 million, Peter Jackson made each installment of the LOTR trilogy for $94 million. Why are these movies costing 2-7.5 times this much? Even if these movies are smash hits (Anyone else sick being disappointed after paying $8+ for a dog of a flick?) they'll only make the studios a meager profit.

Lucas is right. The barrier to entry into filmmaking has typically been cost. Now, on a quick desktop computer, you can create special effects, produce 3D animation, edit your flick, and master a DVD. Applications that make this possible can be bought for under $10,000.  In the fall, you'll be able to buy a new video camera that can meet (or even beat) film quality for a fraction of the price of current offerings. With the cost of entry so low, more movies will be produced, catering to a greater array of niche interests. So many in fact, that you'll have to take a trip down the Long Tail to find stuff that you'd actually be willing to pay for. After all, having more movies doesn't exactly mean more quality movies, or more interesting movies.

As the number of movies increases, the potential audience for any single one splinters, along with its potential profits. Film producers will have no choice but to reduce their budgets in order to justify their existence.

Oh, there will still be blockbusters. There will still be unfathomable budgets. There will just be less of them.

The biggest single problem that these hordes of independents will face, is marketing their finished pieces. The average Hollywood marketing budget is $30 million. Without that $30 million, you don't bring in $40 million the first weekend. When no one knows about your film, sorry, but they just can't give you their money, no matter how much they'd love to.  The hurdle for indies will be to generate the same kind of buzz as a $30 million campaign, without spending the $30 million.  I've got a few ideas regarding this, but we'll see whether or not they can work.  The person that will be able to pull that off will be the new force in moviemaking.  

I guarantee it won't be one of Hollywood's studios.