IFH 364: The New Film Marketplace: Why Your Indie Film Isn’t Worth What You Think It Is

Alex Ferrari 0:00
Now guys, today on the show, I'm going to talk about why your movie is not worth what it used to be. The film industry is going through a major shift. This shift is as big as when we went from black and white films to color or when we added sound to the movies and became talkies. It is a monumental shift in the way the industry is run. And independent filmmakers need to understand what's going on and how they can position themselves and their films in this new reality that is the film industry. Now the business is changing from a product based business which is DVDs and blu rays to a service based business which is streaming services. And by doing this, there has been a massive devaluation of intellectual property in the value of movies and video content in general. Now Spotify in the music side of the business and other music streaming services have devalued music down to basically nothing the making it almost worthless. What used to cost you as the consumer 1799 for one album, to get one or two hits and a bunch of Aren't you didn't even want now cost fractions of a penny. Now on the Spotify streaming service specifically to Spotify and artists needs around 337,000 plays, to earn 14 $172 a month, the monthly minimum wage, though I don't know how many people can actually live on 14 $100 a month in today's world here in the US at least. But that is the minimum, to make a living with your art on a platform like Spotify, on that one revenue stream. Now, let's jump over to the video side of things on amazon prime. And I know a lot of people, you know, because of distributor and what happened with the whole film aggregator thing, I'm like, I'm just gonna upload my movie to Amazon Prime myself amazon prime video direct and put it up on prime and get my rentals and teavana. And all that kind of stuff. Well, if you put it up on prime, I just want you to understand what you're going to get paid, you get paid six cents per hour viewed, not per minute, per hour viewed. Now, I know it doesn't sound a lot. But believe it or not, people are making money with that revenue stream eight, you know, it can do very well for you. But the key is to diversify those revenue streams as much as humanly possible. But before Amazon used to pay 15 cents per hour viewed, which still sounds ridiculous, right? Because in the olden days, it would cost you 399, to rent a movie, or 10 to $15 to buy a DVD, or 25 bucks to buy a blu ray. And that was when the money was flowing in the business. And that's why my last episode where I was talking about the death of traditional film distribution, that's when everybody was just making all sorts of crazy money. And they you really even have to make good movies, you could just slap it out to the DVD market, and you'd be able to make money, but those days are gone. Now, the streaming, the streaming platforms are paying you less and less for your films. That's just the truth. Now, you could diversify those revenue streams, by splitting it out to many different platforms like to be like Pluto, like Amazon Prime, and then maybe going on to some transactional video on demand. But I wouldn't recommend that unless you have an audience. But you could start spreading it out to multiple different platforms. And hopefully you can get a little bit here a little bit there, so on and so forth. Now, of course, I've talked to you about and nauseum in regards to the film to printer method where you can generate multiple revenue streams that are not dependent on the exploitation of the movie. But that's another conversation. We're just talking about where we are right now and what your movie is worth in the marketplace. Because these streaming platforms are paying you less and less, the chances of you being able to recoup a higher budget is becoming harder and harder. You know, one thing I didn't notice at AFM when I was talking to filmmakers, is that the mentality was still very 90s and 2000s, the budgets were still going up. And they were dealing with business models that don't exist anymore. This business model of streaming platforms paying so little for your work is unsustainable. It's not sustainable. You know, to create a song, generally speaking, is a lot less expensive than creating a movie. Creating an album is a lot less expensive than creating a movie for an independent producer or independent artist. And yet, we're getting paid to slightly a bit more than what an artist would get paid on these streaming platforms. And because the streaming platforms have a direct connection to the customer, there's very little that we can do about it. Now, I will give you some tips on what we can do about it at the end of the episode. But I want to explain to you how companies like Disney, Amazon, and Apple, have a business bottle that will not only ensure their survival in the new film economy, but they will flourish. And the reason why these specific companies I just threw out will completely dominate moving forward over all the other studios is because their main businesses are not making movies. And I include Disney in that by the way. They use media as a marketing vehicle to sell other products and services. So I did a little research and I went in to the corporate filings of Disney and I wanted to see where they're really making their money and how much money they're actually making because they're a publicly held company all that information is available to anybody with an internet connection. So Disney's revenue breaks down like this guy's 44% of the money they make From media networks, licensing deals from ESPN, Disney Channel FX networks, etc. to cable and streaming platforms, then 17% is from Studio entertainment. That's the actual exploitation of the product of the movie itself, meaning sales, or revenue generated from viewing or getting access to their studio entertainment. And then 11% is consumer goods, an interactive entertainment. Now that 28% of parks and resorts, a lot of consumer goods are sold at those parks and are part