Abraham writes:

Twitter in particular has proven to be a great device for communication amongst our followers. It has also become a tool for evil, I’ve discovered. On Saturday, August 8th, one month after our official release date, there was a spike in tweets related to LBS. We wondered why and took a look. It appeared that people were tweeting and re-tweeting a URL that linked to a pirated version of the film.

Remember the pink slime from “Ghostbusters II”? For most of the film, it was also a “tool for evil.” But Dr. Spengler et al. sprayed it all over the inside of the Statue of Liberty, and then it made everybody hug. (Ok, it represents a slightly different kind of “free,” but I think the analogy holds.)

I don’t need to spend a lot of time on how to compete with free, since it’s a well-covered topic. Kevin Kelly’s essay “Better Than Free” lists a number of factors that you can build into your film/story/product to give it value that make it worth paying for, even when it’s available for free. Brian Newman has a blog post and video on it, which is worth watching.

What this is really about is taking advantage of Twitter and other communication tools to play a major part in the global conversation about your work. (If there isn’t one, you need to start it.) Piracy on Canal St. happened before the Internet, and illegal downloading happened before Twitter. As Abraham acknowledged, you can’t stop it. Beyond pointers to free downloads, people are going to be saying lots of things about your film that you don’t like, including bad reviews, off-brand descriptions of your work and possibly even lies or personal attacks. The power of the Internet is that you can be in on it. You can know it’s happening, you can respond to it and you can preempt it.

As a filmmaker, you are at a tremendous advantage in owning your brand’s online story. Presumably, you know all about your film before anyone else does, so you can start putting your message out there before anyone else gets to it. You own the domain name, twitter account, etc. for the name of your film. (You don’t? Get on it!) And the people who love the film are probably the most vocal about it, and they’ll link back to you. You have to work real hard to piss people off enough that the haters will shout more loudly than the fans. If you keep the conversation going, those tweets and blog posts about torrent links and other nastiness will drift off the front pages and into obscurity. There are a few tiny things about me personally from way back that I’d rather not have out there (nothing too juicy, sorry), but you have to dig pretty deep to find it, because I’ve put myself out there with Twitter, an open Facebook account, my blog, etc.. But if you keep quiet, the nasties will fill the void for you.

Of course, it’s much harder to take advantage of this when you’ve got $1 million or more at stake and you address the matter after your film is already out. I think it’s wise to keep budgets low for now, as the details are still being worked out, but they will be worked out, since these are not entirely new business principles. Mercedes-Benz doesn’t go out of business just because it’s cheaper to get to work in a Hyundai. And Coach is still profitable, even though their belts are being knocked off everywhere. That’s because Mercedes and Coach are premium brands, and it’s not about a cheap ride to the office or keeping your pants from falling down. Their advertising messages reflect that, which is why Mercedes ads have Janis Joplin and vintage cars instead of some announcer shouting about seasonal discounts.

Most independent films are also premium brands. Your film is probably not about killing 90 minutes. It’s not about catching a glimpse of Megan Fox bent over, and it’s not about keeping the kids quiet in the back of the minivan. You can’t compete with “free” on price any more than Mercedes can compete on price with Hyundai. So don’t. Your film is about a deeper story, and the ability to create that is your sustainable competitive advantage. Twitter and other digital media are your opportunity to demonstrate that.

I’m writing a film right now, and even before the script is finished, I’m planning some cool stuff for screenings, merchandise and other payment points to add value along the lines of Kevin Kelly’s article. When I release the film, I will probably put it online for free. By putting it out there myself, I can beat the pirates to it and make sure free copies are burned with a URL to my online store, and I can track how many people are watching it. But it also tells the story that my film is a full experience and more than just a few hundred megabytes of pixels. After all, as a filmmaker, I should know how to tell a story, right?

Sure the Internet is a double-edged sword. But if you know where to swing it, you don’t have to cut your face off.

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It’s been a few years since I submitted a film to a festival, but I remember it being a miserable process. It’s hard enough to deal with deadlines, trips to the post office (do people do that anymore?) and all those fees (a nasty debate in itself), but I found the premiere requirements practically crippling. Since then, I’ve attended many festivals and have even helped program one, so I have a different understanding of how these things work.

