AN ANALYSIS OF INTERNET TRENDS IN 2014 FOR INDEPENDENT FILMS

A “Working” and Evolving Document 


Author: Marc Schiller, BOND/360
Version 1.1 (June 2, 2014: Added Great Publicity Alone No Longer Sells Movie Tickets )

— INTRODUCTION —

In late 2013, after participating in the marketing and PR campaigns of over 100 independent film releases, BOND Strategy and Influence expanded the services it offers to independent filmmakers and studios and launched BOND/360, a new marketing and distribution initiative focused on leveraging new digital technologies, access to realtime data and analytics, the development of loyalty strategies, and a focus on retail sales of both digital and physical goods.

Over the last six months, after managing a variety of both theatrical and digital releases (Particle Fever, Sign Painters, and more) BOND/360 has been in the unique position of being able analyze and compare an incredible amount of data, coming from both sales and marketing initiatives, that until now has never been aggregated into one financial analysis.

This document is intended to outline the current state of the independent film industry based on specific data and experiences. Unlike most “white papers” it is not meant to be a static, read once, document. It will continue to grow and be updated with new data, insights and strategies as the space evolves and transforms. Some sections of this document will be updated with new data and insights and other sections will be added.

Best,

Marc Schiller / marc@bondinfluence.com
BOND/360


AN ANALYSIS OF INTERNET TRENDS IN 2014 FOR INDEPENDENT FILMS

— COMMERCE —

HEADLINE: Digital Revenue For Individual Films In Traditional Marketplaces Is Falling Rapidly

SUB-HEADLINE: Digital Revenue From Self-Serve Platforms Are Rising Rapidly

The amount of films being added to popular online marketplaces like Apple iTunes, Google Play, and Amazon Instant Video is increasing exponentially every month. This means that the cycle of promotion an average film receives in these marketplaces is decreasing exponentially every month by an equal amount. The result of the rapid increase of new available content is a heavy decrease in revenues on a film-by-film basis. To compensate for this decline of income, distributors are increasing the volume of films they are supplying each year to these digital marketplaces. While this is creating modest year-over-year growth in revenues for these distributors, for the independent filmmaker who is counting on digital sales to make a living or recoup their costs, this situation means that the revenue they once relied on is no longer there.

Today, the most successful (i.e. profitable) independent films are those that are combining the power of discovery and the sheer volume of customers that popular online marketplaces like iTunes and Amazon have, with the power of a growing suite of digital retail tools and realtime analytics that are now being offered by self serve platforms such as VHX, Vimeo, and Gumroad.

Films that are taking advantage of a strategy that equally supports both the traditional established players like iTunes, and the emerging players like VHX, are benefiting from higher sales on both platforms due to more positive word-of-mouth on social networks like Twitter and Facebook. Each platform caters to different types of buyers, thus increasing overall revenues for the same film when its is available on both.

Examples of films that are benefiting from combination of sales on traditional marketplace with sales on direct distribution platforms are films such as Sign Painters (BOND/360), Sound City, Mistaken For Strangers and Camp Takota.

HEADLINE: Niche Content Is The New “Mainstream”

SUB-HEADLINE: The Increase Of Films Available Online Has Lead To Higher Revenue For “Specialty” Films

As more and more films are available on demand at any time, and the available catalogues on marketplaces like iTunes and Amazon continue to grow, more and more movie fans are seeking out films that cater to their specific passions and interests. Today, they know that if a film exists, they can most likely find it. One only has to look at the Top Ten highest selling documentaries each week on iTunes to know that niche content is what’s selling. And this content is not coming from the established distributors or the box office successes. It’s coming from smaller, mostly under the radar companies like BOND/360, who are realizing that films that cater to specific passion points and communities are the most profitable films to release. The key to success with these film is the fact that traditional advertising and marketing costs can be greatly reduced without decreasing sales and income. These more niche films that tap into built-in communities online are now outselling their more heavily promoted studio films that are being released by established players with heavy marketing after coming off of high grossing — yet unprofitable — theatrical releases.

