Three Angles on VOD: Geoblocking; Finding a Distributor; The DIY Route
By Steven Beer, Neil Rosini & Julie Angell
How can geoblocking impact the video-on-demand marketplace?
Geoblocking technology restricts access to internet content based upon the user’s geographical location. International film distribution companies rely on geoblocking as the foundation to their core business model—pre-selling and licensing premium video-on-demand (VOD) content on a territorial basis. Copyright law, which grants rights holders with authority to designate the locations where their property is distributed, is also served by geoblocking.
Netflix, HBO and numerous other VOD sellers offer unique programming based on specialized commercial and cultural considerations. By way of example, HBO Now, the premium VOD streaming service, is only available to US consumers because it has parallel exclusive commercial arrangements with different international partners, each with its own unique programming and business framework. With geoblocking technology, the partnering distributors are able to offer their subscribers a buffet of premium but culturally tailored content at varying price points to their respective markets.
The widespread use of geoblocking is the subject of heated debate that could alter or derail the traditional VOD distribution framework. Detractors regard geoblocking as both an inconvenience and a form of internet censorship. Frustrated consumers actively seek to circumvent the technology by accessing virtual private networks (VPN), which reside on websites outside the designated territory. Resisting this practice, distributors argue that the use of online VPN services to evade geoblocking is a violation of copyright law because it infringes on the rights controlled by the content rights holder. As content owners, many documentary producers support this argument and appreciate that geoblocking preserves the value of their content.
The practice of geoblocking has received particular scrutiny within the European Union, which includes several commercially significant markets such as Germany, France, Italy and Spain. Documentary co-productions often leverage local production incentive programs to facilitate the finance and distribution of projects in development. As a unified commercial policy, the EU adopted a Digital Single Market (DSM) strategy in 2015 to create a single commercial zone free of geoblocking. Fearful that a DSM approach would undermine the traditional model for financing and distributing films, content licensors lobbied the European Commission for an exemption. Under intense pressure, the EC relented and ultimately excluded copyrighted audiovisual works from the DSM strategy mandate in 2016. This means that, for the time being, film rights can continue to be exploited on a territorial basis in the EU.
Excluding copyrighted audiovisual works from the DSM initiative is unpopular outside the established audiovisual business community. Consumer advocates encourage eliminating geoblocking so that consumers can access a wide range of content in an open, price-competitive marketplace without cultural restrictions. For example, they assert that a German consumer should not be restricted from viewing her favorite German-language documentary through a VOD service just because she lives and works in France. Proponents of the copyright audiovisual content exclusion, including the influential Independent Film and Television Alliance (IFTA), assert that eliminating geoblocking will harm the diversity of local film productions, impede state-supported co-productions, dilute the quality of content to consumers, and defy copyright law.
The stakes in the geoblocking debate are especially high for documentary producers seeking to finance and distribute their films on an international basis. Without geoblocking restrictions, the ability of rights holders to license their copyrighted audiovisual content on a territorial basis could be at risk. If the audiovisual exclusion is waived, the traditional model for financing, co-producing and distributing independent films across Europe may be compromised because pre-sales and content licenses to individual territories fuel the entire film business. While the outcome to this debate is unclear, industry stakeholders are concerned about the future of the commercially valuable territory-based marketplace.
To distribute my feature-length independent documentary in digital media, should I use an aggregator or a distributor?
Assuming you have the choice, the answer depends on a number of factors, including whether you want all distribution in all media handled by a single entity (through a distributor) or to have digital rights exploited independently (by an aggregator), and your strategy for making the most of your film.
Before the dawn of internet access, distributors were essentially the only way to get an independent film exploited. Then, as now, they often (but not always) offered an advance or guarantee and assumed the exclusive right to exploit the film for a relatively long time in most or all media for a broad territory.
The term of a distributor deal is typically seven to 10 years. The distributor will get all forms of digital media, including TVOD (transactional video on demand, like pay-per-view), AVOD (advertising-supported video on demand) and SVOD (subscription video on demand like Netflix, Hulu and Amazon Prime). Television rights, videogram rights (such as Blu-Ray discs and other hard copies), non-theatrical rights (which include educational institutions, libraries and other institutions by all means of exhibition), and theatrical rights also go to the distributor. The territory of exclusivity is often the entire world in all languages, but deals that cut the territory back often limited to North America (US, Canada and possessions, etc.) plus the Caribbean, Bahamas and Bermuda, as well as military bases, oil rigs, buses, ships, planes and other transportation in those locations or flying their flags can also be found.