Below, I examine the issue from the perspective of different groups involved and see how each is affected by premiere requirements. I encourage anyone with more experience or a different take to post a comment.

Filmmakers

At a minimum, premiere requirements limit the number of times and places you can have your film exhibited. If you include restrictions on other media, it also eliminates opportunities to build an audience or earn money by having a film available online with advertising revenue or for sale as a download or DVD. But it can stop a filmmaker even before getting to festivals. Filmmakers often have to adjust their post-production and release schedules to the annual cycle of festivals and their deadlines. Premiere requirements can force a producer to pass on one festival in favor of a later, more prestigious festival. If they don’t get accepted to that first choice, they’re forced to wait a whole year to try again at that second choice. By that point, they’ve lost time, audience, relevance and money, and they’re submitting year-old film.

It could be good for filmmakers in that it keeps more screening slots open for more films, but I’m afraid this is not always the spirit in which these rules are in place. And it doesn’t help at all in the case of platform exclusivity.

Festivals

In a short-term way that doesn’t involve too much thinking, premiere requirements are great for festivals, which is presumably why they are still in effect. It can help attract press and industry to a festival, assuming these people are already convinced that the films in question are worth the trip. More simply, the requirements give festivals a lot of power over filmmakers. Lots of other companies use exclusivity as well to raise their negotiating power. (More on that here.) When a filmmaker is forced to put all their eggs in your basket, you can make them beg, and it’s harder for them to ask for concessions like a screening fee or help with a flight and hotel room. The top festivals can use this as a tactic to affect a first-look right for themselves.

Having been a programmer, however, I’ve observed first-hand that great films are precious, so it seems silly to turn away a good film because it’s playing a thousand miles away the week before.

Also, if festivals are to stay relevant, and I believe they can, they need to improve upon and emphasize the value they add as social events. Relying on exclusivity is decreasingly effective and distracts from that.

Audiences

I’m hard pressed to think how premiere requirements are anything but bad for audiences. In my experience, most non-industry festival attendees are local. Very few people can afford to take a week off and spend money on travel for a film festival if it’s not for work. Even locally, film fans don’t have time to run out of films to see. While it is nice to know you’re seeing something before everybody else, you can retain most of that experience knowing that you’re seeing a film in advance of a wide release (if it even happens at all) and with the director and actors in attendance.

Gen Art is an example of a festival that consistently fills theaters with a local, non-industry audience without a strict premiere requirement. They even host year-round screenings of films the week before wide release, adding the value of an after-party and a post-screening discussion with the director and actors.

Newman speaks about the importance of curation. People have more entertainment options than ever. Acceptance into a prestigious (or not) festival is no guarantee that you’ll love a film, and even if it were, many festivals keep attendees too busy to see everything. Prior festival screenings give films time to build a track record of reviews, buzz and community that can help audiences do their own curation and even heighten the experience.

Press and Industry

For the most part, I think premiere requirements are pretty good for press and industry. I assume they were mostly put in place to attract these people. Distributors, festival programmers, journalists and bloggers go to a lot of festivals, so they don’t need to see the same films over and over again. But many of these people have access to screener copies of all these films anyway. While it does make a difference to see a film with an audience, that is not the way most people will see these films.

It appears that premiere requirements hurt more than they help, and they are helping the wrong people. Distributors are not acquiring many films right now, at least not for enough money to cover a production budget. Professional reviews are great, but they are not the best way to reach audiences. And industry professionals have other reasons to attend festivals – networking, panel discussions and free drinks. Film festivals are great at creating social experiences, and they are best suited to serving audiences first, filmmakers second and everybody else after that.

Premiere requirements seem to be based on the idea that a film starts with a certain value and then shrinks from there on out. This is the same idea that holds up the old model of windows, where a film starts with a big opening weekend, followed by decreasing box office and a chain of platforms, each offering lower cost and lower quality. I believe this model is obsolete, and that producers, audiences and the industry can benefit from giving films a chance to grow.

