Another year, another bogus analysis of piracy in indie film. The latest is this gem from Adam Leipzig (who I actually like a lot), and Entertainment Media Partners in Cultural Weekly. The report came out just before Sundance, but I was too busy to even take a look until now. Adam does a pretty good job of showing the numbers for indie films at Sundance this year – how many applied, got accepted, possible budget ranges, etc. I like it when anyone tries to explain data in indie film, so kudos for this.
The problem comes when he starts to analyze piracy’s impacts on indie film. He shows a lot of lost revenue, but his calculations are based on a pretty interesting assumption – that 5% of illegal downloaders would have purchased the film at $3 per transaction. There is no evidence, or even theory, presented as to how he arrives at this percentage. But my bigger problem is the logic – let’s just pretend for a minute that 5% of the 12M+ people who illegally downloaded Whiplash would have purchased the film for $3 meaning $1.825M in lost revenue (per the infographic)… well, that assumption leads to another, that there would be a mechanism for them to actually make this purchase. But that wasn’t an option for anyone who pirated Whiplash (he doesn’t offer transaction dates, so let’s assume most of the piracy occurred early in the film’s release). If they wanted to pay $3 for the film instead of pirating it, they couldn’t. There was no button, no availability, because of old-fashioned windowing practices. This is true of every film on the chart.
What the study actually shows is not that piracy hurts anyone, but rather that millions of dollars are lost each year because of antiquated business practices. If pirates could buy the films for $3 they might, and if 5% of them did, the business would see millions in new revenues. In fact, for the 14 films from Sundance 2014/5 that he studied, that’s over $6.5M dollars lost because of a crap business model. Seems to me that if we studied this a bit more, we might focus less on piracy and more on getting rid of windows.
Every year I send out my predictions for the New Year, and I have to be honest, I don’t have the best track-record. Sure, I was correct last year that it was an important year for Net Neutrality, but no, Chris Dodd wasn’t forced out of the MPAA, and Facebook didn’t launch original content (not to the extent I meant). But I do think I predicted some trends, so I guess I’d take this list more as some predictions for the future, but they might not happen in 2016. Gotta be ahead of the game!
- This will be a boom year for indie films, especially for documentaries, but…it will also presage a major crash. Gotta take the good with the bad. First, the good. With Amazon, Netflix, the Orchard, CNN, AJA, Broad Green, Gravitas… and my Grandmother … all funding original content and buying up indie films like crazy, it’s a great time to have an indie film for sale. We might see another year where almost every Sundance film gets distribution, and regardless, I bet Sundance sales will be gangbusters. This is great, and I hope it works for everyone. So what’s the bad? I don’t think it’s sustainable. We have more distributors and platforms than ever. And sure we have more content for all of them,but it’s a crowded market-place and they can’t all make a return on their investment. Amazon and Netflix can wait it out and keep building their base, but a lot of others can’t. So while I think we’re safe for 2016, I am willing to bet that by 2017, we’ll start to see some major flame-outs among distributors. Until then, Party On!
- Virtual Reality will also boom and bust. I’m not the only one saying this, but we’ll see more VR companies and products launch, and people will snap them up like crazy. But when the nausea sets in, and customers get bored with most of the actual experiences (yes, once you get over the hype, most are pretty yawn inducing), we’ll see a major back-lash. Probably not enough to kill it, as so much has been invested already, but there will definitely be a dampening. This will lead to a few people/companies going back to the drawing board and coming up with some amazing shit, so it’s a good thing. Plus, it also means there’s never been a better time to build a VR company, get funding and/or sell it and make a fortune. That’s what I’d do if I could.
- There will be an ongoing explosion of branded content. I am biased here, as I work almost exclusively in this arena now, but it’s booming and it won’t stop anytime soon. Every day another company launches a new division to make films, or a major initiative. Here’s just a sampling: Levi’s, Patagonia, Starbucks, Marriott, The North Face, Red Bull Media House, GoPro, Timberland, Pepsi, Nike, Chevy, GE, Yeti are all doing some serious films now. Many are actually quite good. This doesn’t even count all of the branded content being made by places like T Brand Studio (the NYT), Conde Nast, etc. Or the Foundations and major nonprofits making content. It’s now a major competitor to other films and TV for at least our attention, and this will only grow as more people come into the space. And brands know marketing, so they know how to build an audience. I suspect we’ll see even more of it in 2016, if not a major push by someone into fiction films as well.
