Small Business

Indie Filmmakers Hit Their Target


Taking cues from musicians' Internet business models, filmmakers are transforming the movie biz by handling marketing, distribution, and DVD sales

As they waited in line outside Cinema Village, the art house theater in downtown Manhattan, Carol Frohlinger and Lindsey Pollak didn't know they were part of the transformation of the film industry. They just thought they were going to see a movie.

But the pair, both authors and bloggers on women's issues, had encountered no advertising, no reviews, and no film festival buzz about What's Your Point, Honey?. Instead, they came out after Pollak got an e-mail about the film, which documents an effort to get young women involved in politics. "It was the topic, the subject matter that got me excited about it," she says. After the sold-out screening, Pollak and Frohlinger endorsed the film on their blogs and encouraged readers to buy the DVD.

Documentary filmmakers once needed luck as much as talent and business sense to succeed. Breaking into festivals, getting picked up by distributors, and doing well at the box office depended heavily on chance. Most independent films never get distributed, and many that do languish in obscurity after brief appearances in theaters. Nearly 1,000 documentaries competed for 16 slots in the 2008 Sundance Film Festival (BusinessWeek.com, 1/24/08), and of the 105 documentaries released in U.S. theaters in 2007, the median box-office gross was about $25,000 for the year, according to the movie industry tracking site The Numbers.

Opting Out of the Festival Circuit

But like musicians who shun record labels (BusinessWeek.com, 10/10/07) to sell their music themselves, anecdotal evidence suggests documentary filmmakers—already an entrepreneurial bunch—are foregoing the conventional path of shopping their films to a distributor. They're skipping such deals and using the Internet to get their stories in front of people who want to hear them.

"Indie filmmakers are getting a little bit less afraid to say no to somebody with all that power, because other new channels are opening up," says Amy Sewell, co-director of What's Your Point, Honey? Sewell, who wrote the popular 2005 documentary Mad Hot Ballroom, has opted out of the festival circuit for her latest film. She and co-director Susan Toffler walked away from a "low six-figure" offer from a distributor so they could hold on to the rights, organize their own screenings, and sell DVDs directly through their Web site.

Few people get rich making documentaries, and that's unlikely to change. But filmmakers who take control of their marketing and distribution can expand their audience and increase their chances of turning a profit, says Peter Broderick, a Sanata Monica (Calif.) consultant to independent filmmakers. "Filmmakers need to be as creative about their distribution as they are about their production," he says.

Closer to the Core Audience

The do-it-yourself approach depends on the filmmaker finding viewers passionate about the subject. The model works well for documentaries, which often have clear target audiences, rather than features made for broad appeal. The producers of King Corn, which examines the role of corn in the U.S., reached out to food activists and organic farmers while they were filming to build an e-mail list of people who care about the topic. "I think we felt in some way that we were better able to communicate with our core audience than a distributor who's used to dealing with mass audiences," says co-producer Curt Ellis.

They booked King Corn for single-night screenings rather than wide theatrical release to keep the film from getting lost among the scores of movies that open each weekend. They also sold DVDs directly at screenings. "I think if we'd done traditional distribution, far fewer people would have actually heard of the film," Ellis says. They've since signed a deal with distributor Docurama to release the DVD in stores and on Netflix (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).


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