To see the relevant part of Brian Newman’s talk, go here, click on the “menu” button in the upper-right corner of the video player, and select the fourth section, titled “Conversation.”

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The video is also available on YouTube.

As promised in the video, here is a list of some of the tools I use and recommend. If you have any to add, post them in a comment. I’ll update this post if I find any others that are useful.

General Information Tools

WordPress: This is the blogging software that runs this website, as well as foureyedmonsters.com, Workbook Project and tons of others. It’s free and open source. You can have it hosted for free on wordpress.com, or you can download it and install it on your own web server and customize it further. In addition to blog posts, you can set up more permanent “pages” for information about your film that isn’t time-based (example).
Learn more and get WordPress at http://wordpress.org

Google Analytics: Most web hosting services provide basic reporting, but Google Analytics offers a clean, more reliable way to track your web traffic and drill down to find more information. I use this mostly to learn where incoming links are coming from and to see which pages and posts on my sites are getting the most attention. This is also free. If you have WordPress, you can use this plugin to easily get Analytics running on your site.
Learn more and sign up for Google Analytics at http://google.com/analytics

Discovery Tools

Search Engine Optimization: This is not a specific software tool so much as a tactic for making your website easier to find through search engines. There are a few WordPress plugins out there, but your best bet is to search around the web for articles. Andrew Peterson, who worked on the Four Eyed Monsters distribution team sometimes blogs about SEO. Some people try to game the system or cheat to get higher search rankings, but I try to use tactics that will also make a site easier and more informal for humans as well as for Google.
Learn about Search Engine Optimization on Wikipedia

Social Networks: This includes the obvious sites, like Facebook and MySpace, but many other sites have social networking components. YouTube, Flickr, Twitter or any other site that let’s you link up to other friends on the same service is a social network. Most social networks will show your friends what you’re up to, and they will show their friends in turn that they’re watching you.

Spreading and Sharing Tools

Social Bookmarking: A variety of tools exist that allow you to bookmark resources on the web and share them publicly. I use del.icio.us (a.k.a. Delicious), but there are a ton of others (Digg, StumbleUpon, Facebook, etc.), each a bit different in exact purpose and features. Encourage your audience to share your videos, posts, etc. on these sites. I use Social Bookmarking RELOADED, which is a WordPress plugin that automatically adds social bookmarking links to every post on my blog. Also, check out ShareThis, which is what you saw on the Iron Sky site in the above video.

Subscription Tools

RSS and Atom Feeds are formats of machine-readable XML versions of websites. They’re great for reading blogs using news reader software, such as Google Reader. The idea is that posts on blogs you read are pushed to you through the reader software so you don’t have to remember to go back to the blog website. They’re also great for syndicating information between sites. The differences between RSS and Atom are subtle and technical, so for right now, they’re almost the same exact thing.
Learn more about feeds

Feedburner is a tool for optimizing RSS and Atom feeds that come out of your blog. It will also help you track how many people are reading your blog through the feed, and you can easily set up an email digest version of your feed. I use this plugin to easily integrate Feedburner into my WordPress blog.
Learn more and sign up at http://www.feedburner.com

Twitter is a service that allows you to very easily post short updates, up to 140 characters from your cell phone, IM (Jabber/GTalk), a website or a variety of software. People can subscribe to your Twitter feed using RSS/Atom or through Twitter itself via those same platforms (text messages, instant messaging, etc.). You can also use the same RSS feed to syndicate these updates to your website, Facebook or other services. This is a great way to keep the updates coming without much time investment.
Learn more and sign up at Twitter.com

Interaction Tools

Disqus: WordPress and other blogging software come with built-in comment functions. Encourage your audience to post comments to keep the discussion going. Disqus is a service that plugs in to your blog and enhances the discussion features. Use these to keep your fans invested, get feedback on what you’re posting and see which fans are most involved.
Learn more and sign up for Disqus

cforms: This should be obvious, but not every film site has this. I use this WordPress plugin to create a great contact form on my site so people can email me directly and privately without me having to post my email address online, which invites tons of spam. It also tracks incoming emails in a database so I can keep an eye on who’s in touch.
Get cforms

Examples

Here are some film and media channel sites that show off some of the tools and strategies I talked about in this video.