of those revenue streams. So together between media networks, parks and resorts, and consumer goods, they all dwarf the moviemaking side of the business. We're talking about 17% of all the business that Disney The Walt Disney Company does is actual studio entertainment, where they're geniuses, if they've built an infrastructure, and a system and a network to exploit the brands and IPS that they have, personally and have acquired over the course of the last 20 years. That's why when they bought Marvel for four and a half million best deal they ever got, when they bought Star Wars for about the same best deal they ever got when they bought Pixar for like 7.6 or something billion. Great, great purchase. And now they just bought Fox, Fox. So all of that content gets thrown in with I did the numbers and do you know how much Disney generates a day. Just so you understand, I want you to understand these numbers. So you understand where the world is and where it's going. Disney generates $36,220,000 a day. And this year, they're estimated to break almost $70 billion in gross revenue. And I promise you that is not from the box office. And it's not from DVDs or blu rays. And now Disney is one of the first big studios to come out with its own major streaming platform of any magnitude. Seriously. Disney plus is a huge sign of where the film industry is going. At its launch, it had 10 million subscribers. It took HBO NOW or plus or whatever it was to get to I think 5 million it took them three years. They have a fraction of the amount of content. The direct to consumer model, which is where the studios and companies are going to is going to kill and is killing the middleman. That includes DVD manufacturers and retailers includes cable networks and channels which are being the cord is being cut left and right satellite as well. And that also includes movie theater chains. Right now it's on the on the table at war in Washington, that they're going to throw out this old law that states that movie studios cannot run their own private theater chains to only show their movies. I said it was an antitrust thing back in the day. But now that we have direct, you know direct access and direct to consumer models, like Disney plus, or Netflix or any of these other kind of, you know, distribution outlets. It's almost like I I already thought it was done. I thought that I thought that law was thrown out years ago. But apparently it hasn't. So what do you think that's going to do to movie theaters, if they if the studios have their way. And specifically, when I talk about studios, there's a handful, there's the six big studios, but there's only maybe three that have any chance of surviving the next five or 10 years, if not, they're gonna just get eaten up by one of the other big ones. People who have IPS people who have franchises, or be able to create franchises and then able within their system to exploit and create multiple revenue streams from those IPS. Now, Amazon Studios is a very interesting model. Because if you've noticed the movies, and the movies that they're purchasing and the series are creating are very different than what let's say Disney is doing. If you've noticed that they've been buying movies like the big sick, their new movie, the arrow knots, as well as very kind of different things that a studio wouldn't normally do. shows like transparent, which are very niche and very specific. They have someone like Ted hope, working for them in the back office at Amazon Studios, because he is a champion of independent film from the olden days of the 80s and 90s. He was there championing true independent filmmaking. So they brought him in because they wanted to create films and series that were aimed at a specific niche art house, kind of people. That's why they were buying a lot of Sundance films early on. That's why they were, that's why they've opened up their platforms to us the independence. Why? Because that kind of material, that kind of content attracts a certain kind of customer. Because Amazon Studios is not in the business of making money with their movies. It is a marketing machine for you to buy a prime account, and to buy products from Amazon. Amazon makes 67% of its revenue from selling goods and services through Amazon. And then they make about maybe like 3%, from Amazon Studios. Do you see that their business model how robust it is, they're using video content using series and movies. To sell product. They're reversing the film intrapreneur method in many ways, and I have a chapter about that in my book about how to reverse the film intrapreneur method. But that's what they're doing. That business model is sound, they're diversified to the hilt. I want you to see what the new world is doing. With movies with series with content. It is no longer about selling the content itself. Can you make money selling it, of course, you can license it, you can sell it and T VOD, if you have the audience. You can you can do s VOD, and a VOD, there's still ways of making it, making money with it. But the amount of money you can make has dropped. It has dropped dramatically. So this new world of the Disney's The Amazon, the apple of the world, which is using content, as a marketing, just a marketing powerhouse, to sell other things apples using Apple TV to sell more physical Apple TVs. They're using Apple TV plus to sell those little Apple TV boxes. And they're also using it to sell iPhones, and the eye watches and computers and iPads, and all the other eyes things and all the other Apple products they have because you're going to want to consume those content, that content that they're creating on their products. It is a marketing play guys. That is where this whole world of media is going. authors are doing it as well. They are authors are doing it in the book industry. musicians are doing it in the music industry. And now it's our turn to start doing it. In the film industry. The old way of doing things is dying, and entire sub industries are trying to hold on for dear life to the status quo. movie theaters are struggling, okay, what anyone says. But