Examples of recent films that are benefiting from catering to niche audiences include Sign Painters and Desert Runners (both BOND/360 releases), Murph: The Protector, Generation Iron, and Somm.

HEADLINE: Methods Currently Used By International Sales Agents Are Creating A Steep Decline In Revenue and A Steep Increase In Piracy

SUB-HEADLINE: The Global Expansion Of Netflix and iTunes, And The Rise Of Self Serve Platforms like VHX, Is Rapidly Changing How Films Are Being Released Internationally

Historically, rights to sell a film around the world have been split between a “US sales agent” and an “International Sales Agent.” Deals with international buyers have traditionally been generated by foreign sales agents who put together a slate of films and then take them as a package to annual sales marketplaces including the Berlin Film Market, Cannes, miptv, the Toronto International Film Festival, and others. This creates cost efficiencies for the sales agent, but today it has become an antiquated approach that no longer works for the individual filmmaker and film.

Because compensation for most sales agents is obtained through a commission of a negotiated advance (i.e. the minimum guarantee or “MG”) most foreign sales agents are incentivized to close international deals that are based solely on the amount of the advance offered by the buyer, not the overall value of the deal. This traditional approach to international sales most often leads to long gaps between the release of the film in various markets around the world.

Today, the reality is that most independent films, even highly successful ones in the United States, have very little to no distribution in the majority of countries around the world.

Because of the rise of the internet, we now live in a world without traditional international boarders. We are all connected globally through the World Wide Web. Online communities that are formed organically on popular social networks such as Facebook, Twitter and others are global in nature, not regional.

Up to 40% of the audience that is following an independent film on Facebook is most likely living in a country where the film will never be released.

Because of the current approach to international windowing, most of these people know that they won’t be able to see the film they are hearing about on the internet in their home country for many months, years, or — most likely — never at all.

This has led to an increase in piracy that is not based on a desire to steal the film and watch it for free, but rather based on a the lack of availability when the global word-of-mouth is at its peak.

To address the growing global online and mobile audience, digital marketplaces like iTunes and Netflix are taking advantage of the increase of digital penetration in overseas markets by rapidly expanding their international footprint and offering (in the case of Netflix) a higher advance for day-and-date international exclusivity and (in the case of iTunes) more visibility and promotion for international day-and-date releases. Both players are launching new markets as fast as they can to gain a global footprint and that benefits from global day-and-date releases.

In addition, platforms like VHX are also taking advantage of this situation and offering independent films the ability to instantly sell their films to over 230 countries (essentially to anyone in the world that has a credit card). This has allowed movie fans in emerging markets such as Vietnam. Estonia, Lithuania to now have instant access to purchase films digitally that have previously never been available to them.

Examples of recent films that are benefiting from selling internationally day-and-date include Swedish House Mafia: Leave The World Behind, Sign Painters (BOND/360), Desert Runners (BOND/360).

— MARKETING —

HEADLINE: The Days Of “Free” Marketing On Facebook For Independent Films Are Over

SUB-HEADLINE: But If You’re Willing To Write The Check, Facebook Is Still The Best Place To Spend Your Money

It used to be that if you dedicated the time to maintain and update your Facebook page by sharing interesting content about your movie, your community would grow organically and you would receive an incredible amount of “free marketing” for your film. This lead to an industry belief that Facebook was the most important platform for an independent film release. And indeed it once was. Digital marketing campaigns for films such as Exit Through The Gift Shop and SENNA had success at the box office on a fraction of the cost of a traditional advertising campaign, all by leveraging “free” marketing on social media platforms.

But, those days are now long gone.

Today, less than 16% of content shared on the page of an independent film on Facebook is seen by the film’s followers.

As a requirement to increase revenues leading into their IPO in 2012, Facebook completely reengineered their codebase. For marketers, Facebook is now primarily an advertising platform catering to those companies and brands who can write the big checks.