• Four Eyed Monsters
• Nerdcore Rising
• Iron Sky
• Dr. Horrible’s Sing-Along Blog
• Indoctrinate U
• Wholphin DVD

For some tips on what not to do with your site, read this article I wrote a few months ago on bad Flash movie websites.

Thanks to Alex Johnson for shooting this video.

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Inspired by our roundtable discussion, I pulled out a couple of old distribution contracts I had and took them apart to look for the value that the distributors brought to the table in exchange for the rights granted. A typical distribution deal will offer the following:

• Physical distribution
• Cutting the deal
• Promotion
• Cash advance and/or minimum guarantee

If we can understand what this value is, we can evaluate whether these distribution deals are the best option. Here is a look at what each of those means and which rights and costs to the filmmaker are associated with each service.

Physical distribution

Getting your film (and soundtrack, posters, t-shirts, etc.) to an audience is a clearly necessary and valuable service. It includes replicating and shipping DVDs and placing them in stores (online and offline); theaters and film prints or digital cinema; and digital download or streaming services. Most of the above services are commodities, in that there are many competitive companies from which a filmmaker or distributor can choose, so prices tend to be reasonably close to the actual cost of time and materials. For physical distribution, the filmmaker often pays either a fixed fee or a small percentage of revenues. Exclusivity is almost never required, and contract terms are for short periods of time.

DVD replication is a great example. Depending on volume, you can pay about a dollar or two per DVD. Shipping costs are fixed, as is the amount per unit that a retailer will usually pay. Download services are not quite there yet as far as deal terms. ITunes is pretty good, passing along 70% of gross revenues, though you have to go through an aggregator, who will take their own small cut. (See the next section.) Other download services have yet to come on board with reasonable terms. It is fair for a download contract to lock you in for a certain amount of time to cover encoding costs, but those costs are always falling and terms should become shorter. (The term should be somewhere from zero to no more than three years, but about one year is fair.)

Cutting the deal

Unfortunately, many distribution platforms won’t work directly with filmmakers, so you need someone to close the deal for you. This could include a lawyer to double-check your contracts. Again, iTunes is one such example; they require that you go through an aggregator, though it’s very possible that they’ll eventually drop that requirement as they learn how to scale the acquisition process. Think of these people as agents, whose services might be worth about 10%.

Promotion

Promotion is perhaps the most elusive and tricky of all the value points distributors will claim to offer. They will often incur costs for advertising, though incurring cost is not the same as providing value. Unless you have the kind of movie that is well represented by newspaper ads, billboards and trailers on television, a distributor is not likely going to know better how to promote your movie than you do. To look at it another way, you can spend $30,000 (guesstimate) on a quarter page ad in the New York Times. For a truly independent film, that might bring ten or twenty people to a screening. (For Four Eyed Monsters, it brought one.) Now, imagine what you could do spending the same $30k on a web video series, where your audience can subscribe and interact repeatedly directly on your website.

Promotion is particularly nasty because it’s the primary reason for someone to demand exclusivity. The idea is that if a theatrical distributor pays for a newspaper ad, someone might see that ad and then buy a DVD instead of going to the theater. So they need to not only get a cut of that DVD but also determine how and when you can sell that DVD. You can get around exclusivity by working with companies that don’t do much or any promotion, though there are many that will claim that they promote your work but don’t really. A buried listing on a website or in a catalogue is not sufficient promotion to justify exclusivity. You may want to offer very limited exclusivity (e.g. on a given platform for 30 days) in exchange for a great promotion or placement opportunity.

Cash advance

At the point that a film is picture locked and ready to screen, filmmakers often find themselves desperate to make a deal that will cover their budget. Such desperation gives any source of said cash undue negotiating power, and the whole situation should be preventable by preparing distribution funding in advance. Consider that a distributor’s advance/minimum guarantee is simply time-shifting of money and sharing of risk. It happens that these are the exact services that financial institutions and equity investors provide. So why would you go to a movie company for financial services instead of to a financial services provider?