you could just look at the numbers, revenue is down and it's going down more and more. They're trying to keep it alive as much as they can. But I don't think movie theaters will go away completely. But they will not be what they are today that I can promise you. At AFM. I heard from many distributors telling me that theatrical was not a growth segment of the industry anymore. By the way, theaters do have a great potential for indie movies, and niche movies going theatrical because all those theaters there's, there's 1000s and 1000s of screens in the United States, and they will want to fill them up. And there's only so many movies that the studios are making. Disney made 17 movies last year, and that number is gonna start drizzling down a little bit more, because we're going to be focusing more and more on their new Disney plus initiative, where they're going to start seeing more and more revenues, it's going to get to a point where the studios will go directly to the to the customer and cut out everybody because it's more money in their pockets. So that model is going to happen one day in our lifetime I believe it will. But the devaluation of movies and series began with YouTube, the free version of Spotify for videos essentially, there's been a generation raised on getting video content for free whenever they want. movies in series, of course fell into that well. So just just because you watch cat videos, you will then assume that you should get movies and series for free as well. Then Netflix came along and gave us the ability to watch films and series as part of a small monthly fee. And we no longer had to wait for weeks to watch full seasons of our favorite shows, or suffer through commercials. We could now binge entire shows in a few days commercial free Be right back after a word from our sponsor. And now back to the show. Now with many streaming series available, why would you buy or rent a film, if it's going to be available in the streaming service in a few weeks, independent filmmakers need to understand this. They think that because they're going to put it up on TV like iTunes, or or Amazon, or Google Play, that you're going to make Mad Money in rentals and sales, if you could drive traffic to it, and you've got an audience that's niche enough, and an audience that's passionate enough to pay you for your video content, all more power to you. Can it be done? Absolutely, it can be done. But it's becoming rare and rare. To have that happen. Our habits are going more towards streaming, getting our content from either a VOD, or s VOD period, the value of your independent film is just dwindling by the second. And I'm not trying to say this to depress you, I want you to understand the realities of the marketplace. And most filmmakers don't understand that most independent film producers don't understand that. So you have to really get to know the marketplace, you've got to start thinking like businesses. Okay, look at the big studios. Everyone's catching up to Disney, everyone. There's not one studio out there right now, that doesn't wish they were Disney, that they owned all those IPS that have that not only own those IPS, but had the infrastructure to be able to exploit every single way to squeeze as much juice out of those movies as humanly possible by creating 1000s of ancillary revenue streams that go on for years and years and years. Through their consumer product lines, through their networks, through their parks and resorts. It's it's it really is remarkable. So don't feel that you're like, Oh, well, I didn't know, the studios didn't know either. I'm doing honest with you. A lot of those studios are still working in the model of I'm going to make a product, I'm going to exploit that product and generate revenue from it. But the bottom line is that that model is getting harder and harder to make work. Can it be done? Of course it can be done the right project, the right marketing, the right everything. Sure. But it's getting harder and harder. And you could just see it. Why is everybody going more towards television, because that's where all the money's being made. It's easier, it's less money upfront, and you can generate much more money with it. Like I said, in my last show, Breaking Bad, generated $410 million. And then some southpark was just licensed by Viacom for half a billion dollars to HBO max for their new streaming service, half a billion for all of that content. Do you see what i'm saying not to mention the billions of dollars that they've made with that content over the years. This is just a streaming license, they still do their own business, off of southpark. I want you I'm telling you all these stories, and I'm telling you all this information, so you really get a grasp of what the marketplace is, and where we as independent filmmakers fit into that ecosystem. Now, the other big problem that we face as independent creators, is it the volume of content that's being dumped into the marketplace is like a massive ocean. Every day, there's hundreds, if not 1000s, of hours, being thrown into a con content ocean. And I'm not talking even about YouTube. I'm not even talking about video games. I'm not talking about all the other things that compete for our attention. I'm just talking about straight movies and series. There's hundreds, if not 1000s of hours being dumped into that ocean every single day. And now along with the studios, independent films have to fight for attention. Period. It's basic economics guys, the more quantity of a product you have on the shelf, the cheaper it is. It's supply and demand. There's wait. There's a lot of demand, but there's more supply than we that we can ever consume. So how can an independent filmmaker survive in this new film economy? You have to niche down you have to focus your work on a specific audience that you can reach or cultivate. May I say you have to become a film trip earner, an entrepreneurial filmmaker. musicians have to deal with this, as well as authors. You see if there's 10 there's two other industries that this happened to before, it was a publishing