Indie Filmmakers Hit Their Target

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com/research/stocks/snapshot/snapshot.asp?symbol=NFLX'>NFLX). King Corn has broken even on its $1 million budget, raised mostly from donors, with half going to production and half to distribution. The producers are reinvesting the profits into reaching new audiences, Ellis says.

Generating More Buzz and Profits

Other filmmakers take a do-it-yourself approach when they can't find distributors. Ben Niles's first film did well at festivals, but no distributor bought it. So he decided to show Note by Note, about the making of a Steinway piano (BusinessWeek.com, 3/6/07), in limited screenings, with either himself or a piano at most theaters to interest audiences. ("The piano is a bigger draw than me," he quips.) He e-mailed piano dealers, music teachers, and technicians in each city to reach the film's core audience. The result? Viewers flocked to screenings in cities such as Rochester, N.Y., where a 536-seat theater sold out. Note by Note has played in more than 70 markets since November.

Broderick, who advised both Ellis and Niles, calls the approach a "semi-theatrical" release, and he says it generates more buzz and profits than booking traditional runs for a few weeks in art houses. But the box office is a loss leader even for many studio films. Independents and documentaries make their real money selling DVDs, and that's where Broderick says DIY distribution pays off.

When filmmakers get a distributor to put a DVD in stores, they might see $2.50 for a DVD that retails at $25. The same DVD sold through the film's Web site returns over $20—all but the cost of pressing the disc. DVDs packaged with study guides can sell to schools for as much as $300. "There are a number of filmmakers who made more than $1 million selling one DVD from one Web site," Broderick says. When fans buy through the film's Web site, each sale also adds an e-mail address to the film's mailing list, something Broderick says is as valuable as the sale itself.

"An Ecosystem for the Independent Filmmaker"

Note by Note cost between $150,000 and $200,000 to produce, Niles says. Although he has sold only about 3,000 DVDs since November, selling 10,000 with a profit margin of $20 would cover a $200,000 production budget. Likewise, Sewell needs to sell 35,000 DVDs to cover the $500,000 budget for What's Your Point, Honey? after donating 30% of profits to nonprofits supporting the film's message. She hopes to hit the mark within a year.

As interest in self-distribution grows, some companies are trying to build an infrastructure online for DIY filmmakers. Web startups such as Withoutabox (now owned by Amazon (AMZN)) and B-Side offer filmmakers ways to submit their movies to festivals, organize screenings, and sell DVDs without giving up the rights to their work. "What we're doing here is creating an ecosystem for an independent filmmaker to be able to act as an entrepreneur," says David Straus, chief executive officer of Withoutabox. In late May, The New York Times reported that Cinetic Media's John Sloss, a kingmaker in the independent film industry, is launching a business, called Cinetic Rights Management, that will seek to distribute independent movies through the Internet and other electronic channels.

Almost none of this was possible a decade ago. Even as recently as 2005—the year YouTube (GOOG) was born—the channels for vigorous self-distribution were in their infancy. Filmmakers thought their best chance of reaching an audience was to sell to a distributor, as Sewell did with Mad Hot Ballroom.

There is still no clear model for independent filmmakers who opt out of traditional distribution. "The ones that are doing this—all of us out there—we may not be the ones to make the money from this, but we're definitely setting up the bread crumbs," says Sewell. And if the line to get into her film's premiere was any sign, the trail they're blazing leads somewhere exciting.

For more, flip through BusinessWeek staff writer John Tozzi's narrated slide show (BusinessWeek.com, 6/6/08).

Tozzi covers small business for BusinessWeek.com.