Typically, before shooting a single frame, a filmmaker will raise money from one or more investors – perhaps private equity (like a dentist uncle), from a production company or by credit card. At that point, the investor is taking on a great deal of risk and will expect an accordingly high share of the profits. Maybe the film will stink; maybe the production will go catastrophically over budget; or maybe the director will get hit by a bus. But once the film is completed, much of that risk has dissipated. The movie has been delivered, and maybe it’s even pretty good. Any further investment from then on should take significantly less ownership, corresponding to the lower risk.

Given an investor-filmmaker relationship that has been successful enough to make it to picture lock, a filmmaker might be best served to return to the original investor(s) to fund delivery and distribution until revenues start coming in from box office, retail, etc. Better yet, one might prepare a business plan to receive a first round of production funding with a high-risk return, followed by a second round of distribution funding at a pre-determined lower return rate once the picture lock milestone has been reached. This is no different from how start-up companies prepare for venture funding.

Build vs. Buy

Whatever resources I need for a film project, I’m always asking myself whether to build or to buy. I look at the costs and benefits of hiring another company provide a service for me, compared with the costs and benefits of putting together the resources to do it myself. Once you break down the real costs and added value of any distribution or other deal, you can determine at each step whether you really need someone else to do it for you. Depending on what you find out, a distributor may be the best way to go, or maybe it’s just better to DIY.

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Brian’s a smart guy… we mostly talked about the importance of collecting information about your fans (and who’s a super-fan versus someone who’s just mildly interested in your movie). We also touched on the deal that ‘Four Eyed Monsters’ did with YouTube and Spout, where YouTube offered the full movie for free, and Spout served as a sponsor, paying the filmmakers a buck for every new member who joined after watching the movie on YouTube.

Check out Scott’s original post and take a minute to look at some of the other posts on his site.

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The video is also available in higher-bandwidth Flash or as an AVI download on my blip.tv channel. Please comment here and/or on the YouTube Watch page, where you can rate it as well. As usual The Film Panel Notetaker has notes.

Peter Goldwyn and I disagreed on a few things, which made for a fun and interesting discussion. He seems like a smart guy, and it was good to hear from Peter and Clémence, who have very different sets of experiences.

Correction: In our discussion, I compared the theatrical film industry to the bottled water industry. I mis-stated some figures. Upon further research, I realized that the global bottled water business generates $50bn, whereas the U.S. market is closer to $10 billion (source: ResearchBuy MarketWikis). However, this is still more than the annual U.S. theatrical gross of $9.49bn (source: MPAA). So I think my point is still valid.

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But here we are, living in a world in which the bottlenecks have suddenly become irrelevant.

I don’t think there’s any question that this is the logical model to pursue in the age of the Internet — the age of free distribution and marketing.

Suppose the writers’ strike continues for months to come — and even beyond that, suppose the actors or the directors also go on strike. In such a scenario, it is hard to see how many companies based on this new model won’t be created extremely quickly — after all, if you really can’t work for the Man, why not start your own company, if you can?

I’m all for it. (It’s exactly what many of my colleagues and I are trying to do – refer to blogroll). It seems that what the WGA strike and the whole “age of free distribution and marketing” thing really have in common is that they are both about power. Big media companies have historically based their value on the power that comes from controlling access to distribution. Similarly, Hollywood has maintained power over the writers (and actors, etc.) by controlling access to jobs. But if creatives can show that they don’t need Hollywood for jobs, Big Media might find itself facing a fresh wave of new competition.

On the other hand, Scott Macaulay at Filmmaker Magazine seems skeptical:

“I think Andreessen overestimates the entrepreneurial business ambitions of most content creators.”