world that happened first in the publishing world with ebooks, it changed the game, where before you could only buy your your book for 2495. in hardcover first, then they held it for months before then would they get sucked all the money they could out of that book, then they would release it on paperback, six, nine months later. Now you could get an E book for under 10 bucks. And Amazon controlled that pricing. Because Amazon was the big player in town. Then came the music industry, where they had to fight technology, they tried to hold on to the way they were doing business because they were making gangbuster money, I'm doing wrong crazy. Talking about 1799 5099 for CDs, do you know what a cost them cost them $1 $1 to produce a CD, and they were selling for 1799, retail, they were trying to hold on to that money As long as they could, then this mp3 thing showed up, then piracy showed up. And all the whole world came crashing down. But they also fought to hold on to the status quo when they should have been focusing on the new technology and control it and dictate it. But instead, they had someone like Steve Jobs come in, and basically write the rules because he had all the he had all the answers. And he created iTunes and change the change the way the game was played. But understand, musicians have begun to focus on building themselves as brands, and using their music as advertising to sell ancillary products to get sponsorships. And to do touring. Because you can't bootleg a T shirt, a hat, an autograph signing, a picture, a photo op, or a live experience, you can't bootleg that. So that's where they're making their money, you can't bootleg a sponsorship, because they're building and cultivating audiences. So that's why a lot of fans are giving their music away to build their brand. They understand that it's a loss leader. Now independent filmmakers can do this as well. I'm not saying you have to give your movie away, though there is there still, there are still ways to generate revenue from your from your art. But it's not, you're not going to make the same amount of money that you used to, it's going to be more and more difficult to do so. But you can do this as well, when you focus on a niche audience. As I've said 1000 times the riches are in the niches. Now, piracy is a huge problem for all the media industries, books, music and movies. with Steve Jobs said it best. You can't stop piracy. You can't fight piracy, you can only compete with it. And that's when you think outside the box. That's when it becomes so impossible to pirate a T shirt, of course, a niche service a sponsorship, you just need to think outside the box guys. The business is changing whether you like it or not. If you don't change the way you think about making films, I hate to tell you, you will not survive, you might be able to make one movie here or there. And you might become a hobbyist. And that's fine. If you want to make a living doing your art, you don't have to do this podcast, as well as film shoprunner. As well as all the companies that I've put together are to help you build a business to help you make a living doing what you love to do. That's why I'm here. There's nothing wrong with being hobbyist, it would be the equivalent of me buying a guitar and playing a gig here and there. Maybe if I'm lucky, go to a coffee shop and play for tips or something on the street. That's a hobby, because I can't live off with my art. The same thing goes for filmmakers, you've got to think about the business guys. You have to think about it. If you don't, you're not going to make it. And unlike that guitar. And unlike musicians, it's much more expensive to create art. It's probably one of the most expensive art forms on the planet. You've got to deal with a lot of people most of the time to create the art. It's a collaborative art as well. So you can't just sit there and write a book. You can't just sit there and play the guitar and write a song. It's a very expensive art form and you need to understand the business if you want to try to make a go of this. Now you can sit there and complain. You can sit there and hold on to the good old days of the way it used to be when used to make a lot more money, like the music industry did for a long time. And the publishing business did for a long time. You can sit there and talk about how things should be or you can adjust and pivot your approach to making and selling your films. Or you're going to end up like Blockbuster Video toy. Are us Circuit City, Virgin Records, and the many other corpses of companies who didn't change with the times, I hope you really understand wholeheartedly what I'm trying to do here, I'm not doing this to scare you. I'm not doing this to depress you. I'm telling you the reality. I'm telling you the raw truth of what this business is today. And I promise you in six months in a year, after all these other platforms show up when peacock shows up, which is the NBC Universal one. When HBO max gets released, when all these other smaller Avon Avon platforms are going to start popping up. Who knows how this business is going to change? Again, it's an ever changing business, you need to stay on top of what selling because it takes so long to make a movie that when you started, you might think, well, a VOD must be the way to go. So we're going to focus our whole business plan around a VOD and this or that, to try to make as much general make generate as much revenue as we can. But by the time the movie is done, which could be a year from now, a VOD might be dead. And the new thing that just came up, who knows what it is, the business is just changing is just changing. But the things that you can do to protect yourself from these changes, is the following niche down to an audience that you can cultivate, or that you can target. Better to cultivate than target in my opinion, but you can do either, either. Or, it's much easier once you've cultivated the audience, which also takes time. You keep your budgets as low as humanly possible. I said this in past episodes, keep that overhead low. The lower the