If the numerous distributors see great potential in your film (or better yet, multiple distributors see great potential in your film), an advance or guarantee that substantially exceeds the cost of production should be expected. Often, however, the advance or guarantee on offer is considerably more modest and any further proceeds to the filmmaker depend both on the success of the film and how the distributor’s compensation is determined. A distributor generally assumes responsibility for marketing and may commit to a marketing plan in consultation with the filmmaker.
Typically, a distributor will take a distribution fee off the top, which is often in the range of a quarter to a third of gross income that it receives. The distributor will then deduct miscellaneous costs (e.g., refunds) and its own distribution and marketing expenses, which can be substantial and from the filmmaker’s perspective are best “passed through” without markup, interest or overhead, and capped at some percentage of gross. The remainder, if any, generally will be split between distributor and filmmaker, (e.g., 85/15), with the distributor recouping any advance paid to the filmmaker from the filmmaker’s share.
Aggregators, which only cover digital rights, exist partially because big platforms willed them into being. With some exceptions, platforms like iTunes, Netflix, Google Play and Hulu will not accept films directly from independent filmmakers, having recognized the efficiency of making deals with a limited number of vetted middle-persons rather than a multitude. There are other practical benefits for them as well, such as having their delivery requirements—including individualized encoding—overseen by dependable intermediaries.
Aggregators do not pay advances or guarantees, but the financial terms of their deals are relatively simple. They will charge flat fees per platform, often with a higher fee of about $1,000 for the first platform and smaller fees for the rest. Some, but not all, aggregators also require a revenue share based on gross receipts (e.g., 10-20%), which may have the effect of reducing up-front fees. The terms of their deals are relatively short (e.g., three years) and in some instances, early termination is permitted. Apart from offering films to digital platforms, aggregators do not get involved in marketing.
The platforms for which an aggregator is engaged to render services often can be selected by the filmmaker—across the board exclusivity in all digital categories for all digital platforms is not a necessity. But aggregators will want exclusivity for the specific platforms agreed upon. They also may want certain holdbacks, for example, for TVOD until the platforms with which they have made deals first make the film available. And they may require that their TVOD pricing not be undercut in deals made by the filmmaker. Territories are not necessarily as broad as distributors tend to demand and may be limited even to USA domestic.
Apart from these considerations, deciding whether a distributor or aggregator is right for your film depends on other factors such as the nature of the film, its prospects for success, whether or not theatrical and hard-copy distribution is very likely, whether self-marketing sounds better than entrusting it all to a distributor, and whether a one-stop deal with a distributor or piecing together different deals for different media in different territories makes the most sense.
What if I can’t afford or don’t want to use an aggregator? Is DIY digital distribution a feasible plan?
A filmmaker might consider VOD self-distribution as an alternative or supplement to the use of an aggregator or distributor to distribute a film. The primary digital platforms that allow self-distribution include Amazon, Vimeo, YouTube and Facebook. Amazon offers both transactional and subscription-based monetization alternatives through its Prime Video Direct service. Vimeo also offers both TVOD and SVOD self-distribution alternatives (although the SVOD service is primarily targeted to the creators of episodic content). YouTube and Facebook both permit filmmakers to upload films for VOD streaming, although monetizing content on these platforms has more significant barriers to entry than Amazon and Vimeo.
On Amazon’s Prime Video Direct service, a filmmaker can upload her film directly to Amazon without the need for an intermediary sales agent, distributor or aggregator. The filmmaker can choose to make the film available for digital purchase, digital rental, for streaming as part of Prime’s subscription service (i.e., Prime members can stream the title without the need to pay an additional fee), or any combination of the three. (An AVOD “free with ads” streaming option has been discontinued.)