Scott has a great point. For many working WGA writers, big media provides the safety of a steady paycheck. But real upside usually requires taking on risk, and if the writers are serious about the revenue share they’re demanding, they may be wiling to take on some risk. Venture capital investment can help to mitigate that risk while providing quite a bit more independence. Besides, Andreessen’s point is not just that artists are all set to become entrepreneurs – if a year and a half of nothing but reality shows drives away enough viewers, big media may be left too week to keep up either the steady paycheck or the revenue share. That makes the decision much easier.

The bigger obstacle to Andreessen’s model is resolving the expectations of VC investors with the economic realities of the movie business. VC’s spread their risk around a million or two at a time, hoping for one or two big successes (MySpace, Facebook, Twitter, etc.), assuming that the rest will be minor hits or failures. A bit of my own informal research has shown that VC’s expect those successes to attain valuations on the order of $100 million or more. That’s extremely exceptional for an independent film and, I suspect, even for a Hollywood film, once you account for advertising costs. And, as Silicon Alley Insider points out, putting your work on the web in a simple ad-based model is not going to cut it.

What then is the big difference between a successful tech start-up and a movie (or a production company)? The tech companies engage their audience repeatedly, regularly and for an open-ended time. They don’t rely on content alone, but they create expandable platforms that increase their value over time. In contrast, most movies invite the audience to interact a few times at best – theatrical, DVD/download, TV. And each successive viewing is lower and lower in value.

Here are some ideas about how you might run your film like a tech start-up:

• Create a brand for yourself. Keep the quality high and share your story in a way that links your work together and keeps the audience coming back. Individual filmmakers are much better at this than Hollywood is. David Lynch, Tarantino and Wes Anderson have strong identities as artists that keep people coming back to them. Compare this with the branding of any movie studio, big or small. They’re diversified and therefore too inconsistent and impersonal for most fans to relate to.
• Bring your audience into your story. Solicit responses from them as videos, text and sound, and feed that back out to your audience as part of your work. Engage them in an open-ended way, motivating them to bring in more fans, creating a network effect.
• Give your audience more ways and better reasons to pay you. Again, I refer to Radiohead’s example of providing the high-value, tactile Discbox. Also, shirt, posters, live performances, additional content, etc. And let your audience know that their money is going to support you, the artist, not some faceless corporation burdened with distribution and advertising costs. If you’ve managed to involve them in your story as above, they may actually care.

These were all ideas that helped spur audience growth for Four Eyed Monsters. That film was funded with credit cards; how much farther could we have pushed it with venture capital funding? There’s room for many more such ideas. Please comment if you have some to share. I’d love to see someone (Mr. Andreessen, perhaps?) propose a financial model as a target for what it might take to get the venture capital model going.

Update: The L.A. Times has a story about Hollywood writers seeking venture funding for web startups, via CinemaTech’s Scott Kirsner, who has his own take on the matter.

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• Aaron Levine (moderator), Film Division Manager at Gen Art
• Peter Goldwyn, Vice President Acquisitions Samuel Goldwyn Films
• Clémence Taillandier, Head of Theatrical Sales, Zeitgeist Films
• Erik Davis Managing Editor, Cinematical.com

Details

I’m looking forward to this panel, because it’s a new batch of panelists for me, different from the usual suspects at Vancouver, IFP Market and London. We’ll be discussing some of the same topics as past panels: on-demand theatrical booking, content discovery, the up-scaling of the theatrical experience. But the added perspective of the bigger-budget, older-school Goldwyn and Zeitgeist representatives should be interesting, and if we’re very, very lucky, maybe we’ll see another showdown. Aaron will also ask us about how the writers strike ties into Internet distribution. One of the greatest consequences of Internet distribution is a shift in power, so we should have a lot to talk about.

See Erik’s post, and check out the Facebook Event to RSVP and see who else is attending.

A little help?

Would anybody be willing to volunteer to shoot the panel so we can get it up on the web? Thanks.

Update: I posted the video of the full panel.

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I introduced myself and my role in the Four Eyed Monsters self-distribution. We focused on the application of traditional business principals to the changing models of media distribution. Have a look:

The video is also available in higher-bandwidth Flash or as a MP4 download on my blip.tv channel. Arin has videos of the other speakers on his YouTube channel.

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