- Theatrical will gain in importance. There’s been way too much hype about the death of cinema. Force Awakens proved people will still go to the theater. But more importantly, everyone is realizing that save for a few instances you simply can’t get the buzz and attention you need unless you have a theatrical. This is partly because of the way critics and the press work – they still pay undue attention to theatrical releases over online – but it’s also because it reaches the core audience who then spreads the word to those of us who might not go to the theater and will wait for the digital release. Yes, windows should usually keep shortening, but theatrical remains a crucial part of the pie. Plus, I am coming around to believing that as people begin to find the cacophony of online overwhelming and too much more of the same, they’ll keep seeking out more genuine experiences. I expect we’ll begin to see a small uptick in younger audiences over the next few years as more of them seek something more rewarding than their cell screen or VR goggles. Luckily, here in NYC we have a few new theaters opening, like the Metrograph, so perhaps this prediction will come true, at least here.
- The end of aggregation options for filmmakers or The Death of Aggregators or The Death of DIY Distribution. Ok, this one has really already happened. Just two years ago, I could steer filmmakers to half a dozen or more aggregators who could help them get their films onto iTunes, Netflix and other platforms. But now, most of those places have become distributors, and they are increasingly turning down a lot of indie films. True, a couple still exist, but options are thinning. On top of that, most of them now demand to take your direct-to-fan sales through Vimeo or VHX as well. Why? They claim it’s competition with them, which it utter bullshit – if someone finds your film on your site, it’s because of your work and they wouldn’t have found it from The Orchard’s work (or anyone else), so why give them a cut? Because they need it? From my perspective, it’s never been a worse time to be a self-distributing indie, unless you already have a massive fan base. The partners you used to have are disappearing, becoming distributors or becoming much less friendly. That said, if you need someone good, try Quiver.
- Facebook buys Vimeo. Ok, this one is a stretch as supposedly Vimeo isn’t for sale. But Barry Diller has thought about it before, and while Facebook can clearly build the system themselves, they would gain an easy path into owning their own set of channels, with a very loyal customer base. They’d gain a mass of quality content that comes cheaper than Youtube or Yahoo, and with much better brand value than the latter. They could turn the VimeoPro features into Consumer-Pro features and have a subscriber base, and they’d automatically have a home for quality video. Facebook will become a network – they are one – so something like this is coming, and it may be the best possible exit for Vimeo anyway.
- Video Start-ups die or are acquired. There’s a lot of tiny video sell-through, rental and SVOD sites out there. They’ve been plugging away for years, but none of them have come close to the user base they need to survive in today’s VC investment environment. I think many will run out of cash, and a few will be acquired. I have some thoughts on who these might be, but I’ll keep that to myself for now, but I do think this is their year of reckoning. That said, we’re long overdue for a well-funded Netflix competitor, so perhaps someone will launch one this year as well?
- HBO is spun off from Time Warner. Everyone else is predicting this as well, so perhaps it won’t happen just because everyone thinks it should. But HBO would arguably be much more valuable that way, and hey, I need at least one of these predictions to come true.
That’s it. I’ve only got 8 predictions for 2016, but I’d love to hear some predictions from others. Send them my way.
The DSM wars are coming! WTF is that? Digital Single Market. The European Union is proposing new rules to create a single, unified market for the selling of goods, and that includes film. For consumers, this is a no-brainer – I should be able to buy a film in Paris and watch it in Berlin, no matter what service I’m using. For platforms, it’s much easier as well – Netflix could license titles for all of Europe instead of doing individual deals for every territory. As a film industry person, I’ve also been hampered by the current territorial system when I’ve been sent screeners – as a judge for a film fest – but couldn’t watch them because the DRM (digital rights management aka bullshit tech) wouldn’t allow me to view the content based on the country I was in at the time. From a business perspective, anything that makes it easier for consumers and new businesses to operate easily should win, but…it’s not so simple.
As Variety and others have reported, and most in the industry know, the film business is built in myriad ways on territorial licenses. A producer might raise money to make a film by pre-selling rights in certain territories. Sales agents make money, and this flows back to filmmakers (in some dream scenario) by selling licenses in different territories. Many films wouldn’t make back their budget, not to mention any meaningful profit without this system. There’s also a cultural argument to be made – this would mean only big players (Netflix) could afford to license titles for all of Europe, and that would decrease competition and likely decrease the diversity of content offered. The fight is shaping up now, and promises to be interesting. Of course, the whole idea could collapse with the entire EU the way things are going lately in geo-politics, but this is an important thing to watch for American indies as well – at least those lucky enough to make foreign sales.