The reality is that Facebook has become too expensive for most independents to reap substantial benefit unless a check is written.

While we feel compelled to keep putting the little social icons on our websites, today nobody wants to fan a movie page.

If you see a Facebook page for an indie film that has a large social fan count, its almost guaranteed that the audience has been bought, not earned.

Meanwhile, Facebook’s self serve ad targeting and analytics are getting better each and every month, allowing those who are smart enough the shift their marketing money to social media advertising to see the benefits of higher engagement and greater conversion.

HEADLINE: Today, The Best Social Media Marketers Are Designers, Not Curators

SUB-HEADLINE: Instagram’s Promotional Value For Independent Films Is Rising Rapidly

Simply posting status updates and sharing photos, links and interesting content, is no longer what leads to a successful social media campaign. Today, organic reach comes only by creating original, bespoke, content that is highly visual, “clickable”, and sharable.

The most loyal and powerful online communities are now centered around visual content, not text. This is leading incredibly devoted fan bases to develop organically around visual content shared on sites like Instagram, Pinterest and Vine.

For those who have small or nonexistent marketing budgets and are looking to benefit from “free” marketing that comes from the time you devote to the platform rather than the check that you write, Instagram, Pinterest, and Vine have become “the new Facebook.”

The most effective marketing on Instagram comes from integrating promotional offers into a stream of highly engaging and sharable visual content.

—-

HEADLINE: Smart Filmmakers Are Realizing That The Key Value Of Crowdfunding Sites Is To Build Community, Not Raise Money

SUB-HEADLINE: Kickstarter and Indiegogo Have Replaced Facebook As The Most Powerful Social Platforms For Building Community Around A Film

Filmmakers that view crowd funding sites only as a way for finance their production or distribution expenses have completely missed the power and potential of these platforms.

More than any other platform that have preceded them (including behemoths like Facebook and Twitter), Kickstarter and Indiegogo create the most important and impactful communities for creators on the internet.

When a fan participates in a crowdfunding campaign, even if he or she’s contributing as little as $1.00, that person now has “skin in the game.”

Those that have skin in the game (i.e. are “invested”) are the most important and loyal fans a filmmaker will ever have in their career.

Crowdfunding campaigns segment out these fans for the filmmaker. Filmmakers that are taking full advantage of the community tools and analytics offered by these platforms are benefiting from them in ways that dwarf the value and importance of the money raised.

Examples of recent films that are benefiting from fully leveraging crowdfunding campaigns are Life Itself, the Roger Ebert Documentary, The Dishonesty Project, and Deep Web: The Untold Story Of Bitcoin and Silk Road (BOND/360)

HEADLINE: Publicity Alone No Longer Sells Movie Tickets

SUB-HEADLINE: Today, you can have the greatest articles and reviews in the world, but they’re all completely worthless if people aren’t sharing them in social media.

For independents with limited budgets, common wisdom has been that a significant portion of the P&A budget should be spent on hiring a powerhouse PR firm. In the past, if the PR hits started rolling in — and they were good — you could feel pretty confident that it would result a strong opening weekend in the box office.

But this is no longer the case.

Indie distributors who are still relying on traditional publicity, fathering than focusing their efforts on strategies that create true community around the film, are now finding themselves unprepared to “pivot” when the box office numbers are soft.

The reality is that most PR agencies don’t care about the grosses. They care about the volume of press hits they can generate for the client.

PR campaigns that continue to rely on traditional media outlets may indeed generate awareness. But they no longer drive people into theaters.
Today, it’s the special interest blogs, Instagram feeds, and Pinterest boards that create word-of-mouth for independent films. Not the mainstream media. Its sites like Buzzfeed, Upworthy, and others.

To have an impact on sales, PR agencies need to diversity and move far beyond the “entertainment pages” and begin to truly embrace all forms of emerging and specialty media.


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