For digital purchases and rentals, the filmmaker receives 50% of the purchase price paid by the buyer, net only of taxes. The filmmaker sets its own prices, although Amazon “reserves the right to adjust the price to ensure competitive pricing with other retail platforms and provide the best customer service.” (Based on a recent unscientific review, documentary titles for purchase on Amazon range may in price from $7.99 through $14.99 per title, and rentals range from $2.99 through $5.99 per title.)
For titles made available as part of the Prime subscription service, Amazon pays the filmmaker a royalty per hours watched. In the US and certain other territories (e.g., the United Kingdom and Japan), the royalty rate is a sliding scale based on a film’s “Customer Engagement Ranking.” In the US there is a minimum potential royalty of $0.01 per hour of streaming, and a maximum potential royalty of $0.12 per hour. “Customer Engagement Ranking” is a percentage ranking of Prime members’ level of engagement with the title in relation to other titles offered on the same service and territory; unique viewers, popularity of the title, and IMDB ratings may factor in, as well. In certain other territories, the Customer Engagement Ranking is inapplicable, and there is a fixed royalty per hours watched in a 365-day period.
Amazon does not charge filmmakers any out-of-pocket fees to distribute on Prime Video Direct, although filmmakers must provide key art and closed captions, and also comply with Amazon’s technical delivery requirements at their sole cost. The analytics offered by Amazon include number of unique streams, minutes streamed and projected revenue. In trying to attract an audience, a filmmaker also might benefit from the potentially built-in audience of Prime video, which has “tens of millions” of users according to some sources.
As an alternative or supplement to Amazon Video Direct, Vimeo provides a video-on-demand platform by which a filmmaker can rent and/or sell a film directly to its audience. The filmmaker sets the rental or sales price, and keeps 90% of the sales after credit card fees and taxes, which range from four to 17%.
Using Vimeo’s service, a film can be streamed directly through the Vimeo-on-Demand consumer portal or through a filmmaker’s own website or custom domain. It can also be embedded with a trailer directly into a filmmaker’s social media posts, where it can also be purchased.
In order to sell or rent your film on Vimeo, a filmmaker must have a $20 per month subscription to Vimeo Pro. The subscription includes 20GB of monthly storage, access for three individuals to manage the account and the ability to publish natively to social media. Detailed analytics are included with the subscription, including the number of total plays, finishes and likes for a film; total and average time watched; and the ability to see the territory in which the film was viewed, the device type used to view it, and the source URL that led to the view.
Vimeo offers sound financial terms and a sleekly-designed portal, but its native audience is not as large as Amazon’s, YouTube’s or Facebook’s, so filmmaker-spearheaded marketing efforts to drive traffic to the point of purchase would be a key to success.
YouTube and Facebook are AVOD platforms with massive audience potential, where a film could be released without the use of an aggregator or traditional distributor. However, both platforms would require a filmmaker to have a pre-existing audience and proven eyeballs before qualifying to make money via in-stream advertising.
On YouTube, in order to monetize content via in-stream advertising, a filmmaker would need to become a member of YouTube’s Partner Program, which requires a channel with 1,000 subscribers and 4,000 valid public watch hours in the last 12 months. On Facebook, in order to be eligible to share in revenue from in-stream ads, a filmmaker’s page would need to have had at least 30,000 one-minute views on videos that are at least three minutes long in the last 60 days; a page also must have 10,000 unique followers in its own right. Both platforms also require compliance with all of their various terms, conditions, guidelines and content policies.
Filmmakers with a sizeable social media following and robust content library who qualify to monetize their content may determine that YouTube and Facebook are viable self-distribution alternatives. A filmmaker with one or two stand-alone films, however, might be best served by using Facebook, YouTube and other social media platforms to build an audience and market the film, while driving traffic to TVOD points of purchase like Amazon or Vimeo.
A successful distribution strategy of any kind requires a filmmaker to identify and attract an audience, and engage with that audience through targeted marketing efforts. A self-distribution effort must include a plan (and, ideally, a budget) to promote the film and drive traffic to the platforms where the film is available.
Franklin, Weinrib, Rudell & Vassallo has over 50 years of experience of counseling makers of documentaries and other nonfiction works in every project phase. Find out more at documentarytoolkit.com.
(Please note: this column is not intended as legal advice. Individual circumstances always need to be taken into account. Please consult your lawyer.)