better. Someone gives you $100,000 to make a movie, make two movies, if you can make three with that same 100 grand diversify your risk. That's you have to think about it like a portfolio, you got to think about it like a business. And I know a lot of you like I'm Armaan artists, I'm an artist. That's great. I'm an artist too. You can you can be an artist and a business person at the same time. Do you think that all of these big directors that you look up to that they're not businessmen and women? Seriously? You think that Guillermo del Toro, Chris Nolan, David Fincher, Steven Spielberg, Francis Ford Coppola, any of these guys, Martin Scorsese, don't think these guys are business men and women. They have to be, they have to understand the business. If not, they won't make it. And it's funny that Francis Ford Coppola, who's arguably one of the greatest directors of all time, and directed some of the greatest films of all time, and said the only time he ever made real money is when he started selling wine. Because that's a real business. He said, It's sad, but it's true. It's insane. But he was able to create an ancillary product line from his brand, Coppola wines. He was able to leverage his brand, to sell other products and other revenue streams, he has restaurants, he has resorts, he has all sorts of things. He's become a businessman. But it took him years, years. There's no reason why you can't do that. Now, as an independent, there is no reason the power is in your hands. Like I said, at the end of every film, entrepreneur, podcast, the power is in your hands, you need to be that the entrepreneur, you need to figure out how to generate revenue with your art. It is possible, it is doable, it is repeatable, and you can build a business around your art. So I hope this episode really opens your eyes to what the value of your movie is, in the current marketplace. The more niche of a product you have, the more opportunity you have to make money with it. And that even includes in the traditional models. If you have a baseball movie, it's easier to sell. If you have a skateboard movie, if you've got a surfer movie, if you've got a vegan documentary or narrative film, it's easier to sell. Even with traditional distributors. They're like, Oh, well, there's an audience there. We can market to that audience. It makes their life easier too, if you want to partner with a traditional distributor, have multiple episodes about that. So I'm not going to get into that here. Now I really do hope this opens your mind and the way you look at making movies. I want you to create the art you want to create. I want you to create the films that are you're passionate about. You just have to be smart about it. And I'm not saying that arthouse films or personal films can't get made in this model? Of course it can. I made a personal film called on the corner of ego and desire comes out the 21st of January 20 8020. And you know what, it's a personal film, but I made it for $3,000. I didn't make it for 30,000, I didn't make it for 300,000 to make it for 3 million, I made it for three grand, I was able to do it at that price point, I could be experimental. And even then, I didn't even have to make it about a niche, I could have made that into whatever I wanted to. But I made it for my niche, my audience, which is you guys, filmmakers, and screenwriters. And because of that, I'm able to generate revenue and do it again, and make another experimental film. This is Meg, my first film was an experimental film as well. And I was able to make money because I targeted it towards my audience, my niche. So I hope this helps you guys, I really, really do. I want to thank you for listening so much. And, of course, if you do want to preorder the rise of the film shoprunner, how to turn your independent film into a money making business, head over to filmbizbook.com, that's filmbizbook.com. It's available for pre order in the ebook right now on Amazon, but the audio book, and the paperback will be available December 2. So please check it out. If not just sign up for the list. And I'll email you and let you know when everything is available. And it is already hit number one a couple times, it's still living now in the top 20 to 30. In our category, in the movie making area of amazon books, and it's remarkable people really, really want this, and I can't wait to get this book out to you guys. If you want to get links to anything I talked about in this episode, including that coupon code for indie film hustle TV for Black Friday, just head over to indiefilmhustle.com/364 for the show notes. And there's a great article about everything I talked about in this episode there as well. So thanks again for listening. Again, Happy Thanksgiving, guys. Happy Thanksgiving, have a great Thanksgiving with yourself and your families. And Oh, and by the way, in this is something I'm going to be doing after the New Year. I'm going to go down to one episode a week for indie film hustle. Instead of two a week. I'm going to do one a week, I'm still going to be doing one film shoprunner episode. And I'm going to be doing one every other week on bulletproof screenwriting. So you're still going to get an obscene amount of content. But I'm just going to pull back one episode because there's projects that I want to focus my energy on and things I want to create for you guys. And you'll still get an obscene amount of content from me as you usually do. But just one less podcast. The weekend almost started at January 1. So after January 1, I'm going to do one a week. There might be the occasional tube because I'm crazy. You know how I am. But as a general statement is going to be one filmtrepreneur week, one indie film hustle week, and one bulletproof screenwriting every other week. So thank you guys for listening. I really do hope this was a value to have a great holiday great Thanksgiving. Oh, when I got a couple of Christmas surprises coming up for you as well. So keep an eye out for that. Thank you guys again for listening. As always, keep that also going. Keep that dream alive. And I'll talk to you soon.